Sort of Simple Pleasures or Let me see you Stripped.......

Today, I teetered on having a meltdown for reasons that aren't relevant here.  Thankfully, I avoided it.  I really wanted to say "THIS IS WHY CHAPTER 13 FUCKING SUCKS", but I pulled myself back from the cliff.

Anyway, sometimes people like me (see title of blog) need some techniques to get a grip.  Or methods to keep me from saying "Fuck you very much, your honor".

What I try to do is think about things I enjoy and things I look forward to and wouldn't want to jeopardize with a trip to the US Marshal holding pen at the Ronald Reagan Building in Santa Ana. 

So in general I try to think / do some of the following:

Listen to music I like specifically -  Depeche Mode Some Great Reward through Violator with two songs from Playing the Angel. 

Read certain magazines I like -  Harpers, Discover, and Scientific America

Read About the 2013 Seahawks Seasons -  this is very exciting and always makes me feel better!

Think back to when the Huskies won a national title, and the Mariners were relevant, usually with some help from youtube to remind me, it was actually real and not some random altered memory.

Surf Wikipedia Endlessly about random people and random stuff from history.

Anyway, those are my "simple pleasures" to the extent there is anything simple about it.  And for what it is worth,  I am listening to this and reading about this guy.  And I feel much more relaxed...thankfully

Insomnia Inspired Irritability

I titled this post more to show off my kickass alliteration skills -  thank you Mr. Marchbank.  Well actually, it is sort of descriptive.  A bit.  I am having trouble sleeping, I feel inspired, and I am a bit cranky, so go figure.

Anyway, my small, growing and loyal readership has demands of my posts making some sort of point, god forbid they find another blog to read.  The last few posts have alternated between bankruptcy law stuff and another series I am trying to start about teachers.  I haven't had a chance to get to teachers yet (aside from a reference in this post).. 

The origin of the name is that the majority of the world is different than me -  they are not bipolar.  This isn't really suprising to anyone.  So the basic point of the name is to emphasize I am and feel different than most people of the world.

The primary point of the name is pride (in the name of love).  It is a misconception that we bipolar people have a disability (legally bipolar is disability, but I'm not making a legal argument).  We are just different.  I am not going to sit in the psychiatric closet (second place was going to the back of the psychiatric bus).

Therefore, the point of the name is to express to the world I am not ashamed of my condition.  In fact I embrace it.  Before you say "surely you can't be serious", I say - "check out this list, and don't call me Shirley.

Teachers / Professors of Mine - Part I

I think teachers at all levels get a bad rap.  When kids do well, their parents take all the credit, when kids do poorly, teachers take all the blame.  Further, good teachers are often forgotten even by students who appreciated their effort.  Whenever, my friends and I are discussing various teachers / professors it almost invariably leads to which teachers / professor's "mailed it in". 

This outlook really reinforces the worst stereotypes of the profession i.e. lazy teachers with tenure who don't care.  Therefore the purpose of this series will be to discuss teachers I have had at all levels of education with a dash of cynicism and praise for those who did well and those who did not.  I'm going to include the following schools I attended -

Marvista Elementary, Normandy Park, WA 1982 - 1988

Sylvester Middle School, Burien, WA  1988 - 1990

Highline High School, Burien, WA 1990- 1994

University of Washington, Seattle, WA 1994- 1998 -  Note this will emphasize my major of Business / Accounting

University San Diego, School of Law, San Diego, CA -  2003 - 2006

Any classmates from those, feel free to comment.

Boston Marathon Bombers

I warn you in advance this might piss some people off.

I was watching Meet the Press this morning and the entire show was dedicated to the bombing, the perpetrators and the aftermath.  The show cut out to a crowd in Boston chanting -

"U.S.A. , U.S.A....."

Really?  Is this an Olympic hockey game?  World Cup?  Did Michael Phelps win another medal?

I remember thinking the same thing when similar chants were heard outside the White House after Bin Laden was killed. 

