In re: Rita Ramos Curiel

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: June 23, 2023
• Docket: 22-1246
• Status: Published

Opinion

FILED JUN 23 2023 ORDERED PUBLISHED SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP Nos. CC-22-1246-SGF RITA RAMOS CURIEL, CC-22-1247-SGF Debtor. (Related Appeals)

MARIE HAMILTON, Trustee of the Ken Bk. No. 8:22-bk-10175-TA Hamilton Family Trust, Appellant, v. OPINION RITA RAMOS CURIEL; ROBERT P. GOE, Subchapter V Trustee, Appellees.

Appeal from the United States Bankruptcy Court for the Central District of California Theodor C. Albert, Chief Bankruptcy Judge, Presiding

APPEARANCES: Michael G. Spector argued for Appellant; Matthew D. Resnik of RHM Law LLP argued for Appellee Rita Ramos Curiel.

Before: SPRAKER, GAN, and FARIS, Bankruptcy Judges.

SPRAKER, Bankruptcy Judge:

INTRODUCTION

This appeal requires us to examine feasibility within a chapter 11, subchapter V 1 case where a secured creditor does not vote to accept the

debtor’s proposed plan of reorganization. Debtor Rita Ramos Curiel

confirmed her plan based largely on statements in her declarations that she

could make the required plan payments, including substantial balloon

payments to her secured creditors. Both the balloon payments and the

monthly plan payments were barely supported by the debtor’s projections.

Secured creditor Marie Hamilton, as trustee of the Ken Hamilton Family

Trust (“Hamilton Trust”), objected to confirmation in large part because

Curiel’s monthly expenses including plan payments substantially exceeded

her income while in bankruptcy. Hamilton Trust also argued that Curiel

failed to present any reliable evidence that she would be able to make her

monthly or balloon payments. Curiel’s ability to make her monthly plan

payments overwhelmingly depends on her incorporated business, but no

evidence of its finances was provided in support of confirmation.

The bankruptcy court acknowledged that feasibility was a close

question but concluded that it was somewhat more likely than not that

Curiel would be able to make her payments. Questions abound as to

whether stricter scrutiny of feasibility was required under § 1191(c)(3) to

establish that the plan was fair and equitable given Hamilton Trust’s

decision not to accept the plan. Those questions were not addressed at

confirmation and elude us on appeal as Hamilton Trust challenges only the

Unless specified otherwise, all chapter and section references are to the 1

Bankruptcy Code, 11 U.S.C. §§ 101–1532.

2 bankruptcy court’s finding that there was a reasonable likelihood Curiel

could make all of her plan payments. But we agree with Hamilton Trust

that Curiel’s unsupported optimism does not overcome the realities of her

case based on the record she presented. For this reason, we REVERSE

confirmation of Curiel’s subchapter V plan and REMAND for further

proceedings, including determination of the applicability of § 1191(c)(3).

Hamilton Trust also appeals from the denial of its relief from stay

motion. Because the denial of relief from stay was based on the

confirmation of Curiel’s plan, we VACATE the order so that the

bankruptcy court can consider the motion in light of the denial of plan

confirmation and any resulting proceedings.

FACTS2

A. The bankruptcy filing and Curiel’s secured debt.

Curiel purchased a three-unit residential property on Sycamore

Street (“Sycamore Property”) in Anaheim, California, and a commercial

property on N. East Street (“N. East Property”) from Ken Hamilton for

$850,000 secured by the two parcels (jointly, “Properties”). As of February

2022, when Curiel filed for bankruptcy, all three units of the Sycamore

Property were occupied by paying tenants. The N. East Property was

occupied by Curiel’s solely owned corporation, Lucky 7 Tire Center, Inc.,

2 We exercise our discretion to take judicial notice of documents electronically filed in the underlying bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 3 which operated a tire store on the premises. In her original schedules,

Curiel listed liens and judgments encumbering the Properties in excess of

$1,500,000. Of this secured debt, she owed $728,227.24 on the purchase note

to Hamilton, which had been transferred to Hamilton Trust. Curiel owed

$464,100 and $337,500 on separate recorded judgment liens in favor of

Michael Daskalakis. Curiel also was liable for property taxes in an

unspecified amount owed to the Orange County Treasurer-Tax Collector.

Curiel later conceded that the Properties were subject to another judgment

lien in favor of the Orange County Transportation Authority for $10,549.

B. Hamilton Trust’s proofs of claim and its Motion for Relief from Stay.

Hamilton Trust filed a proof of claim for $751,581.22, comprised of

$728,227.24 in principal, $11,250.00 in attorney fees, $7,541.00 in foreclosure

fees, and $4,562.98 for the February 2022 installment.

Hamilton Trust moved for relief from the automatic stay to permit it

to proceed to foreclose its security interest against both Properties. It

claimed that cause for relief existed on multiple grounds, including that

Curiel lacked equity in the Properties and they were not necessary for an

effective reorganization under § 362(d)(2). Hamilton Trust also asserted

that Curiel impermissibly was attempting to restructure her debt to

Hamilton Trust because its loan had matured and become fully due and

payable prepetition, as of December 11, 2020.

Hamilton Trust calculated its secured claim as of the time of the

4 motion at $767,270.17 and adopted from Curiel’s schedules the aggregate

amount owed to Daskalakis of $801,600. 3 Combined, the total aggregate

secured debt against the two Properties (excluding county tax debts and

liens) was $1,568,870. Hamilton Trust also adopted the scheduled

aggregate value of the Properties of $1,225,000.

In her opposition to the relief from stay motion, Curiel originally

admitted she had no equity in the Properties but contended that both were

necessary for an effective reorganization in prospect. Meanwhile, Curiel

also moved to value both parcels of real property. Based on appraisals

offered by Curiel which were not opposed, the court valued the N. East

Property at $915,000 as of June 3, 2022 and valued the Sycamore Property

at $615,000 as of that same date. Thus, the court determined the aggregate

value of the Properties as of June 3, 2022, to be $1,530,000.

Ultimately, the court denied the motion for relief from stay at the

conclusion of the final confirmation hearing in December 2022.

In October 2022, Hamilton Trust filed an amended proof of claim for

$782,971.77. The amended proof of claim included accrued interest at the

contract rate of 5%, plus attorney fees incurred, less adequate protection

payments that Curiel made.

3 According to Curiel, the $337,500 judgment lien was partially satisfied. Curiel scheduled the revised balance of the debt at $157,500 in her Plan (defined below) and confirmation brief, so we use this as the outstanding loan balance. Based on the substantial reduction in this judgment and the appraised values, Curiel contended that she had equity in her Properties. 5 C. Curiel’s Plan and confirmation.

1. Terms of the Plan.

Curiel’s operative plan was her second amended plan, which she

filed in September 2022 (“Plan”). The Plan estimated her debts and

proposed the following monthly payments totaling $12,050: Amount Monthly Class of Claim Payment Terms Administrative Expenses Debtor's Counsel $ 35,000 $ 571 $20,000 paid on effective date, balance monthly Subchapter V Trustee $ 15,000 Paid on effective date Secured Debts Hamilton Trust 1 $ 751,582 $ 5,779 Payments amortized over 30 years, payable in 7 years, interest at 8.5% Daskalakis Abstract 2 $ 157,500 $ 1,212 Payments amortized over 30 (Judgment) #1 years, payable in 7 years, interest at 8.5% Daskalakis Abstract 3 $ 464,100 $ 3,569 Payments amortized over 30 (Judgment) #2 years, payable in 7 years, interest at 8.5% Orange County 4 $ 10,550 $ 82 Payments amortized over 30 Transportation years, payable in 7 years, interest at 8.5% Orange County Tax 5 $ 8,945 $ 373 Payable in 5 years interest at 18% Collector Priority Debts Internal Revenue Service $ 7,470 $ 163 Payable at 5% interest over 5 years Cal. Franchise Tax Board $ 5,515 $ 121 Payable at 5% interest over 5 years General Unsecured Claims $ 10,755 $ 180 Not applicable TOTALS $1,466,417 $ 12,050

Her Plan also stated that she had $3,140 in personal monthly

expenses, and expenses for the Properties, including real property taxes

and insurance, averaged an additional $2,569 per month. Altogether, Curiel 6 projected that her total monthly expenses between her personal, real

property, and plan payments would total $17,759.

