District Court Affirms Bankruptcy Court’s Order Allowing Dairy Farm to Incur Additional Debt as Secured Creditor was Adequately Protected.

The debtors, a dairy operation, purchased their farm from lender one, which owned the property because of a prior foreclosure. The debtors executed a security agreement granting lender one a blanket security interest in the land, equipment, and livestock. The debtors defaulted because of milk production problems and filed for Chapter 12 bankruptcy protection. The debtors then filed a motion to incur secured debt from lender two to construct a waste storage facility and a rotational grazing facility. The bankruptcy court conditionally granted the motion under 11 U.S.C. §364(d), and the district court affirmed. The bankruptcy court did not err in determining that debtors were providing adequate protection to lender one by providing an “indubitable equivalent” of lender one’s interest in the property. The court also found that the bankruptcy court did not err in finding that the debtors would have sufficient revenue to pay the finance charges. First Sec. Bank & Trust Co. v. Vander Vegt, No. 12-02144, 2014 U.S. Dist. LEXIS 71781 (N.D. Iowa May 27, 2014), affirming,  In re Vander Vegt, No. 12-02144, 2013 Bankr. LEXIS 4354 (Bankr. N.D. Iowa Oct. 16, 2013).


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