Where were these chants when Christopher Dorner was killed?  I bet 95% of non Southern California  residents couldn't even tell you who Dorner was?  I'm serious, if anyone outside SoCal knew about him, please let me know.

Dorner was every bit the terrorist the Boston Bombers were.  People commit horrific crimes all the time.  To me the attention to Boston Bombers, somehow makes me feel that somehow crimes / terror in my neck of the woods are less important.  So let's keep the USA chants on hold until the 2014 World Cup -  we will really need them much more then.

Concept - Part II - Insiders

I think the biggest mistake people make in life is expecting there to be a right answer to every question.  This kind of thinking, leads people to spend endless hours trying to find the right answer when it doesn't exist.

In the practice of law this problem runs rampant.  It almost seems like some practitioners are looking for a button on their computer which says "Do work" ;  "write response" ;  "think for me".  I have a theory on this, but that is another series for another day.

I was in court last week, and the Judge asked me if a certain person was an insider.  I cannot off the top of head give the verbatim definition of an insider per 11 USC 101(31)

The real issue is why does it matter if some party is an "insider" or not?  We could sift through the code and see where it is mentioned and how it is applied in cases.  I can think of a few sections where I know it is mentioned, but I'm sure there are more.  I am going to off the top of my head, and without looking rattle off three situations where I know there are insider issues that could run afoul of the "Concept"

1.  The proposed broker who is going to sell a parcel of real property is a business partner of the debtor.

2.  Class 2 of unsecured creditors is accepted because the debtor's mom and dad are creditors and have    sufficient numerosity to carry the class.

3.  Debtor paid his best friend back a couple weeks before he filed for Chapter 7, in a case where other creditors get nothing.

There are more.  Applying the "Concept" to insiders, we can infer a sub-concept that is goes something to this effect -
     "transactions involving any party shall not benefit insiders of that party at the expense of any other party"

You could probably add something like this to Sub-Concept 1 "...and all transactions with insiders should be clearly and completely disclosed with ample notice for anyone else to object"

Seems pretty obvious to me.

Concept - Part I

I am sure that my tiny, loyal, but growing readership really reads my entries for my intro commentary as opposed to actual substance.  This post is no different, there is some pre-game commentary, in this a quasi self-congratulotory statement.

I think almost anyone who knows me, realizes that I am, um, well different than most.  See the name of this blog.  It goes without saying that I learn things a little differently than most.  Since as early as I can remember, I've never been able to learn by listening to teachers talk.  I spent the vast majority of my classroom time day dreaming, doodling, and by law school playing online poker.  I can honestly say in undergraduate and law school I may have went to office hours or extra study session once or twice.  I am not lying.

I learn things via observation and reading about it.  Regarding reading about the law, I do not read practice guides -  I read the statutes, the cases, and the secondary sources.  By observation, when I am sitting through boring-ass calendars I watch what happens and try to make mental notes about what might be useful later.  Finally, I try to synthezize into some useful broader concepts that help me analyze situations that are novel.

I really think bankruptcy law can be condensed into almost one sentence, which I am more or less paraphrasing from various cases

"the purpose of bankruptcy law is to allow debtors a chance to re-organize (or fresh start)   his/her/their financial affiars, in a manner which is fair and equitable to creditors, equity interests, and any other party in interest"

That is it.  For the purpose of this series we will call this the Concept.  Arrogant, I know.  But I don't give a fuck, it is my blog and I can quote Winston Wolf all I want.

I hate to rag on Chapter 13 some more, but Chapter 13 for the most part is about mechanics.  The means test says you can't deduct that, the applicable commitment period is this, cable bills can't exceed $40, plan payments must be made monthly on the day the case was filed, and the list goes on and on.

