United States Bankruptcy Court 

Eastern District of Virginia 

Alexandria Division 

In re: 

Terence Michael Hynes, Case No. 16-10556-BFK 

Kathryn Wilson Hynes, 

 Debtors. Chapter 11 

 Hearing: May 3, 2016, at 11:00 am 

 Courtroom III, 3rd Floor 

Motion for Date Certain for Filing of Disclosure Statement and Plan 

and to Have Court Approve a Budget for Debtors’ Expenses 

 Comes Now, Judy A. Robbins, United States Trustee, and files this motion 

to have the Court set a date certain for the filing of a disclosure statement and plan 

of reorganization by the Debtors, and for the Debtors to submit and the Court 

approve a budget for the Debtors’ expenses. 

1. This Court has jurisdiction to hear and decide this matter. 

2. This is a core proceeding. 

3. On February 18, 2016, the Debtors filed a petition for relief under 

Chapter 11 of the Bankruptcy Code. 

4. Terence Michael Hynes is an attorney. 

5. His monthly income is $80,097. Docket No. 17, page 24. 

6. Kathryn Wilson Hynes is a self-employed fashion designer. 

7. Her monthly income is -$1,798. Docket No. 17, page 24. 

8. The Debtors’ total liabilities are $4,889,612. Docket No. 17, page 1. 

9. On Schedule D – Secured Claims, the Debtors listed the Internal Revenue 

Service has having a lien on all the Debtors’ property. The amount of the 

IRS’s claim is $4,239,492. The claim is not listed as disputed, contingent 

or unliquidated. Docket No. 17, page 14. 

10. On Schedule –Secured Claims, the Debtors listed the Virginia 

Department of Taxation has having a statutory lien. The amount of the 

claim is $522,201. The claim is not listed as disputed, contingent or 

unliquidated. Docket No. 17, page 14. 

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11. The Debtors’ total nonpriority unsecured debt is $127,919. Docket No. 

17, page 20. 

12. The Debtors own no real estate. Docket No. 17, page 1. 

13. The Debtors are paying $9,685 a month for rent, and home repair and 

maintenance. Docket No. 17, page 26. 

14. The Debtors’ have listed two adult dependents. Neither dependent 

resides with the Debtors. Docket No. 17, page 26. 

15. Mr. Hynes has two retirement plans that have (on date of filing) 

combined $1,655,765. Docket No. 17, page 6. 

Argument 

 Chapter 11 debtors owe a fiduciary duty to their creditors. 

 The Debtors must act in the best interest of the estate and creditors. They 

should spend “their” money prudently and reasonably. 

A debtor-in-possession is a fiduciary. As such, Debtor 

would owe the same duties as a trustee. See In re J.T.R. 

Corp., 958 F.2d 602, 604 (4th Cir.1992); In re 

International Yacht and Tennis, Inc., 922 F.2d 659 (11th 

Cir.1991) (Chapter 11 debtor-in-possession has same rights 

and duties as a trustee). 56 The fiduciary duties of the 

debtor-in-possession, like the trustee, extend to all parties 

interested in the bankruptcy estate. Commodity Futures 

Trading Com. v. Weintraub, 471 U.S. 343, 354–55, 105 

S.Ct. 1986, 1994, 85 L.Ed.2d 372 (1985). A debtor-inpossession does not act in its own interest but must act in 

the best interest of the creditors of the estate. J.T.R. Corp.,

958 F.2d at 604–05. The job of the debtor-in-possession is 

to make sure the creditors are paid. Grayson–Robinson 

Stores, Inc. v. Securities Exchange Commission, 320 F.2d 

940 (2d Cir.1963) 

In re Bowman, 181 B.R. 836, 843 (Bankr. D. Md. 1995) 

 

 Having a court approved budget would aid in the administration of this case. 

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 It would maintain creditor and public confidence that bankruptcy while 

providing relief to the hard-pressed individual also requires appropriate financial 

responsibility by a debtor. 

 As one commentator stated: 

  

Prior to the enactment of § 1115, few cases addressed the 

issue of whether a debtor had to get court approval for the 

payment of living expenses. Some courts which considered 

the question held that normal living expenses of an 

individual Chapter 11 debtor did not need court approval, 

while others indicated that some form of court approval 

would be necessary at least in cases of significant expenses. 

Indeed one early pre-2005 Amendments decision In re 

Vincent held there was no authority for the payment of 

living expenses from the Chapter 11 estate for a Chapter 11 

individual debtor and his family under the Bankruptcy 

Code. Given § 1115 and Chapter 11 debtors' fiduciary duty 

to creditors, individual debtors should give serious thought 

to having a budget for living expenses approved by their 

Court in order to avoid challenges to the spending later in 

the case. 