Curiel explained that she based her projected monthly income and

personal expenses largely on her historical cash flow amounts as reflected

in her monthly chapter 11 operating reports (“MORs”). She projected that

her net income would support her Plan payments and the feasibility of her

Plan and that she would “be able to meet all my financial obligations under

the Plan.” She estimated her monthly income at just under $18,000. Curiel

calculated her monthly income based on $695 per month from Social

Security, $8,700 in rents from the Properties, $4,500 for her wages from

Lucky 7, and at least $3,000 from her nondebtor partner Israel Guerrero-

Hernandez, who also worked at Lucky 7.

The proposed Plan relied on significant balloon payments to pay off

the remaining secured debt at the end of the Plan, including those owed to

Hamilton Trust and Daskalakis. Curiel explained that the balloon

payments would be funded by a refinancing or sale of the Properties.

2. Hamilton Trust’s objections to the Plan.

Hamilton Trust objected to the Plan. It argued that the Plan

inappropriately attempted to extend a loan that fully matured before

Curiel filed bankruptcy. According to the Hamilton Trust, Curiel’s Plan

could not be confirmed unless she proposed to cure the payment default in

accordance with the loan’s original terms, and the only way to cure a

default from a loan that fully matured prepetition was for the debtor to pay

7 the entire outstanding balance on the Plan’s effective date. Because the Plan

did not provide for full payment of its loan on the effective date, Hamilton

Trust reasoned that it would be free to foreclose after confirmation.

Hamilton Trust also argued that the Plan was not feasible. It noted

that during the bankruptcy, Curiel had reported an average of $12,581 in

monthly income, far short of the monthly income necessary to fund the

Plan. Hamilton Trust also noted that Curiel’s monthly income was heavily

dependent on Lucky 7, as it paid not only the N. East Property rent but also

both Curiel’s and Hernandez’s wages. Hamilton Trust submitted the 2021

financial statements for Lucky 7 that disclosed losses of nearly $20,000

during calendar year 2021, while paying officer wages to Curiel of only

$31,200, or $2,600 per month. It questioned how Curiel reasonably could

expect to derive $4,500 per month in employment income from Lucky 7

during the entire Plan period.

Hamilton Trust acknowledged that Lucky 7 had borrowed $399,000

from the Small Business Administration (“SBA”) roughly a month before

Curiel filed her bankruptcy. Curiel had offered that Lucky 7’s loan could be

used to fund any shortfall in her Plan. Hamilton Trust noted that Curiel

had failed to disclose her personal guaranty of the SBA loan. It also stated

that as of the date she proposed her Plan, Curiel admitted that Lucky 7

only had $316,000 from the loan on hand. According to Hamilton Trust,

Lucky 7’s use of $83,000 over the prior seven months suggested that it was

using the SBA loan proceeds at roughly $12,000 per month ($399,000-

8 $316,000 ÷ 7 = $11,857.14). Hamilton Trust argued that Lucky 7 would need

to use significant amounts of the SBA loan to pay both Curiel and

Hernandez in amounts sufficient to enable them to honor their Plan

commitments. It concluded that Lucky 7 would burn through the

remaining loan proceeds in a matter of months—leaving Lucky 7 with no

apparent means of paying Curiel’s and Hernandez’s increased salary

demands over the entire Plan term.4

Hamilton Trust additionally argued that the Plan was not feasible

because Curiel had failed to demonstrate a reasonable likelihood that she

would be able to sell or refinance the Properties as the Plan contemplated,

which was the only means by which Curiel could fund the Plan’s balloon

payments. According to Hamilton Trust, at least some equity in the

Properties was essential to any proposed refinance or sale, and Curiel

presented no evidence suggesting that she would have equity at the end of

the Plan term. Hamilton Trust further posited that the Properties were

losing value rather than appreciating, because of the rise in interest rates.

3. Curiel’s confirmation brief and reply to Hamilton Trust’s objection to confirmation.

Curiel filed supplemental declarations and a brief in support of Plan

confirmation together with the results of the creditors’ ballots. The only

4 Hamilton Trust made several other arguments challenging the Plan, such as the Plan was not proposed in good faith. But none of these other arguments have been pursued on appeal. 9 creditor to return a ballot was Hamilton Trust and it rejected the Plan.

Accordingly, no class of impaired creditors, including the unsecured

creditors, accepted the Plan. Curiel acknowledged that she did not satisfy

either § 1129(a)(8) or (10) and sought confirmation for a nonconsensual

plan under § 1191(b).

In response to Hamilton Trust’s objections, Curiel characterized as

frivolous the argument that a matured loan could not be modified and

extended as part of a proposed plan. Curiel distinguished the case law

Hamilton Trust relied on and pointed to the bankruptcy court’s comments

in the relief from stay proceedings indicating that such modifications were

permissible. Both her brief and declaration, however, recognized Hamilton

Trust’s amended proof of claim in the amount of $782,971, without stating

any objection.

As for feasibility, Curiel claimed that she had minimal equity of

$5,454 at the time of filing her supplemental brief. This included Hamilton

Trust’s amended claim amount, but Curiel deducted the adequate

protection payments to the Daskalakis judgment liens from the principal

owed without explaining why those payments should not be applied to

interest. More importantly, Curiel claimed that by the time her balloon

payments became due, she would have paid down the principal owed to

each secured creditor in sufficient amounts that she would have sufficient

equity to sell or refinance—regardless of whether the Properties

appreciated in value. Using the aggregate value of $1,530,000 established

10 by the court’s order granting her motions to value the Properties, she

contended that she should have equity of roughly $228,738 when the

balloon payments came due based on her calculation that the balance of

secured debt would total $1,301,262.12 in January 2029.5 Curiel also

disputed that the Properties were decreasing in value because of rising

interest rates. She further claimed that any decrease in value was offset by

certain utility easements that she granted as to both Properties postpetition

(with court approval), which she claimed increased the Properties’ value

by “greatly” improving their access to and use of the utilities.

With respect to her ability to fund the monthly Plan payments and

pay her other expenses during the Plan term, she also submitted a

declaration from Hernandez stating that he would contribute at least

$3,000.00 per month to Curiel’s Plan. Hernandez explained that he has

historically been paid in cash but that he had been sharing household

expenses with Curiel for many years. He attached a photo of a balance

inquiry showing $4,578.07 in a Chase account as of November 22, 2022.

Curiel also reiterated many of the same points she previously made

in support of the Plan. She asserted that her DIP bank account balance of

$62,999.95 and Lucky 7’s bank account balance of $266,983.59 were solid

evidence of her ability to fund her Plan payments. She argued this was

particularly relevant as she had no such bank balance at the time of her

5 Curiel’s calculation, therefore, was based on balloon payments being made six years after the projected effective date though her Plan provided a seven-year term. 11 bankruptcy filing.