That kind of stuff doesn't float my boat.  Nor does chasing down clients for cashier's checks on the day of the confirmation hearing.  I am not into lengthy rules written and unwritten that are about procedures and rules that have nothing to do with my above concept, and more to do with some sort of bizarre power play over debtors and counsel.  If someone feels the need to put down consumer debtors like that, I postulate said person spent most of high school stuffed in a locker,  most of college being that weird guy in your pledge class with a lot of comic books, and most of law school laughed at because he or she thought moot court was real. 

So this series will attempt to apply the "Concept" to certain situations and see if it helps us resolve from some common problems in Chapter 11 and other Chapters as need be.





































 

Legal Status of Terrorists

The recent bombing in Boston was a horrific event.  I will not summarize which is already well known.  This is about the legal status of terrorists. 

There was a lot of discussion (see griping) about the fact the "underwear" bomber was read his Miranda rights after he was apprehended.  Here is a summary of the griping.

The argument that foreign terrorists should not be read their Miranda rights is rooted in the laws of war.  Under the laws of war, "spies" or "saboteurs" are not subject to treatment as prisoners of war and can be dispatched (see killed) relatively summarily.  The United States Supreme Court has held as such.  The factual background behind  Ex Parte Quirin is as interesting as the law. 

On first blush, I tend to agree that foreign terrorists operating in the United States are the effective equivalent of "spies" and therefore are not subject to varous constitutional rights like a regular criminal suspect.  This of course leads to the question -  Who decides whether someone is a spy or a terrorist?

The answer can be found to some degree in Hamdan v. Rumsfeld.  In what I think is an excellent opinion, Justice Stevens explains that both under the Uniform Code of Military Justice, the Geneva Convention, and the common Laws of War, this must determined by a "regularily constituted court".  However, there is a distinction in that in Hamdan the alleged offense was that Hamdan was an "unlawful combatant".  Briefly, summarizing Hamdan was captured abroad in Afghanistan during the initial combat between United States forces and the Taliban.

Another distinction is an "unlawful combatant" is largely a creation of the fertile imagination of the Bush adminstration.  In a nutshell it pre-supposes that some person in foreign country under attack by the United States has in fact no right to in fact be in combat.  As this person is not covered under the Geneva Convetion, he can be subject to a wide range of punishments.  This creates a dangerous precedent in my mind.  The United States conducts military operations in some country.  We take some prisoners and make some unilateral decision that said prisoners are "unlawful combatants" and therefore the Geneva Convention does not apply. 

The only way the "no miranda" argument works is if the alleged terrorist is analogous to a saboteur.  The term unlawful combatant is meangingless in this context.  I think my worry is that the government would start apprehending all sorts of people under the auspices of being "terrorists".  Considering the Obama administration has decided it is ok to kill American citizens with drones, I can't say I trust anyone in the executive branch to make this kind of decision.  Afterall, if terrorists are saboteurs, and a person can be designated a terrorist by the executive, it pretty much gives the executive branch free reign.  And if this can happen to alleged foreign terrorists, it could happen to American citizens next.

I am still not sure how I feel about it.  I think it gives the executive too much power.  But I also believe the laws of war clearly allow detention of foreign military agents conducting "terror".  No easy answer on this.

Chapter 11 v Chapter 13 - Part 6 - The Showdown

The details of our outlay in a Chapter 13 are detailed here.  The estimated gross cost of Chapter 13 is $55,400.

We didn't break down our Chapter 11 outlay yet, but it looks something like this -

Admins -  $15,000
Filing Fee - $1,213
UST Fees for a year -  $2700
Unsecured Creditors -  24 *250 =  $6,000
Uncle Joe if needed -  $10,000 -  this assumes Joe has to kickback his new value to Uncle Joe at some later date.

The tally -  Chapter 13:  $55,400 ;  Chapter 11: $34,913

Money isn't the only consideration.  In a Chapter 13, Joe has to pay via certified funds, which is a cost.  In a Chapter 11, Joe has to complete monthly operating reports, which is some work.  The Chapter 13 discharge is broader than a Chapter 11 discharge.  The Chapter 11 discharge will be entered sooner.  There is no real way to modify a Chapter 11 post-confirmation, the Debtor is in it for the long haul, while in a 13 the Debtor has some modification flexibility.

