Chapter 11: Handling the Individual Debtor Case Debtor and Creditor - - PowerPoint PPT Presentation

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Chapter 11: Handling the Individual Debtor Case Debtor and Creditor - - PowerPoint PPT Presentation

Oct 20, 2023 233 likes •442 views

Presenting a live 90-minute webinar with interactive Q&A Chapter 11: Handling the Individual Debtor Case Debtor and Creditor Challenges With Post-Petition Income, Estate Property, Plan Confirmation, Payment of Attorney Fees and More TUESDAY,

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Chapter 11: Handling the Individual Debtor Case

Debtor and Creditor Challenges With Post-Petition Income, Estate Property, Plan Confirmation, Payment of Attorney Fees and More

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

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TUESDAY, AUGUST 7, 2012

Presenting a live 90-minute webinar with interactive Q&A

Peter M. Lively, Principal, Law Office of Peter M. Lively, Culver City, Calif.

  • M. Jonathan Hayes, Principal, Law Office of M. Jonathan Hayes, Northridge, Calif.
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CHAPTER 11: HANDLING THE INDIVIDUAL DEBTOR CASE AUGUST 7, 2012

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I. PRE-FILING PRACTICE TIPS A. Chapter 13 Debt Limits [11 U.S.C. § 109(e)] 1. Individuals and join-debtors who owe noncontingent, liquidated, unsecured debts of less than $360,475 AND noncontingent, liquidated, secured debts of less than $1,081,400. a) When secured debt is treated as unsecured for eligibility purposes. b) What is contingent and liquidated debt? Is “disputed” debt unliquidated? Not necessarily, even if the debtor denies he owes the debt at all.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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B. Getting Paid 1. Factors in determining the retainer a) Cash collateral prepetition vs postpetition cash collateral b) Source of payment after he/she goes through retainer. c) Non-dischargeability actions – divorces. d) Multiple representations creating potential or actual conflicts. [11 U.S.C. § 327] Proposed attorney cannot be a creditor of the debtor. e) Lien on the retainer? f) Payment in the budget? g) US Trustee Compliance takes a huge amount of time.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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C. Exit Strategies (Determining the end game at the beginning) 1. If the goal of the bankruptcy is to save the home, the Debtor cannot modify the loans and therefore must pay. [11 U.S.C. § 1124(b)(5)] 2. Have to pay net disposable income for five years or duration of

  • plan. [11 U.S.C. § 1129(a))(15)(B)]

3. The Debtor should make the regular monthly mortgage payments immediately even though it is not technically required. D. Does individual qualify as a small business? [11 U.S.C. § 101(51D)] E. Debtor must still obtain pre-bankruptcy credit counseling. [11 U.S.C. § 109(h)]

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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II. FILING THE PETITION A. First Day Motions 1. Cash Collateral [11 U.S.C. § 363(a) and (c)(2)] a) Rent from income properties. [11 U.S.C. § 552(b)(2)] b) Cash, A/R, and inventory in business cases. i. Form a corporation in advance? 2. Personal Budget 3. Wages 4. Utilities [11 U.S.C. § 366] 5. Procedure and Proceedings B. Collateral Valuation Motions [11 U.S.C. § 506(a)] 1. Debtor’s residence- § 1123(b)(5) anti-modification on first deed. 2. Non-residence C. Assumptions, Rejection, and Assignment of Executory Contracts 1. § 365- 120 day deadline for non-residential real property leases.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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  • III. PLAN CONFIRMATION TIPS

A. Disclosure Statement B. Plan Confirmation Alternatives 1. 11 U.S.C. § 1129- Consensual Confirmation a) Sections (a)(4) through (a)(6), (a)(13), and (a)(16) are generally not applicable to individual debtors. b) (a)(1)- Requires compliance with Title 11 form and content of the actual plan. Includes proper classification

  • f claims.

c) (a)(2)- Requires compliance with Title 11 activities of the plan proponent. Includes adequate disclosures. d) (a)(3)- Good Faith i. Plan must be proposed in good faith and not by any means forbidden by law.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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e) (a)(7)- Liquidation Analysis i. Plan must be proposed in good faith and not by any means forbidden by law. f) (a)(8)- Acceptance i. Each impaired class must affirmatively accept the plan. What is impaired? [11 U.S.C. § 1124] ii. A class accepts if holders of more than half in number and at least two-thirds in amount vote to accept. Count

