Confirmation of Joint Chapter 12 Plan Denied Where Repayment Terms to Secured Creditor Were Not Commercially Reasonable.

The debtors, including a farm company and two individuals, filed Chapter 12 bankruptcy petitions. A secured creditor filed an objection to the confirmation of their joint plan on the grounds that the debtors’ proposed treatment of the creditor’s personal property secured claim was not commercially reasonable. Although the secured creditor conceded that its claims were substantially undersecured and therefore subject to “cram down,” it objected to the specific terms.  The parties reached an agreement under which the creditor’s secured claims would be collateralized by real property, but the plan was underfunded and the trustee agreed that it was not feasible. The court agreed that the debtors’ proposed repayment terms were well outside of the acceptable parameters that the court could approve. Even if the repayment terms were sufficient, the proposed interest rate was also unreasonable. The 6 % interest rate proposed by the debtors did not give the secured creditor the present value of its personal property secured claims.  Consequently, the court denied confirmation of the joint plan.  In re Howe Farms LLC, No. 13-61601, 2014 Bankr. LEXIS 4385 (Bankr. N.D. N.Y. Oct. 16, 2014).