However, at the end of the day, Joe would be a fool to file a 13 here.  He has far more flexibility in constructing his plan and he saves money.  He gets his discharge faster.  He has control of his plan, not the trustee.  His attorney gets paid more.

The only thing stopping Joe from filing Chapter 11 is fear of the term Chapter 11.  For whatever reason, a lot of debtor's counsel think Chapter 11 is too hard.  Don't sell yourself short.  One of my philosophies on life is don't worry about what you can't do, focus on what you can do, and a large majority of my fellow Debtor's counsel colleagues can do this, I know that for a fact.

I know it is a fact because I figured it out by asking a few veterans some questions, using westlaw, and stealing pleadings off pacer.  Nobody showed me how to do it, I just figured it out.  The good news is anyone who bothers to read this blog is smart enough to figure it out too.  I'll be happy to give you my insight, thoughts, and of course some unsolicited opinions about things you certainly don't care about.  You have to take the good with the bad. ... and there is more good in Chapter 11 than bad. 

Chapter 11 v Chapter 13 Part 5

Now it is time for Joe to confirm his plan of re-organization.  In order for a plan to be confirmed, there 15 elements that need to be met -  See 11 USC 1129(a).  The most important one is getting one impaired class to accept the plan.  Once you get that, you are in the game.

I don't think I discussed what "impairment" means.  It is any claim whose legal rights are altered by the plan.  The easiest way to get an impaired class on board is via modifying a vehicle loan.  There is no "hanging paragraph", so that 2013 Porsche you bought 2 days before you filed is fair game. 

In this scenario, remember Joe had 36 more months on his ride @ 300 per month.  Let's say his vehicle is worth $10k and the present value of the loan is $12,500.  Very simple, split the claim, go 5 years secured @ 4.5% for the $10k and slide the $2.5k into your unsecured class.  Usually this will get you some sort of response from the secured claim holder.  We want this.

At this point, the end game of the car loan is irrelevant as long as Joe and the lender agree to whatever terms.  This is where it gets slick.  Joe's objective is to get the lender to agree to some sort of terms that require it to accept the plan as to the secured class AND accept as to the unsecured class (bifurcated portion).  Now, without any voting, we have an acceptance of class 1 and an acceptance of class 2. 

Since, I have a consenting class in my back pocket the rest is really academic.  Joe's "I-J" is still $600 or so, but who cares?  I'd slide our class two about $250 per month for 24 months.  Most of the time, the rest of the unsecured creditors won't bother to return ballots.  If they don't, you have both impaired classes accepting and you are confirmed. 

Let's say some guy in Amex's BK department tries to play hero and rejects as to class 2.  If he is the only other voter, Class 2 hasn't accepted.  Not a problem at all.  A little background here.

When a Debtor faces this situation, where he has met all the confirmation elements aside from all impaired classes accepting the plan, he must attempt to "cram down the plan".  This is colloquially known as the "Absolute Priority Rule".  While it sounds like a Richard Marx album and rather intimidating, at its essence it is pretty simple - if the non-consenting impaired class is secured, the creditor must be paid the full value of its secured claim w/ interest.  That is usually easy to work out.  If the non-consenting class is unsecured, then you must pay this class the full amount of its claim (THIS IS A PARAPHRASE, IT IS ACTUALLY MORE COMPLICATED THAN THIS OFTEN). 

Joe has no desire to pay his unsecured creditors in full.  In fact his precise words are "fuck that", I'd rather be sending tax refunds to the trustee for 5 years than doing this.  The good news is according to some courts, BACPA has said "fuck that" to the Absolute Priority Rule in individual 11s.  In the 9th Circuit, the BAP in In re Fridman has held the APR does not imply in individual 11s. 

