THOMAS TUCKER, Bankruptcy Judge
On May 6, 2009, Debtor filed a plan and disclosure statement, in a document entitled "Debtor's Combined Disclosure Statement and Plan of Reorganization" (Docket # 75). The Court cannot yet grant preliminary approval of the disclosure statement contained within this document ("Disclosure Statement"). The Court notes the following problems, which Debtor must correct.
First, the priority tax claim of the State of Michigan is currently improperly classified and treated in Paragraph 3.4 of the Plan on page 9. "[P]riority tax claims . . . are not supposed to be classified in a Chapter 11 plan for voting or other purposes." In re Northwest Timberline Enterprises, Inc., 348 B.R. 412, 422 (Bankr. N.D. Tex. 2006) (citing 11 U.S.C. §§ 1123(a)(1)). Debtor must amend the Plan so that the § 507(a)(8) tax claim of the State of Michigan is not included in a class under Article III. Rather, it must be included in Article II. Debtor must relabel the classes in Article III to account for the removal of current Class IV. Debtor must also make the necessary changes to the Summary of Classes under the Plan in the Disclosure Statement ( see, e.g., Paragraphs 2.2 and 3.3 in Part VI.A of the Disclosure Statement on pages 28-29).
Second, Paragraph 3.1 of the Plan on page 8 describes the treatment of the secured claim of the Macomb County Treasurer. Debtor must state in this paragraph that the claim of the Macomb County Treasurer is secured by real property owned by the Debtor, which is located at 33503 23 Mile Road, Chesterfield Township, MI 48047." ( See Proof of Claim # 7.) Debtor also must state in this paragraph: "This Class shall be Impaired."
Third, Paragraph 3.3 of the Plan on page 8 describes the treatment of the secured claim of LifeHouse A.L. Holding, L.L.C. ("LifeHouse") "based upon a mortgage on the real property owned by Debtor at 33503 23 Mile Road, Chesterfield Township, MI 48047." This paragraph states, in relevant part: "The Macomb County Treasurer's office holds a first priority claim of $128,949.06 [on the real property owned by Debtor at 33503 23 Mile Road, Chesterfield Township, MI 48047], and thus LifeHouse has a secured claim in the amount of $3,000,000.00 less $128,949.06 or $2,871,050.94 with respect to the real property and fixtures located at 33503 23 Mile Road, Chesterfield Township, MI 48047." (Emphasis added). There appears to be an inconsistency in the Plan. The secured claim of the Macomb County Treasurer is stated to be $122,218.20 in the Plan at Paragraph 3.1 on page 8, and in Section I.V.A of the Disclosure Statement on page 26, and in Proof of Claim # 7. Debtor must explain why the amount of the claim of the Macomb County Treasurer is different in Paragraph 3.3.
Fourth, Debtor must correct the typographical error in Paragraph 3.5 of the Plan on page 9, which currently describes the treatment of Class V claims. This paragraph states, in relevant part: " Class IV shall also consist of the deficiency claim of LifeHouse[.]" (Emphasis added).
Fifth, Section II.B of the Disclosure Statement on page 19 describes "Debtor's Partners and Management." Debtor must amend this section as follows:
• Debtor must amend the sentence which states: "Upon confirmation, all partners shall retain their positions," to state: "Upon confirmation, all partners shall retain
their percentage of ownership interest."
• Under the heading entitled "Compensation," the Disclosure Statement states: "Since the Petition Date, the partners have received no compensation from Debtor. It is contemplated that postpetition, the principals will receive reasonable salary and benefits only to the extent of available funds." Debtor must state the names of the "principals" it is referring to; what positions they held prepetition; what their backgrounds are (
e.g., their education, employment history, experience); what salary and fringe benefits, if any, they earned pre-petition (if they did not earn any salary or fringe benefits pre-petition, the Debtor must state this); what positions they are expected to hold postpetition, and the amount of the "reasonable salary and benefits" they have received "postpetition," and the amount they will receive in the future if funds are available.
