What judge is going into the budget so much? Judge Clarkson does not
believe it is necessary, nor do I (my position is that the debtor is using
estate assets in the ordinary course of business, which business is to lead
a normal life just like you do if you are in a 13 and nobody requires a
budget motion in a 13 even though the law is analogous). Judge Bluebond
also does not believe it necessary. In the end, if you're in front of a
judge who might possibly think it necessary, like Judge Zurzolo who may
require the motion only because he contributed to the creation of the form
11 plan and disclosure statements and I assume the accompanying motions,
you simply follow the from motion and file it timely and the hearing is
usually uneventful. Be exhaustive (as to the expenses) but conservative
(especially as to projected income) in your budgeting and it is not a
motion that ever causes me worry.
On the other hand, do comply with the U.S.T.'s requirements. One of them
is to do the notice of setting/increasing insider compensation, which is
required and has some of the same entries in common with a budget. The
disposable income issues and the absolute priority rule come into play as
part of plan drafting and confirmation.
On Wed, May 22, 2013 at 1:46 AM, Alik Segal wrote:
> **
>
>
> Please help me analyze this situation:
>
> Chapter 11 Debtor needs to present his projected budget for a status
> conference. This question concerns with whether the means test applies and
> the amount of the claim. The so-called problem is that debtor's income has
> increase substantially postpetition.
>
> Debtor moved out of his residence before filing the petition. After
> filing the petition, he rented out his former residence, which has become
> an income property. Debtor's goal is to bifurcate the mortgage balance per
> 506(b).
>
> Prepetition Debtor was barely making ends meet, but not that we filed
> (post-petition), his business income improved substantially and we may be
> facing the means test.
>
> 1. The first question is whether a postpetition increase in income could
> trigger a means test. I am not sure if the statute authorizes this
> explicitly, but my gut feeling is that under Lanning, an argument might be
> made that ignoring a post petition increase in income is wrong.
>
> 2. The second question is whether the debts are primarily consumer
> debts. The mortgage is $450K. Unsecured business debts are $200K while
> unsecured consumer debts are $50K. Since the mortgage is the 1,000 lb
> gorilla in this scenario, how the mortgage is characterized will determine
> whether the debts are primarily consumer debts or not. The original
> purpose of the mortgage was to finance a purchase of a residence so
> originally the debt was a consumer debt. However, currently the debt is
> secured by collateral that is used to produce income. What is the
> determinative time period--1) when the debts were incurred or 2) now? Does
> the change in the use of the collateral affect the character of the debt?
>
> 3. Assuming post-petition change in income applies and the mortgage
> counts as counts as consumer debt because is was originally incurred to
> acquire a personal residence, how will the cumulative dividend or the
> monthly payment be determined? Will there be a budget battle with the
> UST?
>
> 4. Let's say that based on the deals currently in the works, Debtor is
> projecting $5K of disposable income (after business expenses and living
> expenses) for the next six month. However, this number is based on
> expected contracts and it may not materialize. In fact, Debtor did not
> make a dime for the year and a half immediately before filing. Should the
> $5K projection be presented in the status conference report? Should
> speculative income be presented in the status conference projections?
>
>
> Alik Segal
>
Alik.Segal@gmail.com
> 310-362-6157
> California Central District
>
>
>
Giovanni Orantes, Esq.
Certified Bankruptcy Specialist*
Orantes Law Firm, P.C.
3435 Wilshire Blvd. Suite 2920
Los Angeles, CA 90010
Tel: (213) 389-4362
Fax: (877) 789-5776
e-mail:
go@gobklaw.com
website:
www.gobklaw.com
*Board Certified - Business Bankruptcy Law - American Board of Certification
*Board Certified - Consumer Bankruptcy Law - American Board of Certification
WE ARE A "DEBT RELIEF AGENCY" AS DEFINED BY FEDERAL LAW.
SERVING BAKERSFIELD, LOS ANGELES, ORANGE COUNTY, RIVERSIDE, SAN BERNARDINO
AND SANTA BARBARA AND THE WORLD FOR CHAPTER 11 AND 15 CASES.
Note: The information contained in this e-mail message is confidential
information intended only for the use of the individual or entity named. If
the reader of this message is not the intended recipient or an agent
responsible for delivering it to the intended recipient, you are hereby
notified that any dissemination, distribution or copy of this communication
is strictly prohibited. If you have received this communication in error,
please immediately notify us by telephone or e-mail and delete the original
e-mail at (213) 389-4362 or (888) 619-8222.