4. Additional filings and the court’s confirmation of the Plan.

Three additional filings are pertinent to the Plan confirmation

proceedings. First, Hamilton Trust filed evidentiary objections to most of

the statements made in Curiel’s and Hernandez’s declarations in support

of her Plan confirmation brief. In relevant part, Hamilton Trust objected

that neither Curiel nor Hernandez had laid a proper foundation as to their

personal knowledge regarding Lucky 7’s ability to pay them income

during the Plan term in amounts sufficient to enable them to fully fund

Curiel’s Plan obligations. Nor had they established their qualifications as

experts capable of rendering valid opinions regarding the status of and

prospects for Curiel’s, Hernandez’s, and Lucky 7’s finances, or how the

value of the Properties might change over time.

Second, the subchapter V trustee filed a statement in support of

confirmation of the Plan. The trustee opined that the Plan appropriately

treated Hamilton Trust’s claim, though she opined that the due date for the

balloon payments should be reduced from 7 years to 3-5 years. The trustee

further suggested that the bank balances both Curiel and Lucky 7 had

managed to accumulate during the pendency of the bankruptcy supported

both the feasibility of the Plan and Plan confirmation.

Third, and finally, after the court advised Curiel that it would prefer

to hear from the SBA before making its final decision on Plan confirmation,

Curiel negotiated and entered into a stipulation with the SBA stating that:

12 (1) SBA’s loan and guaranty rights would not be modified or affected by

the Plan or by the parties’ stipulation; (2) though Curiel had contingent

liability as a guarantor of the loan SBA made to Lucky 7, SBA’s guaranty

claim had not matured because Lucky 7 was not obligated to begin making

monthly payments on the loan until January 2024; and (3) subject to the

above terms, SBA consented to the Plan.

At the final hearing on Plan confirmation, the bankruptcy court

summarily overruled the evidentiary objections and rejected Hamilton

Trust’s arguments challenging the Plan’s feasibility. The court specifically

asked Curiel, “[w]here in the record is there, in your view, sufficient

evidence that the Debtor can actually make the [Plan] payments as

promised?” In response, Curiel pointed to her MORs as evidence of

sufficient income. Curiel noted that her MORs demonstrated that she had

“stayed current” with her adequate protection payments to both Hamilton

Trust and Daskalakis. She also noted that she had stayed current on her

personal expenses and still managed to increase cash on hand in her

debtor-in-possession bank account from $3,100 at the start of the case to

roughly $62,000 as of the time of the hearing.

After considering the parties’ arguments, the court observed that

feasibility presented a very close question, but it ultimately found that it

was more likely than not that Curiel’s Plan was feasible. Though the court

remarked that it would have been happier if Curiel had provided “more

extensive projections,” it found that “it’s somewhat more likely than not

13 that she can do this . . . .” The court further commented, “I agree this is a

close question. It’s not an obvious case, but I think it’s just at the 50-yard

line plus an inch. And that’s all it has to be, I guess.” The court specifically

found that the Plan was feasible and confirmed the Plan—modified to

require the balloon payments of the secured creditors’ claims within 60

months of the effective date. Based on confirmation of the Plan, the court

also denied Hamilton Trust’s relief from stay motion. Hamilton Trust

timely appealed both orders.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(G) and (L). We have jurisdiction under 28 U.S.C. § 158.

ISSUES

1. Whether the Bankruptcy Code permits debtors in a reorganization

plan to modify and extend repayment of a debt secured by real estate if

that debt arises from a loan that fully matured before the bankruptcy was

filed.

2. Whether Curiel’s Plan was feasible.

3. Whether the bankruptcy court incorrectly overruled Hamilton Trust’s

evidentiary objections.

4. Whether the bankruptcy court abused its discretion when it denied

Hamilton Trust‘s relief from stay motion.

STANDARDS OF REVIEW

Hamilton Trust’s appeal requires us to interpret the Bankruptcy

14 Code. Questions of statutory interpretation are reviewed de novo. Kashikar

v. Turnstile Capital Mgmt., LLC (In re Kashikar), 567 B.R. 160, 164 (9th Cir.

BAP 2017). When we review a matter de novo, we give no deference to the

bankruptcy court’s ruling. Id.

We generally review the bankruptcy court’s feasibility finding for an

abuse of discretion. First S. Nat'l Bank v. Sunnyslope Hous. Ltd. P'ship (In re

Sunnyslope Hous. Ltd. P'ship), 859 F.3d 637, 647 (9th Cir.) (en banc), as

amended (June 23, 2017). To the extent the feasibility finding arose from

factual inferences the bankruptcy court made about the financial condition

and future prospects of Curiel and Lucky 7, however, we review those

inferences under the clearly erroneous standard and give them due

deference. See Wells Fargo Bank, N.A. v. Loop 76, LLC (In re Loop 76, LLC), 465

B.R. 525, 544 (9th Cir. BAP 2012) (citing Wiersma v. O.H. Kruse Grain &

Milling (In re Wiersma), 324 B.R. 92, 112–13 (9th Cir. BAP 2005), aff'd in part,

rev'd in part on other grounds, 227 F. App’x 603 (9th Cir. 2007)), aff'd, 578 F.

App’x 644 (9th Cir. 2014). A bankruptcy court’s factual findings are clearly

erroneous if they are illogical, implausible, or without support in the

record. United States v. Hinkson, 585 F.3d 1247, 1261–62 (9th Cir. 2009) (en

banc).

We review evidentiary rulings for an abuse of discretion, and we

only reverse them if they more likely than not affected the outcome of the

litigation. Van Zandt v. Mbunda (In re Mbunda), 484 B.R. 344, 351-52 (9th Cir.

BAP 2012), aff'd, 604 F. App’x 552 (9th Cir. 2015).

15 We also review for abuse of discretion the bankruptcy court’s denial

of Hamilton Trust’s relief from stay motion. Veal v. Am. Home Mortg.

Servicing, Inc. (In re Veal), 450 B.R. 897, 914 (9th Cir. BAP 2011). The

bankruptcy court abused its discretion if it applied an incorrect legal rule

or its factual findings were illogical, implausible, or without support in the

record. TrafficSchool.com v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).

DISCUSSION

Hamilton Trust challenges both the bankruptcy court’s confirmation

order and its denial of relief from stay. We address each order separately.

A. Appeal from confirmation order.

According to Hamilton Trust, Curiel’s Plan impermissibly modified

and extended the secured debt she owes to it, which fully matured prior to

her bankruptcy filing. Hamilton Trust maintains that the only permissible

treatment for its secured debt was payment in full on the Plan’s effective

date. Hamilton Trust also contests the bankruptcy court’s finding of

feasibility. In conjunction with its feasibility arguments, Hamilton Trust

asserts that the court incorrectly overruled its evidentiary objections.

1. Extension of Hamilton Trust’s secured debt.

With certain exceptions not relevant here, a chapter 11 debtor’s plan

may modify the rights of secured creditors. Section 1123(a)(5)(E) says that a

plan may provide for the “satisfaction or modification of any lien.”

Section 1123(b)(5) further specifies that a chapter 11 plan may “modify the

rights of holders of secured claims, other than a claim secured only by a

16 security interest in real property that is the debtor’s principal residence.”

See In re Brock, 628 B.R. 509, 510 (Bankr. N.D. Miss. 2021) (explicating

§ 1123(b)(5)).

There are exceptions to, and restrictions on, the general rule

permitting modification. For instance, a chapter 11 debtor cannot modify

the rights of a secured creditor whose collateral consists solely of the

debtor’s principal residence. Id. In addition, if the plan alters “the legal,

equitable, and contractual rights” of the secured creditor, the secured

creditor is considered impaired under § 1124(1) and entitled to additional

rights and protections as set forth in § 1129. Although subchapter V might

alter the chapter 11 debtor’s right to modify secured claims, none of those

differences are relevant to this appeal. See generally Hon. Paul W. Bonapfel,

A Guide to the Small Business Reorganization Act of 2019, at 115-16 (Rev. June

2022) (“SBRA Guide”), https://www.alsb.uscourts.gov/sbra-materials (click

on “SBRA guide (Judge Paul Bonapfel, 338 pp.) (updated June 2022)”) (last

visited June 20, 2023) (explaining differences in modification rights under

§ 1123(b)(5) and § 1190(3)).

