This is an important note from Nancy Clark, President of the cdcbaa,

Dear Members:

At Judge Zurzolo’s last Chapter 13 Confirmation hearings, he asked me to pass along a message to the debtor bar regarding preparation for the confirmation hearings.  He was disappointed by the fact that debtor attorneys had failed to timely prosecute their cases and were asking for continuances for simple things like providing tax returns to the trustee, providing documents in response to the trustee’s object, or for not filing mortgage declarations.  He stated that if attorneys do not make the effort to prosecute chapter 13 cases in a timely manner he is ready to go to a same day 341(a) Meeting of Creditors Hearing and Confirmation Hearing as is done in Riverside which may result in more dismissals.

His next Chapter 13 Confirmation calendar is on September 28, 2015.  This is a friendly reminder that if you need to file a Motion for Order Disallowing Claim you need 30 days notice.  Therefore file it now. Also, if you need to amend the plan, you should do so soon as you need to have 28 days service if the amended plan contains any material changes.  Make sure your client provides you the information needed to file the mortgage declaration.  Remember, you no longer need to attach the copies of the payments and proof of mailing to the mortgage declaration.  Now is a good time to review the trustee’s objection and make sure you have provided the documents requested and prepared your written response, if necessary.

 All the Best,

Nancy B. Clark
Borowitz & Clark, LLP

I have taken out the names of the parties but this is a well known and well regarded bankruptcy boutique law firm.  This is the Judge’s Tentative Ruling.

Tentative Ruling:

This is the first and final application for allowance of fees and costs of [the Firm], debtor’s former counsel.  The application is opposed in part by the Chapter 11 trustee, and is opposed in whole by both the UST and the debtor.

This is a disturbing case on several levels.  First, the case under the DIP was a disaster.  A trustee was ultimately appointed for several reasons but most prominently, the MORS were incorrect and seriously misleading, and not only slightly but by a factor of hundreds of thousands.  This led to a grave concern whether anything the DIP said or reported could be relied upon.  Further, the case appeared to languish for an extended period without tangible progress being made toward reorganization.  A disclosure statement was finally provisionally approved, but never amounted to anything because no exhibits were filed as required and ultimately the estate under the trustee’s direction abandoned the entire approach described in the plan.  It also developed after the fact that some basic rules were either misunderstood or ignored, including that substantial amounts of cash collateral were spent without consent or authority in violation of §363(c).  Cash collateral may have been used in substantial part to pay [the Firm] $57,010 toward its interim fees under a Knudsen order. The lame excuse is offered that counsel thought Bank of America was adequately protected by equity cushion in any event, so apparently decided not to bother with this most basic of Chapter 11 requirements.  In addition, apparently substantial amounts of estate property were deposited in Mrs. [debtor’s] account and expended without disclosure at all or any authority under §363.  Again, such behavior casts the DIP in the most unfavorable light and makes a consensual plan unlikely.

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Well that’s a good question.  But according to Peter Lively, the deductions are allowable in Judge Zuzolo’s courtroom from now on.  Below is the email I received today from Peter.

Judge Zurzolo announced at the confirmation hearing this morning regarding one of my clients that he will now allow voluntary retirement contributions for his cases.  He is no longer following the BAP’s In re Parks opinion.  In all fairness to Nancy Curry, she withdrew her objection prior to the ruling and the case was confirmed, but Judge Zurzolo recalled the case and said he has spent a lot of time reading the brief and considering the issue and wanted to announce his decision.