After the 2005 Amendments, some courts appear content to 

allow the individual debtor to use estate property to pay 

“ordinary” living expenses without obtaining court 

approval. Nevertheless, an individual Chapter 11 debtor 

should consider requesting bankruptcy court approval of a 

living expense budget in order to avoid challenges to the 

spending later in the case or at the very least, discussing the 

issue with the local U.S. Trustee attorneys. As one 

bankruptcy court recently noted, 

A chapter 11 debtor in possession or his counsel might well 

conclude that it would be in the debtor's best interest to 

seek such approval, whether or not it is required, in order to 

put parties in interest on notice as to the amounts the debtor 

intends to spend on living expenses each month, rather than 

wait until estate assets have been dissipated and another 

party in interest claims that the debtor's disbursements were 

unreasonable or excessive (and therefore constitute grounds 

to warrant the appointment of a chapter 11 trustee or 

conversion of the case) or did not qualify as ordinary 

course expenditures. 

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 5 Norton Bankr. L. & Prac. 3d § 106:5 (footnotes omitted, citations omitted) 

In this case, a budget will ensure that the Debtors’ expenses are ordinary and 

reasonable. Spending approximately $9,000 a month for rent does not appear for 

two people does not appear reasonable. 

 As one court stated on this issue: 

Rather than struggle to invent out of whole cloth a procedure and 

standard for approving requests by chapter 11 debtors for authority 

to spend property of the estate for the payment of post-petition 

living expenses, the court should give section 363(c)(1) the same 

interpretation in chapter 11 cases as it has always been understood 

to have in chapter 13 cases. That is, the court should recognize that 

section 363(c)(1) authorizes a debtor in possession to use property 

of the estate to pay post-petition living expenses without prior 

court approval, so long as the amounts to be disbursed qualify 

as “ordinary course” expenses. An individual chapter 11 debtor 

needs to pay his living expenses in order to continue generating 

revenues for the estate. Thus, the payment of ordinary course 

living expenses should be treated as being within the debtor's 

ordinary course of business for the purpose of interpreting section 

363(c)(1). The reasoning of In re Goldstein, 383 B.R. 496 

(Bankr.C.D.Cal.2007), supports this conclusion. In Goldstein, the 

bankruptcy court was called upon to consider the debtors' request 

to employ a divorce attorney at the expense of the estate. *291 

Noting that section 1115(a) makes a chapter 11 debtor's postpetition wages property of the estate, leaving the debtor without 

the ability to pay a divorce attorney from non-estate assets, the 

court in Goldstein began its analysis with the premise that section 

363(c) permits a debtor to use post-petition wages to pay his 

ordinary course living expenses: “This provision [section 363(c)(1) 

] authorizes a debtor to buy bread and probably to purchase a ticket 

to travel to a court hearing. However, the hiring of divorce counsel 

is not typically a transaction in the ordinary course of business.” 

Id. at 499. Therefore, the debtors could only use property of the 

estate to employ divorce counsel after notice and a hearing under 

section 363(b). Had the debtors merely been requesting authority 

to pay undisputedly ordinary living expenses, the clear view of 

the bankruptcy judge in Goldstein is that bankruptcy court 

approval would not have been required 

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In re Seely, 492 B.R. 284, 290-91 (Bankr. C.D. Cal. 2013) 

(footnotes omitted) (emphasis added) 

 Asking that a date certain be set for the filing of a disclosure statement and 

plan of reorganization is the other side of having a budget. The disclosure 

statement should set forth the Debtor’s projected disposable income and how it 

was determined. 

 Judy A. Robbins 

 United States Trustee 

 /s/ Jack Frankel 

 Jack Frankel, Attorney 

 Office of United States Trustee 

 115 S Union Street 

 Alexandria, VA 22314 

 (703) 557-7229 

Certificate of Service 

 I hereby certify that on the 4th day of April, 2016, I mailed, United States 

mail, postage prepaid, first class, a copy of this motion and notice of motion and 

hearing to: 

Brian Andrew Tucci, Esq. 

Goren &Tucci, LLC 

7979 Old Georgetown Road, Suite 750 

Bethesda, MD 20814 

Terence Michael Hynes 

Kathryn Wilson Hynes

7004 Green Oak Drive 

Mc Lean, VA 22101-1551 

 /s/ Jack Frankel 

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