Notwithstanding the plain language of the Bankruptcy Code,

Hamilton Trust argues that it was impermissible to confirm a plan enabling

Curiel to make monthly payments of $5,779 on its claim and then make a

balloon payment for the substantial remaining balance five years later.

According to Hamilton Trust, the “only thing a plan can do to ‘cure’ a

17 default of a fully matured debt is to provide for full payment of the debt on

the effective date of the Plan.”

To support this proposition, Hamilton Trust primarily relies on three

decisions: (1) Great Western Bank & Trust v. Entz-White Lumber & Supply, Inc.

(In re Entz-White Lumber & Supply, Inc.), 850 F.2d 1338 (9th Cir. 1988),

partially abrogated on other grounds by Pacifica L 51 LLC v. New Investments,

Inc. (In re New Investments, Inc.), 840 F.3d 1137 (9th Cir. 2016); (2) In re

Liberty Warehouse Associates Ltd. Partnership, 220 B.R. 546 (Bankr. S.D.N.Y.

1998); and (3) United States Trust Co. of New York v. LTV Steel Co (In re

Chateaugay Corp.), 150 B.R. 529 (Bankr. S.D.N.Y. 1993), aff'd, 170 B.R. 551

(S.D.N.Y. 1994). But none of these decisions help Hamilton Trust. All three

cases dealt with the interest rate a chapter 11 debtor must pay in the

process of curing or reinstating a loan in default. None of them specifically

addressed whether or how a chapter 11 plan can extend repayment of a

loan that matured prepetition.

Hamilton Trust’s argument is fundamentally unsound. It conflates

the concept of curing a default with the concept of modifying a secured

creditor’s contractual rights. Though neither the term “cure” nor the term

“modify” are defined in the Bankruptcy Code, the two concepts are

distinct. As one bankruptcy court recently explained:

A modification of a loan is a fundamental alteration in a debtor’s obligations, e.g., lowering monthly payments, converting a variable interest rate to a fixed interest rate, or extending the repayment term of a note. By contrast, a “cure” merely reinstates a debt to its pre-

18 default position, or it returns the debtor and creditor to their respective positions before the default. A cure will remedy or rectify the default and restore matters to the status quo ante. Curing a default commonly means taking care of the triggering event and returning to pre-default conditions. The consequences [of default] are thus nullified.

In re Jacobs, 644 B.R. 883, 900 (Bankr. D. N.M. 2022) (cleaned up) (emphasis

added). Further emphasizing the distinction between the two actions, cure

of defaults is subject to different provisions of the Code than modifications.

Compare § 1123(a)(5)(E) and (b)(5) with §§ 1123(a)(5)(G) and 1124(2)(A).

The only other decisions Hamilton Trust cites in support of its

position are: (1) Seidel v. Larson (In re Seidel), 752 F.2d 1382, 1383 (9th Cir.

1985); and (2) Greenberg v. Champion Mortgage Co. (In re Greenberg), 622 B.R.

60 (S.D. Cal. 2020). Neither of these decisions help Hamilton Trust any

more than Entz-White, Liberty Warehouse Assocs., or Chateaugay help it. Seidel

and Greenberg are based on the restrictions set forth in § 1322(b)(2) and

§ 1123(b)(5), which respectively prohibit chapter 13 and chapter 11 debtors

from modifying the rights of secured creditors whose debts are secured

solely by the debtor’s principal residence. Hamilton Trust’s claim is not

secured by Curiel’s residence. Thus, these two decisions are inapposite.6

6 Seidel is helpful analytically in one limited respect. It makes clear that a chapter 13 plan provision proposing to repay a fully matured home loan over the term of the plan constitutes a modification of a secured debt subject to the restrictions of § 1322(b)(2). In re Seidel, 752 F.2d at 1383-86. Thus, Seidel is fundamentally inconsistent with any notion that such secured debts lose their status as home loans protected by § 1322(b)(2)’s anti-modification provision because the debt fully matured prior to the 19 Hamilton Trust attempts to write an exception to the chapter 11

debtor’s statutory authority to modify secured creditor rights for loans that

mature prepetition. The statutory text does not contemplate such an

exception. The final enactments codified as § 1322(b)(2) and § 1123(b)(5)

evidently were the result of Congress’s protracted consideration of

competing policy concerns and represent its best efforts to balance the

rights of debtors and secured creditors in bankruptcy. Cf. In re Seidel, 752

F.2d at 1385-86; In re Brock, 628 B.R. at 510. We will not second-guess

Congress’s carefully crafted statutory scheme.

2. Feasibility.

a. The applicable standards for feasibility.

To confirm a subchapter V plan, all the requirements set forth in

§ 1129(a) must be met, other than the requirement imposed on individual

debtors to commit their disposable income over five years. § 1191(a).

Section 1129(a)(11) requires the debtor to prove that “[c]onfirmation of the

plan is not likely to be followed by the liquidation, or the need for further

financial reorganization, of the debtor or any successor to the debtor under

the plan, unless such liquidation or reorganization is proposed in the

plan.” This feasibility requirement is a critical factor for every proposed

chapter 11 plan. See In re Bashas' Inc., 437 B.R. 874, 915 (Bankr. D. Ariz.

bankruptcy filing. Indeed, in Seidel the conversion of the secured creditor’s rights from security interest into a post-foreclosure judgment lien did not render § 1322(b)(2) inapplicable. Id. at 1386-87. 20 2010) (stating that feasibility “is the most important element of § 1129(a)”).

In the Ninth Circuit, a plan is feasible under § 1129(a)(11) if the plan

proponent demonstrates that the plan “has a reasonable probability of

success.” Acequia, Inc. v. Clinton (In re Acequia, Inc.), 787 F.2d 1352, 1364 (9th

Cir. 1986). It is well settled that a debtor is not required “to prove that

success is inevitable[.]” Comput. Task Grp., Inc. v. Brotby (In re Brotby), 303

B.R. 177, 191 (9th Cir. BAP 2003) (citing In re WCI Cable, Inc., 282 B.R. 457,

486 (Bankr. D. Or. 2002)). The Ninth Circuit has explained that the purpose

of the feasibility requirement “is to prevent confirmation of visionary

schemes which promise creditors and equity security holders more under a

proposed plan than the debtor can possibly attain after confirmation.” Pizza

of Haw., Inc. v. Shakey’s, Inc. (In re Pizza of Haw., Inc.), 761 F.2d 1374, 1382

(9th Cir. 1985) (quoting 5 Collier on Bankruptcy ¶ 1129.02[11] (15th ed.

1984)).

If all classes of creditors vote to accept the subchapter V plan, the

debtor need not prove anything more than she is reasonably likely to be

able to perform her plan obligations as required under § 1129(a). But where

one or more classes of impaired creditors do not accept the plan and

§ 1129(a)(8) or (10) are not met, a court may confirm the plan only if it

“does not discriminate unfairly, and is fair and equitable, with respect to

each class of claims or interests that is impaired under, and has not

accepted, the plan.” § 1191(b). Because no creditors accepted or voted for

21 the Plan, Curiel did not satisfy the requirements of § 1129(a)(8) or (10) and

was required to cramdown the plan under § 1191(b).