First, next time you are in Judge Clarkson's courtroom be sure to thank him for this ruling.  Second, the absence of the APR makes confirming individual 11s so easy, it isn't funny.  Some judges though, are too cool for the BAP (ironically, Judge Clarkson has a great opinion, In re Rinard where he makes a compelling argument the BAP is not binding on lower bankruptcy courts, or in effect a judge can be too cool for the BAP). 

Let's say you find yourself in Santa Ana, Courtroom 5B.  The APR is alive and well here.  See In re Khamel.  The situation is still not insurmountable.  Joe must provide "new value".  New value makes a lot of sense in non-individual cases, but in individual cases it can be a bit counter-intuitive.  Again this is my paraphrase of new value -  essentially the interests who are junior to the unsecured class (i.e. equity) must contribute money upon confirmation of the plan that represents the going concern value of the re-organized entity.  I will provide a list of useful cases on this at the end of the series.

In an individual case, basically the Debtor must provide money that represents the going concern value of himself.  Further this money has to come from some place beyond the estate.  As stated by Judge Albert, this new value needs to come from "uncle joe" as a sort of gift.  It is wise to plan ahead for this, so it is important to have "Uncle Joe" in place well before plan confirmation, so if needed he can pump 5 or 10,000 bucks into the plan which is probably sufficient to be new value.  The best part, is this new value will in almost all likliehood go to administrative costs i.e. your fees.

Congrats.  Joe has a confirmed Chapter 11 plan.  He is a re-organized debtor.  His name will be engraved on the Wall of Fame in the Office of the United States Trustee and he can tell all of his friends about the great job his attorney did and provide him a bunch of referrals for more Chapter 11 work.

Now it is time for comparison.  Which is better for Joe?  Stay tuned....

My Evolution on Abortion

The term du jour in the debate about same-sex marriage is "evolution".  Every politician who has changed his or her view describes it as an evolution.  Apparently, in this context "evolution" is code for meaning the evolved person's changed opinion is based on his or her true feelings as opposed to political expediency.  Any politician with a functioning cerebral cortex can see that being against same-sex marriage will soon squarely put him or her on the wrong side of history.  As a result, I might be a tad skeptical as who is really evolving or who is just doing good politics.

I am going to talk about an evolution I have had, meaning I really feel this way (or so I say, I could be posturing for my future political career...).  So here it is.

I am not a big believer in sudden life changing events.  I guess if I won the lotto, it might change my financial lot in life, but it wouldn't really change how I see the world (I hope).

That being said, when I viewed our to-be born child's ultra sound it was pretty profound.  You can call it whatever you want, but it is life, or more specifically human life. 

I have never held adamant opinions on the never-ending abortion debate, because I viewed it as something other people dealt with.  Since, I viewed it as something other people deal with, I naturally gravitated towards the so-called "pro-choice" position.

However, seeing the ultrasound picture has definitely changed my view on this.  Again, you can call abortion whatever you want, but it is terminating a human life.  There is really no other way to describe the procedure.

This doesn't necessarily make put me in the hardcore "pro-life" camp.  The pro-life argument is something to the effect it is wrong to kill an innocent life.  This argument assumes intentionally killing an innocent person is always wrong.  It is not, or at least society has said it is not.

The obvious example is war.  In war a lot of people die.  We like to tell ourselves that is only Taliban and al Queda bad guys who got what they deserved.  This is patently false.  The average soldier in an any Army is just some poor guy doing what he is told.  He isn't guilty of anything aside from being in the wrong place, at the wrong time.  Nor is the civilian killed in what is Orwellian described as "collateral damage".

For better or worse, war is sometimes necessary.  I suppose if one was 100% pro-life on abortion, a consistent position for that person would be almost complete pacifism on war.  I am by no means a pacifist.

So where does that leave me?  I can't in good conscience say that any abortion for any reason is right or should be legal.  That being said, much like war, there is some sort of balancing act between the rights of the mother and the child, or put it another way, if I believe that are certain reasons that justify the killing of innocents in war, it follows there may be certain reasons for justifying an abortion.

