Fernando Anthony Edwards and Sharon Yvette de Edwards

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 08-41073 T
SHARON YVETTE DE EDWARDS, 	Chapter 11
FERNANDO ANTHONY EDWARDS,
Debtors-in-Possession.
______________________________/
MEMORANDUM AND ORDER RE PLAN AND DISCLOSURE STATEMENT
AND VACATING PREVIOUSLY SET EVIDENTIARY HEARING
The above-captioned case was commenced on March 7, 2008. 	On
August 18, 2008, after a duly noticed status conference, the Court
set a deadline of December 1, 2008 for the debtors to file a plan
and disclosure statement. 	This deadline was continued to January
31, 2009. 	A further request for continuance was denied. 	The
debtors were originally represented by counsel. 	However, counsel
was permitted to withdraw without opposition in February 2009.
In April 2009, the debtors filed a plan (the “Plan”) and
disclosure statement (the “Disclosure Statement”) and submitted the
Disclosure Statement to the Court for conditional approval. 	The
Signed: May 05, 2009
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
May 05, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-41073 Doc# 158 Filed: 05/05/09 Entered: 05/05/09 15:00:45 Page 1 of
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Court has reviewed the Plan and Disclosure Statement and finds them
both seriously deficient. 	The most serious problem with the Plan
is that it omits most of the claims against the estate and does not
provide for their treatment. 	The most serious problem with the
Disclosure Statement is that it does not coherently disclose what
payments the debtors intend to make and does not adequately discuss
the feasibility of the debtors making those payments. 	Conditional
approval of the Disclosure Statement will therefore be denied.
In the mean time, an event has occurred that is likely to
affect the case in a dramatic way. 	On or about March 16, 2009,
Countrywide Home Loan Servicing, L.P. (“Countrywide”), the creditor
holding the deed of trust on the debtors’ residence, obtained
relief from the automatic stay. 	The debtors contend that the IRS
secured claim is in first position, ahead of Countrywide. 	If so,
the foreclosure will not only eliminate the substantial payments
required to be made to Countrywide, it will also eliminate the IRS
secured claim. 	If not, the foreclosure will likely render the IRS
an unsecured claim except for any personal property it encumbers.
Even if these claims are eliminated, there appears to be
serious feasibility problems. 	The debtors’ most recent monthly
operating report states that, during the last year, they have
experienced a negative cash flow of $56,259. 	The Disclosure
Statement states that Ms. de Edwards recently reduced her operating
expenses by $10,000. 	Their most recent monthly operating report
reflects net cash flow of approximately this amount. 	However, the
Case: 08-41073 Doc# 158 Filed: 05/05/09 Entered: 05/05/09 15:00:45 Page 2 of
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monthly operating report for the month before reflects net cash
flow of only $5,000 and the monthly report preceding it a negative
cash flow of $18,000.
The most serious problem is the dispute with regard to the
IRS priority claim. 	The debtors assert that it is only $64,406 and
propose to make payments accordingly. 	The IRS asserts that its
priority claim totals $251,286.96. 	The debtors propose no
mechanism for resolving this dispute and have not filed an
objection to the IRS priority claim. 	The debtors were authorized
to employ special tax counsel in May 2008. 	There is no evidence of
any progress in resolving the disputes with the IRS since then.
There has been a great deal of confusion caused by Ms. de
Edwards’ attempt to cease doing business as a professional
corporation (the “PC”) and to start doing business as a sole
proprietorship (the “SP”) in order to prevent the IRS from levying
on her accounts receivable. 	Her goal has been thwarted by the fact
that her contracts with insurers, who pay for her services, are
with the PC. 	In order to negotiate new contracts, Ms. de Edwards
was required to obtain a new employers’ identification number
(“EIN”). 	The debtors contended that they had problems getting a
new EIN from the IRS. 	In an attempt to preserve the status quo
pending submission of a plan, the Court previously order the IRS to
forbear making any further levies on any accounts receivable
generated post-petition.
Case: 08-41073 Doc# 158 Filed: 05/05/09 Entered: 05/05/09 15:00:45 Page 3 of
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Thereafter, the Court heard the debtors’ emergency motion
complaining about the IRS levy on funds from a proposed settlement
with Sutter Delta Medical Center (“Sutter”). 	At the hearing,
factual disputes arose concerning the nature of the claims giving
rise to the settlement: i.e., whether they constituted claims by
the PC or claims by the SP. 	Moreover, the settlement had never
been noticed to creditors or submitted to the Court for approval.
The debtors’ contention that the levy was improper was inconsistent
with their failure to obtain Court approval for the settlement.
Factual issues were also raised concerning the timing and amounts
of any levies made by the IRS during the case. 	The Court set an
evidentiary hearing for May 28, 2009 at 9:00 a.m. to attempt to
resolve these issues.
After reviewing the Plan and Disclosure Statement, the Court
now concludes that it was ill advised to set the evidentiary
hearing. 	The Court is doubtful that the debtors can file a plan
and disclosure statement capable of being confirmed, at least
unless they obtain bankruptcy counsel promptly. 	The Court
previously issued an order to show cause why the case should not be
dismissed, converted to chapter 7, or a chapter 11 trustee
appointed. 	The hearing has been continued to May 28, 2009 at 9:00
a.m. 	The Court also ordered the debtors, by no later than May 8,
2009, to file and notice a motion to approve the settlement with
Sutter for the same date and time.
Case: 08-41073 Doc# 158 Filed: 05/05/09 Entered: 05/05/09 15:00:45 Page 4 of
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The Court has concluded that it should vacate the evidentiary
hearing but keep the hearings in place on the motion to approve the
settlement with Sutter and on the order to show cause. 	The Court
anticipates making a dispositive order with regard to the case on
May 28, 2009 absent some constructive action by the debtors in the
mean time.
Good cause appearing therefor, it is
SO ORDERED.
END OF DOCUMENT
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COURT SERVICE LIST
Fernando Anthony Edwards
Sharon Yvette de Edwards
715 Castle Rock Road
Walnut Creek, CA 94598
Fernando Anthony Edwards
3432 Hillcrest Ave., #125
Antioch, CA 94531
Richard C. Harper
7 C-Street
Tracy, CA 95376
Joe Smith
Revenue Officer
Internal Revenue Service
303 Water St., Ste. 3
Santa Cruz, CA 95060
Cynthia Stier
Assistant United States Attorney
U.S. Attorney’s Office, NDCA
450 Golden Gate Ave.
San Francisco, CA 94102
Jennifer L. Pruski
Trainor Fairbrook
980 Fulton Ave.
Sacramento, CA 95825-4558
Case: 08-41073 Doc# 158 Filed: 05/05/09 Entered: 05/05/09 15:00:45 Page 6 of
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