Section 1191(c) states the “[r]ule for construction” for purposes of

§ 1191(b) and determining whether a “plan is fair and equitable with

respect to each class of claims or interests.” It sets forth the three minimum

requirements a subchapter V cramdown plan must meet to be considered

“fair and equitable.” First, it incorporates the requirements of

§ 1129(b)(2)(A) for secured claims. § 1191(c)(1). Second, the plan must

provide the required disposable income. § 1191(c)(2). Third, the debtor

must prove either that she “will” be able to make all payments under the

plan, or there is a reasonable likelihood she will make all plan payments

and appropriate remedies are provided in the event of a default.7

§ 1191(c)(3). 8 This third requirement requires a harder look at feasibility

than otherwise conducted under § 1129(a)(11) alone.9 In re Samurai Martial

7 The bankruptcy court is not limited to the three enumerated requirements set forth in § 1191(c). The subsection states that whether the plan is fair and equitable includes those requirements. Because the term “includes” is not limiting, a court may consider other relevant factors as well. § 102(3). 8 As originally enacted, § 1191(c)(3)(A) included both tests for feasibility, while

§ 1191(c)(3)(B) added the requirement for appropriate remedies in the event of a default. The Bankruptcy Threshold Adjustment and Technical Corrections Act, Pub. L. No. 117- 151, § 2(f), 136 Stat. 1298, 1299 (2022) (hereinafter “BTATCA”) separated the standards for feasibility and now requires proof of appropriate remedies only where the debtor proves a reasonable likelihood that she will make the plan payments. This provision of BTATCA applies retroactively to cases, such as this one, that were commenced on or after March 27, 2020, and were pending on the effective date of June 21, 2022. BTATCA § 2(h)(2). 9 Section 1191(c)(3)(A) is the more stringent of the two alternatives as it requires

22 Sports, Inc., 644 B.R. 667, 698 (Bankr. S.D. Tex. 2022) (feasibility under

§ 1191(c)(3) differs from “the more relaxed feasibility test that § 1129(a)(11)

contains.”); In re Pearl Res. LLC, 622 B.R. 236, 269-70 (Bankr. S.D. Tex. 2020);

SBRA Guide at 157.

In this instance, neither § 1129(a)(8) nor (a)(10) were satisfied, and

Curiel was forced to cramdown her Plan under § 1191(b). Hamilton Trust

does not contend that Curiel’s Plan was unfairly discriminatory, that it

failed to meet the requirements of § 1129(b)(2)(A), or that Curiel did not

commit the required disposable income under § 1191(c)(2). The parties’

citations to § 1191(b) and (c)(3) suggest that they understood the

bankruptcy court was required to perform a more rigorous examination of

feasibility to determine if the Plan was fair and equitable under the

requirements set forth in § 1191(c). They do not, however, address the

applicability of the different standards provided by § 1191(c)(3)(A) and

(B).10

that the subchapter V debtor show that she “will” be able to make all the required payments. See In re Channel Clarity Holdings LLC, 2022 WL 3710602, at *16 (Bankr. N.D. Ill. July 19, 2022); SBRA Guide at 157. Alternately, a debtor can still show that it is reasonably likely she will be able to make all payments, but she must now also show that the plan includes “appropriate remedies” in the event of default. Thus, § 1191(c)(3)(B) also requires more than § 1129(a)(11) alone. SBRA Guide at 157. 10 Judge Bonapfel has cautioned in the SBRA Guide: “It is unclear whether the

additional requirements [§ 1191(c)(2) and (c)(3)] apply when only the secured creditor rejects the plan.” SBRA Guide at 140 (cleaned up). At least two bankruptcy courts have applied the disposable income requirement imposed by § 1191(c)(2) and the feasibility/remedy requirement of § 1191(c)(3) as additional factors to the fair and equitable test to nonconsenting secured creditors under § 1191(b). In re Pearl Res. LLC, 23 On appeal, Hamilton Trust argues only that Curiel failed to prove the

feasibility of her Plan, without discussing the applicable standard. It does

not question the appropriateness of the Plan remedies upon default.11 Nor

did it argue that Curiel was required to prove that she “will” be able to

make her Plan payments under the more stringent requirements of

§ 1191(c)(3)(A). We, therefore, turn to the limited question presented on

appeal as to Plan feasibility: whether Curiel proved that she is reasonably

likely to be able to make her Plan payments. Hamilton Trust has forfeited

any other arguments on feasibility by not specifically and distinctly raising

them. Christian Legal Soc'y v. Wu, 626 F.3d 483, 487–88 (9th Cir. 2010);

622 B.R. at 267-69; In re Moore & Moore Trucking, LLC, 2022 WL 120189, at *6-7 (Bankr. E.D. La. Jan. 12, 2022). In this instance, however, § 1191(c)(3) was clearly invoked because no class of creditors, including the unsecured creditors, accepted the Plan. 11 Curiel’s Plan provided that in the event of a default Hamilton Trust could

serve a notice of default and give Curiel at least sixty days to cure the default. If the default was material, Hamilton Trust “may: (i) take any action permitted under bankruptcy or non-bankruptcy law to enforce the terms of the Plan; (ii) seek liquidation of nonexempt assets pursuant to § 1191(c)(3)(B); (iii) seek to remove the Debtor as a DIP; and/or (iv) move to dismiss this case or to convert this case to Chapter 7 pursuant to § 1112(b).” We note the dearth of cases discussing what are, or are not, appropriate remedies under § 1191(c)(3)(B)(ii). But we agree with the bankruptcy court’s observation in In re Channel Clarity Holdings LLC, 2022 WL 3710602, at *16, that merely allowing creditors to ”pursue remedies under applicable law if Debtor should default is a toothless remedy.” The requirement under § 1191(c)(3)(B)(ii) that the remedies provided be “appropriate” suggests that they should be tailored to the situation. Curiel could bolster the default remedies to provide for a prompt auction of the Properties, a stipulated foreclosure, or an automatic deed in lieu of foreclosure. The prospect of an immediate, certain, and inexpensive remedy would increase Curiel’s incentive to obtain funding for the balloon payment and decrease the prejudice to Hamilton Trust if she is not successful. 24 Brownfield v. City of Yakima, 612 F.3d 1140, 1149 n.4 (9th Cir. 2010). Even

under this less restrictive standard, we conclude that confirmation was

clearly erroneous.

b. Ability to make monthly Plan payments.

It is Curiel’s burden, as the Plan proponent, to present concrete

evidence to establish that she has sufficient cash flow to maintain her

ongoing personal expenses while funding all Plan payments. See In re Pizza

of Haw., Inc., 761 F.2d at 1382; 7 Collier on Bankruptcy ¶ 1129.02 (16th ed.

2023). And while feasibility under § 1129(a) presents a relatively low

threshold, it still depends on adequate evidence. Legal Serv. Bureau, Inc. v.

Orange Cnty. Bail Bonds, Inc., (In re Orange Cnty. Bail Bonds, Inc.), 638 B.R.

137, 148 (9th Cir. BAP 2022) (citing In re Brotby, 303 B.R. at 191). To this end,

“[f]actual support must be shown for the Debtor’s projections.” In re

Hobble-Diamond Cattle Co., 89 B.R. 856, 858 (Bankr. D. Mont. 1988). “The use

of the word ‘likely’ in Section 1129(a)(11) requires the Court to assess

whether the plan offers a reasonable ‘probability of success, rather than a

mere possibility.’” In re Sanam Conyers Lodging, LLC, 619 B.R. 784, 789

(Bankr. N.D. Ga. 2020) (quoting In re Aspen Vill. at Lost Mountain Memory

Care, LLC, 609 B.R. 536, 543 (Bankr. N.D. Ga. 2019)). Thus, “[t]he mere fact

that the bare numbers in the income and expense projections provided in

the plan demonstrate an apparent surplus to adequately fund the plan is

not enough to meet the burden on feasibility.” In re Kowalzyk, 2006 WL

3032145, at *5 (Bankr. D. Minn. 2006).