I think my rationalization is that we as a society should look seriously as to why certain women have abortions.  The obvious reason is unwanted pregnancy.  If we were to take steps to eliminate this i.e. access to birth control, better education of women it would help a lot.  For those women who do find themselves with an unwanted pregnancy, our society should provide them with resources to deal with it, medical care, counseling, adoption alternatives, economic incentives etc...

Beyond that it is complicated as to how much choice a woman should have.   I do not claim to have the answer, except that our society should create conditions where women with an unwanted pregnancy should not feel like an abortion is their only option.

I'll leave it with a quote from General Robert E. Lee -

"It is well that war is so terrible, lest we should grow too fond it".

I'm Taking a Ride with My Best Friend........

A little break from law related posts.  I figure to post about music.  Here are some albums or clusters of albums which I think fucking rock.

1)      Black Celebration, Music for the Masses, and Violator -  Depeche Mode

Words cannot express how rad these albums are.  I am pretty certain I know all the lyrics to all of these albums and can identify the songs after one or two notes.

When I listened to the dud, that is DM’s new album, I realized since Alan Wilder left the band, only Playing the Angel is worth listening to.  Kind of sad how one guy made all the difference.

2)      Diesel and Dust -  Midnight Oil

This taught me everything I know about the history of Australia and the Aborigines. 

3)      Kiss Me, Kiss Me, Kiss Me ; Disintegration, Wish -  the Cure

The tune to Lullaby is in my head as I am typing this.  Enough said.

4)      Unforgettable Fire -  U2

I could have flanked this with War and Joshua Tree, however this album seems to get a bad rap in the U2 pantheon.  I couldn’t disagree more, the title track, Bad, A Sort of Homecoming, Pride are all excellent songs. 

5)      The Cars -  The Cars

This album is just what I needed.  It is a close race between this and Heartbeat City for the Cars finest work.  And for what it is worth, the Cars reunion album from 2011 was pretty good.

6)      Hopes and Fears -  Keane

I guess I needed am album from post 1991.  Keane is kind of cheesy, but I listened to this a lot in law school and still a lot today.  First 4 songs are really good.

Chapter 11 v Chapter 13 - Series Summary to Date

Here are the links for part one, two, three, and four.

I think if this series had a theme song it would go something like....

"I don't want to start any blasphemous rumours, but I think that trustee has no sense of humour, and when we convert to 11, I expect to see him pouting...."

Excerpt from Chapter 13 Good Faith Rant, I mean Brief

This relates to my previous post about April Fools and Chapter 13.  Before, I get to the excerpt, I'm going to start a little contest with my tiny, but hopefully growing readership.  In paragraphs 3 and 4, I give some examples of Debtor expenses -  the best expense that someone can provide from a REAL CASE, I will add to my brief.  Enjoy.

It is well settled good faith is a totality of the circumstances analysis.  See In re Goeb, 675 F.2d 1386, 1387 (9th Cir. 1982).  A Debtor who merely takes advantage of the bankruptcy code offers him is not acting in bad faith.   In re Ragos, 700 F.3d 220, 227 (5th Cir. 2012) .

The 9th Circuit has recently held that the concept of disposable income no longer has a role in determining good faith.  In re Welsh, 2013 WL 1192961.  While, the Welsh court was specifically analyzing social security income and secured debt payments the holding goes beyond that.  Since disposable income is strictly defined, a bankruptcy court no longer has the discretion to make good faith determinations based on Debtor's individual expenses stated on their Schedule J.

The implications of this may be unsettling to some.  A Debtor who lists expenses for Directv NFL Package, figure skating lessons for children, premium gasoline, fast track, or buying organic groceries might be seen as someone who could "tighten their belt" and pay creditors more.  An argument can be made that when unsecured creditors are getting paid less than the full value of their claims, a debtor should expect to only watch the Fox Game of the week, provide their child with a set of used roller skates, buy 87 octane gas, sit in traffic and shop at Albertsons and devote the difference to their creditors.

