By Ryan C. Wood
There has not been too much movement in actress Teri Polo’s Chapter 11 bankruptcy case since I last checked in. A couple of operating reports were filed regarding Ms. Polo’s income and expenses since the case was filed and the approval of professionals to represent Ms. Polo is progressing. Bankruptcy attorneys must seek the approval of the bankruptcy court to represent clients in Chapter 11 reorganization cases. An actual application must be filed addressing a number of issues and more or less describing why you the attorney are qualified to represent the client.
Why Must Monthly Operating Reports Be Filed in a Chapter 11 Reorganization?
A debtor-in-possession is what the person or company that filed for bankruptcy protection under Chapter 11 is once the case is filed. The bankruptcy filer is the debtor in possession of their assets or the assets of the company that filed. New bank accounts must be opened and the bankruptcy court must approve any out of the normal course of business expenditures. When an individual files for Chapter 11 bankruptcy there is less to report, but just as important as in a multi-million dollar corporate reorganization. The assets of the debtor cannot be pilfered by the bankruptcy filer.
May and June 2014 Operating Reports
Actress Theresa Polo’s operating reports are not too complex given the nature of her income and expenses. Both operating reports are attached to this article as PDFs with Ms. Polo’s children’s names redacted pursuant to Federal Rules of Bankruptcy Procedure 9037 for their protection, unlike the actual filed monthly operating reports in the bankruptcy case. The May 2014 Operating Report lists income of $10,750 and expenses of $5,784.11. The expenses are nominal but for her rent ($4,000), half of May 2014 child support ($1,250) and payment of community property residuals to her ex-husband totaling ($534.11). The June 2014 Operating Report provides a clearer picture of Teri Polo’s monthly expenditures. For the month of June 2014 Ms. Polo’s income was $26,601.13 with expenditures of $23,699.90. The expenses included rent ($4,000), car payment ($315.57) child support ($2,500), community residual payment ($1,605.47), petty cash ($2,900), take-out food ($286.89), medical ($915), pets ($105), New York expenses ($377.94), entertainment/toys ($195.36) and groceries at Whole Foods and Target (593.73). Another expense listed in the June 2014 operating report are two transfers labeled as “Transfer to Payment Plan A/C” totaling $2,750 each. While a Chapter 11 plan of reorganization has not been filed yet, it appears Ms. Polo will be paying approximately $2,750 into her Chapter 11 plan. Time will tell.
Request to Hire Special Family Law Counsel
On July 14, 2014, Ms. Polo’s family law attorneys filed an application for approval of the employment of Harris Ginsberg, LLP as special family law counsel. This request by itself is not unusual. What is not usual is a request in the application for pre-petition fees allegedly earned by Harris Ginsberg, LLP to be given administrative claim status and approved by the bankruptcy court by fee application. Apparently Harris Ginsberg, LLP has been actress Teri Polo’s family law attorneys for quite some time and completed some work for Mr. Polo prior to the bankruptcy case being filed. Harris Ginsberg, LLP holds an unsecured claim for their unpaid attorneys’ fees totaling around $7,000. It is possible to request the approval of the employment to be retroactive back the date the bankruptcy case was filed, April 14, 2014, but any fees allegedly earned prior to April 14, 2014, should have been scheduled as a general unsecured claim. Harris Ginsberg, LLP is attempting to jump in line to get paid. On July 23, 2014, the United States Trustee’s Office objected to the employment application of Harris Ginsburg, LLP for this very reason. A hearing has not been set yet to resolve this issue. You never know, the court may find a way to prejudice other unsecured creditors and approve Harris Ginsburg, LLP’s request.