25 Curiel relies heavily on her own statements, submitted in her

declarations, that she can perform her Plan obligations and that she will be

able to refinance or sell the Properties to make the balloons payments. She

also submitted a brief declaration from Hernandez that he would

contribute at least $3,000 per month towards Curiel’s Plan payments.

Neither Curiel, nor Hernandez, were cross-examined by Hamilton Trust.

Instead, Hamilton Trust contends that the declarations are contradicted by

her historical income while in bankruptcy. It also argues that the absence of

any meaningful evidence as to the finances of either Hernandez or Lucky 7

should preclude Curiel from relying on these sources of income to prove

she will be able to make her monthly Plan payments.

Hamilton Trust takes particular issue with Curiel’s dependence on

Lucky 7 in general and on the proceeds from its SBA loan in particular. It

notes that $14,000 of Curiel’s projected monthly income of $18,000, or 78%

of her total income, comes from Lucky 7 directly or indirectly. Curiel also

admits that the SBA loan proceeds diminished from $399,000 in February

2022 to $266,983.59 when she filed her brief in support of confirmation on

November 23, 2022. Hamilton Trust argued this reflected that Lucky 7 was

using more than $16,000 per month at the time of confirmation. Curiel

disagreed with Hamilton Trust’s characterization of Lucky 7’s use of the

SBA loan proceeds as evidence of a monthly “burn rate,” but she admitted

that Lucky 7 had used some of the proceeds “as operating capital and to

pay down some of its existing debt.” She did not, however, provide any

26 evidence or details concerning Lucky 7’s current finances or use of the SBA

loan proceeds.

The only evidence of Lucky 7’s finances in the record came from

Hamilton Trust, not Curiel. As part of its confirmation objection, Hamilton

Trust submitted a Periodic Report Regarding Value, Operations, and

Profitability of Entities in Which the Debtor’s Estate Holds a Substantial or

Controlling Interest previously filed by Curiel for Lucky 7 in September

2022. The report disclosed the balance sheet for Lucky 7 as of December 31,

2021, attached to its federal tax return, which showed a negative cash

balance and a loan to shareholder as its only assets. The report also

attached a profit and loss statement as of December 2021, which showed a

loss of $19,951.05. Curiel discounted the relevance of the financials as

skewed by the Covid pandemic. But there is no evidence of Lucky 7’s

financial performance in 2022, apart from its receipt of the SBA loan. Curiel

has also downplayed the significance of Lucky 7’s obligation to repay the

SBA loan, noting that its $1,916 monthly loan payments do not start until

January 2024. Again, however, there is no evidence in the record showing

how the SBA loan repayments may affect Lucky 7’s finances, much less its

ability to underwrite Curiel’s Plan over the five-year term.

The absence of any evidence regarding Lucky 7’s finances, including

the SBA loan proceeds, is only magnified by the problems surrounding

Curiel’s financial evidence supporting feasibility. Both Curiel and the court

relied on the MORs to support their feasibility arguments. MORs are

27 recognized as “the life blood” of chapter 11, “enabling creditors to keep

tabs on the debtor’s post-petition operations.” In re Aurora Memory Care,

LLC, 589 B.R. 631, 639 (Bankr. N.D. Ill. 2018) (citing In re Berryhill, 127 B.R.

427, 433 (Bankr. N.D. Ind. 1991)). Courts regularly scrutinize the debtor’s

MORs to gauge the feasibility of a proposed plan. See, e.g., In re Hao, 644

B.R. 339, 348 (Bankr. E.D. Va. 2022); In re Allied Consol. Indus., Inc., 569 B.R.

284, 293-94 (Bankr. N.D. Ohio 2017); In re Augusto's Cuisine Corp., 2017 WL

1169537, at *10-11 (Bankr. D.P.R. Mar. 28, 2017); In re Mangia Pizza Invs., LP,

480 B.R. 669, 703 (Bankr. W.D. Tex. 2012).

The bankruptcy court agreed with Curiel that her accumulation of

cash reserves reflected in her MORs over the course of her bankruptcy

provided evidence that her financial condition had improved and

supported her ability to perform her Plan obligations. Yet, some further

examination is required. Curiel was paying her secured creditors roughly

half of her Plan obligations. As Hamilton Trust’s amended claim showed,

the $3,000 per month adequate protection payments it was receiving were

insufficient to cover the accruing postpetition interest, albeit barely. And

because Curiel concedes that Hamilton Trust is an oversecured creditor, its

claim increased over the course of the bankruptcy by a small amount of

postpetition interest (accruing at 5%), together with other charges and

attorney fees. See § 506(b). Similarly, her combined payments to Daskalakis

increased from $2,000 per month in adequate protection to $4,781 per

month under the Plan. It is unclear whether the $2,000 adequate protection

28 payment was sufficient to cover all of the interest accruing on Daskalakis’

two judgment liens, or if those secured claims increased during the

pendency of the bankruptcy as well. Regardless, the net effect of the Plan

obligations was to eliminate Curiel’s monthly cash cushion by which she

accumulated her cash reserve. Moreover, Curiel committed $35,000 of this

reserve to pay the trustee’s administrative expense in full and $20,000

toward her counsel’s fees on the effective date.

Curiel’s monthly Plan obligations totaled $12,050, without adjusting

for Hamilton Trust’s amended claim. She disclosed that her personal

monthly expenses, including expenses for the Properties, totaled an

additional $5,647. Her projected monthly expenses, therefore, totaled

$17,697. Curiel projected that she would have monthly income of $17,895 to

satisfy these expenses and Plan payments. Thus, even under her own

projections, she had only $198 in net monthly income at the beginning of

her Plan payments. Over the first three years of the Plan, she projected that

her net monthly income would fluctuate between $95 and $252 per month

until she paid off her attorney fees. She also expected that her monthly net

income would increase from $584 to $601 over the last two years of the

Plan.

Curiel’s projected monthly net income was at odds with what she

reported throughout her bankruptcy. At the time Hamilton Trust opposed

confirmation on November 13, 2022, Curiel had submitted her MORs for

February through September 2022. Those reports detailed monthly income

29 ranging from $10,555 to $18,306, resulting in average monthly income of

$12,581. Curiel proposed to make monthly Plan payments that alone

totaled $12,050. According to Hamilton Trust, the MORs established that

Curiel’s actual finances left a sizable shortfall to cover the remainder of her

monthly obligations, estimated to exceed $5,000.

Curiel addressed this shortfall by stating that she was increasing her

wages from Lucky 7 and was adding a significant monthly contribution

from her non-debtor partner Hernandez. Curiel explained that she had

been taking a minimal salary of $31,000 annually to help Lucky 7 get

through the Covid pandemic. But beginning August 1, 2022, Lucky 7

would increase her wages to $4,500 per month to “offset rising inflation.”

Her MORs reflected that her monthly wages varied significantly and were

often received in bunches; they ranged from $1,620 to $4,800. Curiel’s MOR

for August 2022 disclosed $3,230 in wages. Her September report showed

only $1,620 in wages, but for the first time also included $3,300 for

“company/officer income.” No explanation for the company/officer income

was provided. Given the closeness of the issue, it is significant that Curiel

projected her gross monthly income would be used for her personal and

Plan obligations. That is, she expected all of her monthly wages would be

applied to her expenses without any reduction for taxes.