On the other hand, it could be argued that a debtor who gets to watch his favorite NFL team every Sunday, provide his children with the sporting activities of their choice, puts high quality fuel in his car, spends less time in traffic (perhaps more time at work), and eats healthy food would be a happier, healthier and less stressed person.  On account of this, this hypothetical debtor might be more economical productive during the life of the plan and hence unsecured creditors would benefit in the long run.

Unfortunately, Congress has foreclosed all of the analysis of the above.  The bottom line is when a Debtor has committed his projected disposable income to the plan, what his "actual" expenses are has no bearing on good faith.

to make a finding of bad faith.

April Fools Edition of Chapter 13

I started off this week feeling really optimistic about the future of my Chapter 13 practice.  Haha.  April Fools.

No, in reality, I started out this week dreading the fact I had a Chapter 13 341a on Tuesday.  I will not say where, but let's say it is approximately 47 miles east of my residence in Huntington Beach.  That was the bad news.  The good news was the individual adjudicating the confirmability of the plan, has at least of today not issued a manifesto regarding Chapter 13 plan procedure.

A little background on this case, my Debtors have a pretty solid income and there legit 22C spits out about $125 a month, and with a 401k step, their plan looks something like -

$275 for 30
$850 for 30
15% -  there are a bit of taxes, a little arrears, and of course counsel's cut

I had all my docs in and got my lien avoid granted on the tentative.  So, the optimist in me figured a little negotiating and I'd be back in the office by 11 with a plan on consent maybe somewhere around $375 / $1000.  Obviously, if it worked out that way I wouldn't be writing this post.

First, some of the people involved in the bankruptcy universe have no fucking sense of humor.  None.  I am going to re-tell my joke from Tuesday here it is -

Trustee Counsel -  Next calling the case of (totally botched the name, clients are Cambodian)
(we shuffle up to the table)
Faler -  Good morning, I'd like to start off by saying there has been a big change of events in this case....
Trustee Counsel (scowling) - appearances please
Faler -  Oh, Matt Faler for the debtors -  anyway, the big change of events is Mrs. Debtor just found out on Sunday she inherited $400,000 so we can pay this plan in full
Trustee Counsel (glaring at me and about to speak)-
Faler-  April Fools!  But, I did get the lien strip granted and that isn't a joke.

My joke got my clients to laugh, the assistant, a few random people in the room, but nothing but stern looks from Trustee attorney.

Anyway, we got down to business and utilizing some sort of mathematical formula requiring an abacus and the number pi taken to the 3rd power, the trustee had concluded my Debtors could pay $600 per month before the step.  More specifically, the trustee had concluded that we had (1) taken an illegit expense for 401k contribution (2) overstated our insurances expenditures and (3) didn't believe our charitable contribution expense.

Regarding point (2) -  there wasn't a real dispute as to the amount of incurred but rather whether the numbers were in fact reasonable.  It was implied the Debtors should have done more comparison shopping for their insurance numbers.  Regarding point (3) it was implied my clients didn't actually donate to charity. 

My response was we will provide you actual invoices for insurance and I used the average number from the last 3 years of itemized deductions for the charitable deduction number and I didn't think Buddhist Temples gave receipts for donations.

Anyway, it was agreed I would provide evidence of the following in advance of our continued hearing.  To top it off, the trustee counsel took the time to briefly lecture my clients on their spendthrift ways and promised to go through their budget with what could best be described as double-secret strict scrutiny.

