BAP Affirms Confirmed Chapter 12 Plan and Affirms Relief From Stay Based on “Drop Dead” Provision
MSBA Bankruptcy Bulletin
Contributing Editors: Karl Johnson and Kesha Tanabe
In Brooks v First Central Bank McCook (In re Brooks), No. 20-6014 (B.A.P. 8th Cir. Nov. 25, 2020), the Bankruptcy Appellate Panel held that the Bankruptcy Court did not abuse its discretion by granting relief from the automatic stay when the debtor failed to fulfill his obligations under a confirmed plan that provided for relief from stay as a remedy upon default. The debtor acknowledged that he did not make all the payments due under the plan, and the plan did in fact include a “drop dead” provision providing that a secured lender would be entitled to relief from stay as a remedy upon default. The BAP rejected the debtor’s argument that there was no default because a separate provision of the plan provided that the bank agreed to attempt to renegotiate the loan. Specifically, the BAP noted that the plan did not condition the debtor’s obligation to make its plan payments upon the status of such negotiations. The BAP emphasized that relief from the automatic stay under these circumstances is “about Debtor’s obligations under his plan and the consequences of his failure to meet those obligations” and not about 11 U.S.C. § 362. Because there was a default and the plan specifically provided for stay relief as a remedy upon default, the Court did not abuse its discretion by enforcing the terms of the plan.