Curiel’s Plan also depends heavily on her receiving $3,000 per month

from Hernandez, who also works at Lucky 7. Voluntary plan contributions

from friends and relatives of the debtor typically are viewed with

30 skepticism and are disfavored. See, e.g., In re Gedda, 2015 WL 1396605, at *4

(Bankr. M.D. Fla. Mar. 24, 2015) (chapter 11); In re Deutsch, 529 B.R. 308,

312–13 (Bankr. C.D. Cal. 2015) (chapter 13). Though Hernandez declared

that he would, and could, make the monthly contributions to Curiel’s Plan,

he has not disclosed his gross or net monthly income, or otherwise

substantiated his income. The MORs reflect that, beginning in April 2022,

Hernandez did contribute to Curiel on a monthly basis. But his

contributions between April and September 2022 ranged between $825 and

$987.50. This is a far cry from the $3,000 per month contemplated by her

We agree with the bankruptcy court that if one were to accept

Curiel’s projected income and expenses, feasibility would be a very close

question. We also understand that we must give due deference to the

bankruptcy court’s findings. See Cardenas v. Shannon (In re Shannon), 553

B.R. 380, 387 (9th Cir. BAP 2016). But “sheer optimism and hopefulness,

without more, is not sufficient to support a finding of feasibility.” In re Om

Shivai, Inc., 447 B.R. 459, 463 (Bankr. D. S.C. 2011); see also In re Walker, 165

B.R. 994, 1004 (E.D. Va. 1994) (“sincerity, honesty and willingness are not

sufficient to make the plan feasible, and neither are visionary promises”

(cleaned up)). Curiel’s MORs undermine her projections. They similarly

undermine the bankruptcy court’s inference based on the projections that

Curiel’s income was reasonably sufficient to support performance of her

Plan. Her calculations suggest that if everything were to go as projected,

31 she initially would have just enough to perform her Plan obligations.

However, her monthly reporting cannot be reconciled with the projections

or the bankruptcy court’s feasibility findings. More specifically, there is no

reliable, concrete evidence to support that Lucky 7 will be able to fund the

necessary income—that Curiel will be able to contribute $4,500 in gross

monthly income from her wages and receive $3,000 from Hernandez. See In

re Aurora Memory Care, LLC, 589 B.R. at 642 (“Optimistic but hollow

declarations from a debtor’s principal about hopes for funding do not do

the job.” (cleaned up)).

Additionally, Curiel’s expenses are understated. She did not revise

her projections to include Hamilton Trust’s amended claim. Under the

terms of her Plan, Curiel’s monthly Plan payment should increase to $6,020

instead of the original monthly Plan payment of $5,779. This $241 increase

in monthly payments ($6,020 - $5,779 = $241) alone would eliminate any

positive monthly net income even under her projections over the first three

years. Similarly, Curiel’s MORs reflect that some of her personal expenses,

specifically her rent, groceries, and payments to a bookkeeper, exceeded

the budgeted amounts she projected as of the date of confirmation.12

12Curiel’s MORs reflect that Curiel’s rent increased from $1,200 to at least $1,300 per month beginning in August 2022. While Curiel included minor increases for other expenses over the term of her plan, her personal rent was never adjusted in the projections. Additionally, Curiel’s MORs include an expense for a bookkeeper that ranged from $272 to $500 per month between February through September 2022, though there is no discussion whether such fees were ordinary expenses or related to the bankruptcy. 32 Adjusted to reflect the increase in monthly payment to Hamilton Trust and

a $100 increase in her personal rent, Curiel has a negative monthly income

ranging between $88 and $246 over the first three months of the Plan

(without taking into account the taxes withheld from Curiel’s wages).

In a different case these amounts might be dismissed as trivial. In this

instance, however, they serve to confirm that Curiel’s finances do not

support feasibility on this record. Curiel appears to acknowledge the risk

inherent in relying on Hernandez for $3,000 per month over the 60-month

term of her Plan. She argued to the bankruptcy court that she would be

able to meet her Plan obligations even without the $180,000 budgeted from

Hernandez over its term. In her Plan, Curiel stated that even without his

monthly contribution, “she would earn this as follows: the current

$4,500/month which the business already pays her + $3,000 x 60 months is

$180,000, and her corporation has $399,000 sitting in the bank.” Again, the

unexplained and significant reduction in Lucky 7’s loan proceeds suggests

otherwise.

On these facts, we are left with the definite and firm conviction that

Curiel did not carry her burden to prove that the Plan had a reasonable

probability of success. Curiel’s own projections suggest a razor thin

monthly net income to meet her monthly personal and Plan obligations.

Her positive monthly net income is at risk to the smallest changes to her

finances, as demonstrated by her increased payments for personal rent and

to Hamilton Trust to account for its amended claim. Her projections are

33 simply not realistic given her historical income stated in her MORs. Yet,

she has not reconciled her actual expenses such as her increased rent,

Hamilton Trust’s increased claim, or the taxes withheld from her wages.

These concerns only heighten the need for evidence that Lucky 7’s finances

can bear the weight Curiel’s Plan places on them. Yet, the record lacks any

concrete or specific evidence demonstrating that Lucky 7 will be able to

fund Curiel’s and Hernandez’s income at the required levels while paying

its monthly rent. Though Curiel’s explanation that Lucky 7’s SBA loan was

needed to address the effects of the pandemic is understandable, there is

simply no evidence as to how Lucky 7 was able to rebound in 2022. Bluntly

stated, it is unclear whether Curiel’s actual and projected income is

dependent on Lucky 7’s diminishing loan balance. The only evidence of

Lucky 7’s finances show that it lost money in 2021 while paying Curiel only

$36,000 in salary.

Given Curiel’s dependence on Lucky 7’s finances to fund her Plan

obligations, and the discrepancy with her historical income demonstrated

in her MORs, we conclude that the court’s determination of feasibility

under § 1129(a) is not supported by the record and was clearly erroneous.

c. Curiel’s ability to make the balloon payments.

Hamilton Trust also argues that Curiel failed to prove a reasonable

likelihood that she would be able to make the required balloon payments

to her secured creditors at the end of her Plan. The court did not

specifically address the prospects of Curiel’s ability to make the required

34 balloon payments to her secured creditors. Rather, it appears to have been

factored into its general analysis of feasibility under § 1129(a)(11).

Even under § 1129(a)(11), courts are required to determine whether a

sufficient refinancing or sale is reasonably likely to occur where a debtor

intends to fund future balloon payments in that manner. See Pineda Grantor

Tr. II v. Dunlap Oil Co. (In re Dunlap Oil Co.), 2014 WL 6883069, at *16 (9th

Cir. BAP Dec. 5, 2014); 2010–1 CRE Venture, LLC v. VDG Chicken, LLC (In re

VDG Chicken, LLC), 2011 WL 3299089, at *6 (9th Cir. BAP Apr. 11, 2011)

(citing F.H. Partners, L.P. v. Inv. Co. of the Sw., Inc. (In re Inv. Co. of the Sw.,

Inc.), 341 B.R. 298, 311, 313–14, 316–17 (10th Cir. BAP 2006)); see also In re

Bashas' Inc., 437 B.R. at 915–16 (listing cases). The debtor must establish this

reasonable likelihood by presenting credible, concrete evidence

demonstrating the debtor’s prospects for selling or refinancing the

property. See In re VDG Chicken, LLC, 2011 WL 3299089, at *6; In re Bashas'

Inc., 437 B.R. at 915–16.

Curiel explains that after her monthly plan payments, she believes

that the value of the Properties will exceed the total remaining secured debt

and support either refinancing or a sale of the Properties. She concludes

that either scenario would pay the secured creditors in full. In support of

her argument, Curiel projects that her Properties would, at least, retain

their combined current value of $1,530,000. She calculated that her total

secured debt would be $1,301,262.12 in January 2029. That calculation,

35 however, was based on several errors that are individually small but

cumulatively significant.

First, Curiel originally calculated her future secured debt balance

based on six years of Plan payments. At the court’s request, Curiel agreed

to reduce the term of the Plan payments to the secured creditors to five

years with the balloon payments to be made by the 60th month. Curiel

never adjusted her calculations for the shorter term which necessarily

results in higher payoffs needed to satisfy her secured debt.

