Collins A. Mbanugo

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 08-47449 T
Chapter 11
COLLINS A. MBANUGO,
Debtor-in-Possession.
_______________________________/
MEMORANDUM RE AMENDED PLAN AND DISCLOSURE STATEMENT
A final hearing on the motion for relief from the automatic
stay filed by PR Investor Services, Inc. and Meridian Mortgage
Investors Fund VII, LLC (collectively hereinafter “Meridian”) is
scheduled for May 22, 2009 at 1:00 p.m. 	In the mean time, the
debtor has filed an amended plan and disclosure statement,
attempting to correct the deficiencies noted by the Court in its
order of April 16, 2009, which referred back to the Court’s
Memorandum of April 13, 2009. 	The Court has reviewed the
amended plan and disclosure statement and provides the following
comments to assist the parties in preparing for the May 22, 2009
hearing.
Signed: May 20, 2009
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
May 20, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-47449 Doc# 94 Filed: 05/20/09 Entered: 05/20/09 17:50:31 Page 1 of 5

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A. 	THE PLAN
The Court sees a few structural defects in the plan.
1. First, the Court does not believe the debtor can alter
the statutory rate of interest payable to Alameda County on
account of its property tax claims.
2. 	Second, with respect to those secured creditors to
receive monthly payments not specified as being based on an
amortization schedule or interest only, the plan is not
sufficiently specific as to the amount of the monthly payment.
If the monthly payments are to be in equal amounts, that should
be specified. 	Otherwise, each payment amount should be
specified. 	With respect to Class L, the plan does not even
specify whether the payments will be monthly or at some other
interval.
B. 	THE DISCLOSURE STATEMENT
There are several minor problems with the disclosure
statement.
1. 	The plan specifies a proposed treatment of the priority
claim of the Franchise Tax Board. 	The disclosure statement
states that there are no unclassified priority claims other than
the claim of the Internal Revenue Service. 	This inconsistency
should be fixed or explained.
2. 	The disclosure statement discloses the total amount of
delinquent property tax due to Alameda County but not the
amounts encumbering each parcel. 	The latter approach is
required.
Case: 08-47449 Doc# 94 Filed: 05/20/09 Entered: 05/20/09 17:50:31 Page 2 of 5

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3. 	The disclosure statement does not adequately discuss
the debtor’s assets. 	Several of the properties have houses on
them. 	One of the houses is the debtor’s residence. 	However,
there is no discussion of whether there is anyone living in the
other residences, if so, who, and whether any income is being
generated as a result.
4. 	The disclosure statement represents that the debtor’s
nondebtor spouse’s income is sufficient to pay for their living
expenses other than the home mortgage. 	There is no discussion
of how she is employed, what income she earns, or the amount of
the couple’s other living expenses. 	Schedule I discloses no
income or employment by the debtor’s spouse. 	The instructions
to that form make it clear that a spouse’s employment and income
must be disclosed even if the spouse has not filed bankruptcy
him or herself.
However, the most serious problems are the lack of a
liquidation analysis and an insufficient discussion of
feasibility.
1. 	The disclosure statement states that it is not
providing a liquidation analysis and does not believe one is
necessary due to the plan’s proposal to pay general, unsecured
creditors in full. 	This conclusion is misguided. 	The general,
unsecured creditors will be paid in full only if the debtor
successfully performs his plan. 	At minimum, there is a risk
that the debtor will not succeed. 	In order to vote, the
creditors must be able to compare what they would be likely to
Case: 08-47449 Doc# 94 Filed: 05/20/09 Entered: 05/20/09 17:50:31 Page 3 of 5

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receive in a chapter 7 liquidation. 	Thus, each property must be
analyzed on a liquidation basis: the gross sale price estimated
and from that deducted the encumbrances, costs of sale, and
exemptions, if any. 	The net sale proceeds should then be
totaled and the priority and estimated administrative claims
deducted. 	The amount of the general, unsecured claims should
then be compared to the balance.
2. 	The feasibility discussion is also deficient. 	The
narrative style of the discussion is not conducive to a clear
understanding of the required plan payments or the debtor’s
ability to make them. 	In the mean time, they are being delayed
in enforcing their rights. 	The disclosure statement should set
forth graphically the monthly payments that the plan will
require the debtor to make over the period of at least the first
five years of the plan. 	It will presumably then be possible to
determine whether the amount of excess cash flow that the debtor
represents that he expects to generate is realistic.
END OF ORDER
Case: 08-47449 Doc# 94 Filed: 05/20/09 Entered: 05/20/09 17:50:31 Page 4 of 5

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COURT SERVICE LIST
James F. Beiden
Law Offices of James F. Beiden
840 Hinckley Rd. #245
Burlingame, CA 94010
Collins A. Mbanugo
90 Skyway Lane
Oakland, CA 94619
Donald H. Cram, III
Severson & Werson
One Embarcadero Center, 26 th Floor
San Francisco, CA 94111
Patric Kelly
Adleson, Hess & Kelly, APC
577 Salmar Ave., Second Floor
Campbell, CA 95008
Kelly Woodruff
Farella Braun & Martel LLP
Russ Building, 235 Montgomery St.
San Francisco, CA 94104
Case: 08-47449 Doc# 94 Filed: 05/20/09 Entered: 05/20/09 17:50:31 Page 5 of 5