The Court found “cause” to dismiss or convert a pro se Debtor’s subchapter V bankruptcy case under § 1112(b) based on 1) Debtor’s failure to comply with an order of the Court requiring her to mail complete plan packages by a certain date; and 2) Debtor’s inability to propose a confirmable plan. Debtor continued to file multiple amendments and corrections to the plan after the Court-imposed deadline to mail plan packages that included the entire plan in one document, preventing creditors and parties in interest from having sufficient time to evaluate the proposed plan before the objection and voting deadline. Debtor’s plan and amendments did not comply with the requirements of the Bankruptcy Code regarding classification and treatment of secured claims and in other respects. Debtor’s filings demonstrated her inability to propose a confirmable plan absent assistance of counsel. Debtor’s pro se status did not establish unusual circumstances that would prevent the Court from dismissing or converting Debtor’s case. Dismissal, rather than conversion, was in the best interests of creditors and the estate where the UST expressed a preference for dismissal; Debtor’s properties had insufficient equity from which a chapter 7 trustee could make a meaningful distribution; and Debtor intended to maintain regular payments on various claims. Finally, because Debtor’s violation of the Court’s order was not willful, the Court did not impose refiling restrictions under § 109(g).

The UST sought to dismiss or convert the debtors’ jointly administered chapter 11 cases based on the debtors’ failure to maintain insurance. The Court found that “cause” existed under § 1112(b)(4)(C) based on the Debtors’ failure to maintain appropriate insurance that poses a risk to the public or to the estate, but ultimately held that the “unusual circumstances” exception applied, and denied the motion. The Debtors committed to file a joint liquidating plan by a date certain committing to distribute the expected $3 million plus of surplus proceeds from the sale of one Debtor’s real property to the estate of the other Debtor to pay its creditors. This scenario is unusual. Debtors were justified in their failure to obtain both property and general liability insurance because of their inability to pay the premiums. The Court required the Debtors to cure the failure to maintain appropriate insurance within a reasonable time fixed by the Court as follows: 1) the Debtor with no real property and little personal property was required to abandon its personal property; and 2) the other Debtor was required to obtain general liability insurance on the real property. Creditors holding mortgage liens against the real property had or could obtain forced place insurance to protect their interests such that the Debtor’s failure to maintain property insurance, while not prudent, did not pose a material risk to the public or to the estate.

Taxing authorities could claim administrative expenses for taxes incurred post-petition, pre-chapter 11 plan effective date, despite filing their claims after the general administrative expense claims bar date. Under § 503(b)(1)(D), taxing authorities are not required to file a request for payment of administrative expense as a condition to allowance of an administrative expense claim. Neither the administrative expense claims bar date order nor the confirmed plan specifically overrode § 503(b)(1)(D)’s exception. However, once property of the estate vested in the debtor on the plan effective date, no further taxes could be incurred by the estate. Consequently, because administrative tax claims are limited to taxes incurred by the estate, the Court disallowed the taxing authorities’ claim for administrative expenses incurred on or after the plan effective date.  

The United States Trustee and the Subchapter V Trustee objected to Debtor’s counsel’s fee application, arguing that the requested fees were not reflective of the results obtained. Debtor’s proposed chapter 11 plan proposed to pay attorney’s anticipated allowed unpaid fees of $210,00 in full at the rate of $5,000 per month while unsecured non-priority creditors would receive only $45,000 over five years. Debtor pursued an adversary proceeding that had the potential to eliminate its primary creditor’s claim and generate substantial funds for the estate, but the litigation was not successful. Had Debtor not pursued the litigation, Debtor’s business would have ceased and unsecured priority and non-priority creditors would have received nothing. The Court determined that under Tenth Circuit precedent, it was required to apply the Johnson factors, including the “results obtained” factor, as well as the § 330 factors to assess the reasonableness of requested fees. However, “results obtained” is only one factor, and the Court in its discretion may give whatever weight to that factor it deems appropriate under the circumstances of the case. In exercising its discretion, the Court determined after applying the §330 and Johnson factors that counsel’s fees should be allowed in the amount requested. Under the circumstances, where Debtor’s only viable alternative was to pursue the litigation in its effort to propose a plan that would provide a dividend to unsecured creditors, the attorney’s decision to perform the services was reasonable and appropriate when the services were rendered. The “results obtained”  included getting a decision on the merits of the adversary proceeding, which all parties agreed had to be resolved before the Court could hold a confirmation hearing, and valuation of the primary secured creditor’s collateral. Even though Debtor did not “win” the litigation, the litigation was of importance to the administration of the estate.