IRS Circular 230 Disclosure: In order to comply with requirements imposed
by the Internal Revenue Service, we inform you that any U.S. tax advice
contained in this communication (including any attachments) is not intended
to be used, and cannot be used, for the purpose of (i) avoiding penalties
under the Internal Revenue Code or (ii) promoting, marketing, or
recommending to another party any transaction or matter addressed herein.
What judge is going into the budget so much? Judge Clarkson does not believe it is necessary, nor do I (my position is that the debtor is using estate assets in the ordinary course of business, which business is to lead a normal life just like you do if you are in a 13 and nobody requires a budget motion in a 13 even though the law is analogous). 're in front of a judge who might possibly think it necessary, like Judge Zurzolo who may require the motion only because he contributed to the creation of the form 11 plan and disclosure statements and I assume the accompanying motions, you simply follow the from motion and file it timely and the hearing is usually uneventful. Be exhaustive (as to the expenses) but conservative (especially as to projected income) in your budgeting and it is not a motion that ever causes me worry.
On the other hand, do comply with the U.S.T.'s requirements. One of them is to do the notice of setting/increasing insider compensation, which is required and has some of the same entries in common with a budget. The disposable income issues and the absolute priority rule come into play as part of plan drafting and confirmation.
On Wed, May 22, 2013 at 1:46 AM, Alik Segal <
listserv.inbox@gmail.com> wrote:
Please help me analyze this situation:Chapter 11 Debtor needs to present his projected budget for a status conference. This question concerns with whether the means test applies and the amount of the claim. The so-called problem is that debtor's income has increase substantially postpetition.
Debtor moved out of his residence before filing the petition. After filing the petition, he rented out his former residence, which has become an income property. Debtor's goal is to bifurcate the mortgage balance per 506(b).
Prepetition Debtor was barely making ends meet, but not that we filed (post-petition), his business income improved substantially and we may be facing the means test.1. The first question is whether a postpetition increase in income could trigger a means test.ling is that under Lanning, an argument might be made that ignoring a post petition increase in income is wrong.
2. The second question is whether the debts are primarily consumer debts. The mortgage is $450K. Unsecured business debts are $200K while unsecured consumer debts are $50K. Since the mortgage is the 1,000 lb gorilla in this scenario, how the mortgage is characterized will determine whether the debts are primarily consumer debts or not. The original purpose of the mortgage was to finance a purchase of a residence so originally the debt was a consumer debt. However, currently the debt is secured by collateral that is used to produce income. What is the determinative time period--1) when the debts were incurred or 2) now? Does the change in the use of the collateral affect the character of the debt?
3. Assuming post-petition change in income applies and the mortgage counts as counts as consumer debt because is was originally incurred to acquire a personal residence, how will the cumulative dividend or the monthly payment be determined? Will there be a budget battle with the UST?
4. Let's say that based on the deals currently in the works, Debtor is projecting $5K of disposable income (after business expenses and living expenses) for the next six month. However, this number is based on expected contracts and it may not materialize. In fact, Debtor did not make a dime for the year and a half immediately before filing. Should the $5K projection be presented in the status conference report? Should speculative income be presented in the status conference projections?
Alik
SegalAlik.Segal@gmail.com310-362-6157California Central District
-- Giovanni Orantes, Esq.Certified Bankruptcy Specialist* Orantes Law Firm, P.C.3435 Wilshire Blvd. Suite 2920Los Angeles, CA 90010
Tel: (213) 389-4362Fax: (877) 789-5776e-mail:
go@gobklaw.comwebsite: www.gobklaw.com*Board Certified - Business Bankruptcy Law - American Board of Certification
*Board Certified - Consumer Bankruptcy Law - American Board of CertificationWE ARE A "DEBT RELIEF AGENCY" AS DEFINED BY FEDERAL LAW.SERVING BAKERSFIELD, LOS ANGELES, ORANGE COUNTY, RIVERSIDE, SAN BERNARDINO AND SANTA BARBARA AND THE WORLD FOR CHAPTER 11 AND 15 CASES.
Note: The information contained in this e-mail message is confidential information intended only for the use of the individual or entity named. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that any dissemination, distribution or copy of this communication is strictly prohibited. If you have received this communication in error, please immediately notify us by telephone or e-mail and delete the original e-mail IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
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