Court Upholds Bankruptcy Rule Barring Plan Modifications With Insufficient Notice.

The debtors defaulted on two loans secured by mortgages on their 144-acre farm.  The farm was divided by a public road, with bare farmland on one side of the road and the other side containing the residence and farm buildings.  Ultimately, the debtors filed Chapter 12 to stave off the sale of the farm at auction.  The debtors filed multiple amended plans so that the farmland could be sold to partially satisfy a secured loan and obtain plan confirmation.  The bankruptcy court approved a plan allowing the private sale of the farmland or the entire farm, but there was no provision that allowed the trustee (or debtor) to divide the farm into multiple tracts.  While the debtor did find a buyer for the farmland, the sale didn’t close before the auction which resulted in a sale to the highest buyer at over $12,000/acre (total selling price of $1.75 million).  However, the debtors claimed that their appraisers valued the property at twice that amount.  The bankruptcy court did not allow for a plan modification that would have given the debtors more time before the sale because there was insufficient time before the scheduled sale remaining when the petition for an amended plan was filed.  On appeal, the court affirmed.  The court determined that bankruptcy rule 90006(c) barred plan modifications without at least 21 days’ notice.  The court also determined that the debtor did not establish that the trustee had a duty to divide the farm into multiple tracts.  Thus, the debtor had the duty to take the necessary steps to get the property divided before the auction.  The court also held that it was not error for the bankruptcy court to conclude that any error that the auctioneer made by indicating that the property could not subdivided except for one or two homes did not drive away prospective buyers.  It was up to prospective buyers, the court held, to undertake their own due diligence as to how the land could be utilized.    The deed to the farm will not be transferred to the buyer because the debtors filed an appeal with the U.S. Court of Appeals for the Third Circuit.  In re Thorpe, No. 15-5239, 2015 U.S. Dist. LEXIS 137997 (E.D. Pa. Oct. 9, 2015).

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