Facts: A developer defaulted on a loan it obtained to build a condominium complex. The developer filed for chapter 11 bankruptcy protection. Under the court-confirmed bankruptcy plan and in expectation of an improving economy, the developer had three years to sell the complex or refinance the loan to pay the lender in full and avoid foreclosure. The developer remained current on payments under the plan but the economy did not improve as expected, causing the developer to file for chapter 11 bankruptcy a second time before the three years had run. The developer’s second bankruptcy plan proposed to provide the developer ten years to sell or refinance, and reduce the interest rate and the amount owed to the lender.
Claim: The developer sought the bankruptcy court’s confirmation of the second plan, claiming an extraordinary change of circumstances affected its future ability to adhere to the terms of the first plan since the economy did not recover as the developer expected when they entered into the first plan.
Counterclaim: The lender sought the bankruptcy court’s rejection of the developer’s second plan, claiming the developer did not experience an extraordinary change of circumstances since the economy underwent little unforeseen change between the confirmation of the first plan and the filing of the second plan.
Holding: A bankruptcy court held it will not confirm the second plan, since the developer did not experience an extraordinary change of circumstances as the economy underwent little unforeseen change between the confirmation of the first plan and the filing of the second plan. [In re Caviata Attached Homes, LLC (2012) 481 BR 34]