This rather unpleasant experience did leave me with a golden oppurtunity to finally argue a factoid of law that is well settled in the Ninth Circuit but little enforced in places and that is :

BAD FAITH IS MORE THAN A FEW SUBJECTIVELY UNREASONABLE EXPENSES.  IF YOU THINK OTHERWISE READ IN RE GOEB 675 F.2D 1386 (9TH CIR. 1982).  I HAVE EVEN INCLUDED A HYPERLINK FOR YOU.  IF YOU STILL DONT UNDERSTAND WHAT BAD FAITH IS THEN READ IT AGAIN AND AGAIN AND AGAIN UNTIL YOU UNDERSTAND.

I promise to post my brief when I file it.

And another Chapter 13 event of this week was I had a client dissatisfied with the amount of a fee application for some extra Chapter 13 work.  It went in front of the judge, and as to the Judge's ruling, all I would tell my clients is LOL (and pay up).

 

Chapter 11 v Chapter 13 - Part 4

I think we left off somewhere around where the disclosure statement was to be filed.  The purpose of a disclosure statement is to provide "adequate information" for a claim holder to either accept or reject the plan. 

In a nutshell, the disclosure statement should really explain how and why your plan will work, and to some extent "sell" your plan to the entities which will end up voting on it.  As to what information is necessary to accomplish this, it is really common sense.  It is important to substantiate your DS -  use bank statements, property leases, pay stubs, tax returns, appraisals, listing agreements if real property is to be sold etc....

The DS should also describe how the various classes have been designated and how they will be treated.  It should address any assumed leases or planned adversaries.  In the context of our hypothetical, much of the information used to draft the disclosure statement is the same information remitted to the Chapter 13 trustee. 

The plan is really who gets paid what and when, and other legal consequences of plan acceptance.  I personally find it way more fun to draft Chapter 11 plans, as you have a lot of latitude on how to structure your plan.  There is no time limit.  It can last for years or have a lump sum payout and pretty much anything inbetween.  However, when drafting it keep in mind while you could conceivably force a class to acceptance its payments in pennies, they probably would be disinclined to accept your plan, nor would you pass a good faith test, so try to keep it within bounds.

The DS and Plan are filed simultaneously and there is a hearing on the adequacy of statement.  There are really two types of objections to DS -  (1)  Legitimate objections because you have glossed over some point, and there is missing information.  By glossed over, I mean made some assertions regarding the plan lacking substantiation.  (2)  Veiled plan objections.  There are a few cases out there standing for the proposition that if your plan is so bad, it can be denied at the DS stage because going beyond that is pointless.  This usually is the case if your plan has completely improper classifications or attempts to do something that isn't allowed.  However, some creditors borrow a page from the Chapter 13 trustee and use this oppurtunity to launch myriads of objections to the plan that are premature in an attempt to derail the case. 

The good news is the more numerous and detailed the veiled plan objections are is excellent evidence your DS provides adequate information.  If a creditor has all kinds of objections about how shitty your plan is for them, you can tell the court, that you provided adequate information because said creditor has enough to information to conclude the plan sucks.  In fact you can trap creditors on this, if you make some statement as to is there any information that the plan proponent could provide which would cause said creditor to accept the plan.  Usually the answer is no and the DS is approved.

Anyway back to our example, this whole process can take a while.  I'd estimate around 15 hours or so of legal work, but let's say it is 25 hours total and at $300 per, our Debtor is now in the hole to his counsel for $7500, but the DS is approved and the plan is set for confirmation.  Keep track of these numbers as there is going to be an item by item breakdown at the end.

Joe our debtor has been at this point paying his quarterly fees and any necessary adequate protection payments, but he is not making "plan payments" so to speak.  If things are going well, you will notice your client's DIP accounts steadily increasing every month.  If they are not increasing, your client is either completing bullshit operating reports (not unheard of) or the plan isn't going to work.

It is important to note we have not heard the term 22C and definitely no discussion about expenses for cell phone data plans or prom dresses for kids or about the job prospects for a 21 year old child kicking it at home while masquerading as a community college student.

So this concludes part 4.  We might go up to parts 7 or 8 before I'm done.  However, I am going to take a brief interlude to explain some Chapter 13 adventures from this week.