• Paragraph VI.F on page 34 of the Disclosure Statement states: "Mario Pallazola shall have the sole right to manage the Debtor, shall be paid reasonable compensation and may not be terminated absent willful or wanton misconduct." This sentence must be moved to Section II.B of the Disclosure Statement. And Debtor must state the amount of the "reasonable compensation" Mr. Pallazola will be paid to manage the Debtor.
• Debtor must state in this paragraph (not by reference to another portion of the Disclosure Statement) what the legal relationships of the principals with the Debtor are, if any,
e.g., lessor, lessee, creditor of the estate, debtor of the estate.
Sixth, Section III.C of the Disclosure Statement on pages 22-23, under the heading "Insider Transactions," states: "There have been no insider transaction [sic] during the bankruptcy proceeding [ other than that Salt River Place, LLC is the Debtor's general partner]." (Emphasis added). Debtor must explain what it means by this statement.
Seventh, the Disclosure Statement in Section IV.A on page 23 states: "Debtor's Liquidation Analysis is attached as Exhibit `A.'" Debtor's Liquidation Analysis is Attachment 2 to the Disclosure Statement and is not labeled Exhibit A. Debtor must label its Liquidation Analysis "Exhibit A."
Eighth, the Disclosure Statement in Section IV.A on pages 23 through 26 includes a summary of claims filed in this case that is taken from the Claims Register. The summary of the claim for the Macomb County Treasurer erroneously lists the claim as "unsecured." The actual proof of claim filed (Claim # 7) indicates that it is a secured claim. Including the summary of this proof of claim is confusing without elaboration. Debtor must include a footnote explaining that the summary contains an error regarding the claim of the Macomb County Treasurer and that the actual proof of claim filed shows that it is a secured claim.
Ninth, Paragraph VI.B of the Disclosure Statement on page 30 states: "Attached to this Disclosure Statement as Exhibit `B' are cash flow projections[.]" There is no attachment labeled Exhibit B. Debtor must correct this.
Tenth, there are attachments to the Disclosure Statement labeled as "Months After Confirmation" (Attachment 3) and "Months of Confirmation" (Attachment 4). However, there are no months designated. There are columns with number or letter designations, but it is unclear what they relate to. Debtor must designate the columns by months and years that are covered by these attachments rather than by number or letter.
Eleventh, Debtor has attached as Exhibit C and Exhibit D financial information relating to the Debtor's postpetition and prepetition operations. Debtor must amend these exhibits so that they contain a detailed breakdown of the income and expenses rather than just totals.
Twelfth, Debtor must correct the typographical error on page 35 of the Disclosure Statement under Section VII (Legal Requirements). In the first sentence of this section, the Disclosure Statement refers to this section as "VI."
Thirteenth, Debtor must amend the sentence at Section VII.C.1 on page 35 so that it reads: "Each class of impaired creditors and interests must accept the plan, as described in paragraph VII.B above.
Fourteenth, Debtor must amend Section VII.E of the Disclosure Statement as follows:
• Debtor must amend the sentence in Paragraph VII.E.2 on page 36 so that it reads: "Except as provided in the plan
and in 11 U.S.C. § 1141(d)(3) :"
• Debtor must amend Paragraph VII.E.2(c) on page 36 to replace the two references to § 727(a) with § 1141(d)(5).
• Debtor must delete the last sentence of this section, which reads: "See Part II-A of this Disclosure Statement to determine which of the above paragraphs applies in this case," and add the following: "Part VII.E.2(a) applies."
Accordingly,
IT IS ORDERED that Debtor must file, no later than May 18, 2009, an amended combined plan and disclosure statement which corrects the above stated problems.
IT IS FURTHER ORDERED that Debtor also must provide to Judge's chambers, no later than May 18, 2009, a redlined version of the amended combined plan and disclosure statement, showing the changes Debtor has made to "Debtor's Combined Disclosure Statement and Plan of Reorganization" (Docket # 75), filed May 6, 2009. Debtor must submit this redlined document to chambers electronically, through the Court's order submission program.