  • nly creditors who actually vote. [11 U.S.C. § 1126]

g) (a)(9)- Administrative Claims i. Administrative claims must be paid cash equal to the allowed amount of such claims on the effective date of the plan, unless otherwise agreed to. ii. Priority taxes must be paid in full with interest within five years of petition date. iii. At the government interest rate- Section 511.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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h) (a)(10)- Acceptance by Impaired Class i. At least one impaired class must accept the plan, unless plan leaves all classes of claim unimpaired. The dreaded “consenting class”! ii. Problematic for individuals. i) (a)(11)- Feasibility i. Court must find that confirmation is not likely to be followed by the liquidation, or the need for further financial reorganization. ii. Demonstrated if Plan has a reasonable probability of success. j) (a)(12)- Requires payment of US Trustee Fees k) (a)(14)- Domestic Support Obligations i. Individual debtor must be current with all domestic support obligations that accrue postpetition.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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l) (a)(15)- Five or More Years of Disposable Income i. Individual debtor must pay all unsecured claims in full OR devote an amount equal to the greater of five years,

  • r the duration of the plan, worth of the debtors

projected disposable income to unsecured creditors. ii. What is due to a holder of an unsecured claim who

  • bjects to confirmation?

iii. Effect of Supreme Court decision Hamilton v. Lanning, 130 S. Ct. 264 (2010) on chapter 11 cases. iv. 11 U.S.C. § 1325(b)(2) and disposable income individual chapter 11 cases. Does it only speak to below median debtors?

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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2. 11 U.S.C. 1129(b)- Cramdown (Where not all impaired classes accept plan) a) All requirements of 1129(a) must be met except for 1129(a)(8). b) (b)(1)- Plan must not discriminate unfairly and must be fair and equitable as to each class that has not accepted the Plan. c) (b)(2)(A)- Cramdown re Secured Creditors i. Creditors must recover present value equal to allowed claim and retain lien. ii. Sale of property. RadLAX case – Bank can credit bid pursuant to §363(k). iii. Indubitable equivalence.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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d) (b)(2)(B)- Cramdown re Unsecured Creditors i. Creditors must be paid in full except where the absolute priority rule does not apply, i.e., unsecured creditors vote for the plan, or is satisfied at a lesser amount. ii. Absolute priority rule and individual chapter 11 debtors: Majority view— In re Friedman, 466 B.R.471, (9th Cir. BAP 2012). Absolute priority rule applies. iii. Minority view—In re Kamell, 2011 WL 1760282 (Bankr.C.D.Cal.2011). Absolute priority rule does not apply.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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e) Cramdown Interest Rates i. Creditors Application of Till (chapter 13 cramdown on a truck) in a chapter 11 bankruptcy. Footnote 14 lack

  • f an efficient market, then look to prime plus risk

adjustment (is that only plus 1-3%?). ii. In re North Valley Mall, LLC, 432 B.R. 825 (Bankr.C.D.Cal. 2010)- Blended rate approach. Tranches to stipulate a market rate of interest. f) Cramdown Interest rates when there is equity. g) Cramdown Interest rates where there is no equity- “Tranches” and weighted average or “blended” rate. h) Establishing the appropriate interest rate. Requires establishing the value of the collateral.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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3. Miscellaneous Provisions a) 11 U.S.C. § 1115 i. What is included in property of the estate? Section 541 plus? ii. Includes post-petition earnings. b) 11 U.S.C. § 1123(a)(8) i. Post-petition earnings from personal services must be contributed to the Plan. What are reasonable expenses? c) Creditors may seek modification over the five year

  • term. [11 U.S.C. § 1127(e)]

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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C. The 1111(b) Election 1. Negates bifurcation of claim pursuant to 11 U.S.C. § 506(a) for subject collateral and claim. Cannot be used if interest is of inconsequential value. 2. Creditors must receive present value of its Interest in collateral and the total amount of those payments must = Creditor’s total allowed Claim. 3. Election can be made at any time prior to the conclusion of the hearing on the disclosure statement unless the court orders

  • therwise [FRBP 3014].

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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  • IV. EFFECT OF CONFIRMATION

A. Chapter 11 U.S.C. § 1141(d)(5) 1. No discharge until completion of all payments to unsecured creditors. 2. Lien stripping is not finalized until discharge. V. MOTION FOR FINAL DECREE A. As soon as plan payments start? B. Closes case and cuts off further US Trustee Fees. C. 11 U.S.C. § 1127(e)- Modification of Plan after confirmation.

Peter M. Lively, JD, MBA Law Office of Peter M. Lively 11268 Washington Boulevard, Suite 203 Culver City, CA 90230 Telephone: (310) 391-2400 / Web: www.petermlively.com Email: Peter@PeterMLively.com

  • M. Jonathan Hayes

Law Offices of M. Jonathan Hayes 9700 Reseda Boulevard, Suite 201 Northridge, CA 91324 Telephone: (818) 882-5600 / Web: www.hayesbklaw.com Email: Jhayes@hayesbklaw.com

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