Second, as previously referenced, Hamilton Trust increased its

original claim amount from $751,582 to $782,971 shortly before the

confirmation hearing. The amended amount should result in an increased

monthly payment but would also increase the amount of the balloon

payment.

Finally, Curiel’s calculations in her confirmation brief reflected that

all of the adequate protection payments on the Daskalakis judgment liens

would be applied to reduce the principal of the smaller judgment lien.

Curiel offers no support for this purported principal deduction, or for

ignoring the other judgment lien. 13 We, therefore, assume that the adequate

13 We offer no opinion as to whether the adequate protection payments covered all interest on Daskalakis’ secured claims. But even if these payments somehow were applied to the smaller judgment lien, Curiel has not presented evidence of the application to both interest and principal. Not all of the payments could properly be applied to principal. Moreover, it is unclear why the larger judgment would not accrue interest or receive adequate protection payments. 36 protection payments were applied to interest on Daskalakis’ two judgment

liens and the principal amounts remain the same.

Adjusting the term of Curiel’s Plan to 60 months, the amounts owed

to the secured creditors would be: Secured Creditor Total Per Balance at Balance at Balance at Curiel Month 72 Month 60- Month 60- Per Curiel Trust paid Trust paid $5,779/mo $6,020/mo

Orange County Tax Collector $ 8,944 $ - $ - $ - Hamilton Trust (amended claim) $ 782,971 $ 729,634 $ 765,630 $ 747,661 Daskalakis Abstract #1 $ 157,500 $ 130,929 $ 150,397 $ 150,397 Daskalakis Abstract #2 $ 464,100 $ 432,485 $ 443,170 $ 443,170 Orange County Transportation $ 10,550 $ 8,214 $ 10,074 $ 10,074 Total Secured Debts $ 1,424,065 $ 1,301,262 $ 1,369,272 $ 1,351,303

Curiel asked the bankruptcy court to assume that the Properties

would hold their value over a five-year period. 14 The parties have focused

on the sale of the Properties to fund the balloon payments, and no evidence

was presented to support the refinance of the Properties in five years. Even

if we accept that the Properties will retain their present value through the

14 Curiel submitted a declaration testifying that she expects one or both Properties to appreciate in value over the Plan term. The only basis she offers for this expectation is that both Properties are fully rented out. Her assumption assumes no deterioration over her five-year plan term. The Sycamore Property is used for monthly rentals and the N. East Property is used as a tire shop. The Plan initially provides for $100 per month for real property maintenance, repair and upkeep for each property and incrementally increases that amount to $300 per month by the end of the Plan term. There is no evidence as to what amount of maintenance, repair, or upkeep should reasonably be required, or the effect on the Properties’ valuation. These limited amounts, with no evidence as to the required maintenance for each property, calls into question the reasonableness of Curiel’s future valuation of the Properties. 37 next five years, a sale at $1,530,000 results in a thin amount of equity above

the balance of secured debt. All parties have estimated the costs of sale at

8% of the value, and we do the same. Under any scenario a sale would

result in less than a $60,000 margin for payment of all projected balloon

payments: Total Per Balance at Balance at Balance at Curiel Month 72 Month 60- Month 60- Per Curiel Trust paid Trust paid $5,779/mo $6,020/mo

Estimated Value of Properties $ 1,530,000 $ 1,530,000 $ 1,530,000 $ 1,530,000 Less Costs of Sale at 8% $ (122,400) $ (122,400) $ (122,400) $ (122,400) Sale Proceeds Net of Closing $ 1,407,600 $ 1,407,600 $ 1,407,600 $ 1,407,600 Total Secured Debt Remaining $ (1,424,065) $(1,301,262) $(1,369,272) $(1,351,303) Estimated Equity $ (16,465) $ 106,338 $ 38,328 $ 56,297

Curiel’s declaration demonstrates our overarching concern regarding

the valuation issue: she failed to lay any foundation regarding her expertise

to opine on the future value of the Properties. A debtor may offer her lay

opinion on the current value of the real property she owns. See In re

Cocreham, 2013 WL 4510694, at *3 (Bankr. E.D. Cal. Aug. 23, 2013) (citing

Fed. R. Evid. 701). Here, Curiel relied upon appraisals to establish the

current value of the Properties. An opinion of future valuation, however,

requires expertise in the types of information that might be relevant to an

appraiser in establishing the value of the property. Id. (citing Barry Russell,

Bankruptcy Evidence Manual, Vol. II, § 701.2, p. 784–85 (2012–13)). Curiel’s

bald declaration of future value failed to establish her expertise to value the

Properties in five years. Rather, she has only provided her belief that the

38 Properties will retain their current value or appreciate. Because the record

fails to establish her qualifications to render such an opinion, or the basis

for such an opinion, Curiel failed to prove even a reasonable likelihood that

she would be able to refinance or sell the Properties in satisfaction of her

secured debt.15

For these reasons, we REVERSE the bankruptcy court’s Plan

confirmation order and REMAND the case for further proceedings. We do

so largely because the record does not contain sufficient evidence to carry

the debtor’s burden even under the general feasibility standard of

§ 1129(a)(11). On remand, the parties and the court are free to address

feasibility in further detail consistent with the applicable legal standards.

We are sensitive to, and acknowledge, the reality that cases under

subchapter V differ in timing and temperament from other chapter 11

cases. Still, Curiel could offer more evidence about the financial

performance of her business in the present and recent past, to provide

concrete evidence that Lucky 7 can afford to increase her salary

independent of its remaining loan proceeds. As we have pointed out, the

evidence she offered to date is sparse at best, and inconsistent with her

own predictions at worst. Because her partner’s contributions are a key

element of the Plan, additional evidence should also be provided about her

partner’s ability to make the contributions that he has promised. Curiel

15 Given our decision, we need not review Hamilton Trust’s other evidentiary objections, so we decline to address them. 39 could also offer expert testimony about the prospects of her business and

the likelihood of a refinancing or sale under the Plan, though we

acknowledge that this only works if Curiel can afford to hire an expert.

These questions and concerns are left for the parties and the

bankruptcy court to consider on remand as it sees fit.

B. Appeal from denial of relief from stay motion.

Hamilton Trust also challenges the denial of relief from stay because

Curiel conceded at confirmation that she lacked equity in her Properties. It

relies on § 362(d)(2), which permits the bankruptcy court to grant relief

from stay with respect to property when there is no equity in such property

and that property is not necessary to an effective reorganization. See Sun

Valley Ranches, Inc. v. Equitable Life Assurance Soc’y of the U.S. (In re Sun

Valley Ranches, Inc.), 823 F.2d 1373, 1376 (9th Cir. 1987). Hamilton Trust

only addresses the equity prong of § 362(d)(2) and does not address

Curiel’s need of the Properties for her reorganization. Indeed, the totality of

its argument on appeal is comprised of two sentences.

The bankruptcy court trailed the relief from stay motion and took the

Plan confirmation hearing first. After confirming the Plan, which obviously

depends upon retention and use of the Properties, the court denied the

relief from stay motion without explanation.

We are remanding the case for further proceedings on confirmation.

It is far from certain on this record that Curiel cannot propose a

confirmable plan on remand. Any such plan is likely to depend upon the

40 retention and use of the Properties. Accordingly, we VACATE and

REMAND the denial of the relief from stay motion. On remand, the

bankruptcy court may consider whether, in light of the reversal of the Plan

confirmation order, there is any basis for concluding that the Properties are

necessary to an effective reorganization.

CONCLUSION

For the reasons set forth above, we REVERSE and REMAND the Plan

confirmation order for further proceedings. We also VACATE and

REMAND the denial of the relief from stay motion for further

consideration in light of the reversal of the Plan confirmation order.