IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Alexandria Division

In Re: :

 :

LINDA M. ARMELLINO : CASE NO 20-12475-BFK

MICHAEL J. ARMELLINO : Chapter 11 

 :

 Debtors :

 :

CHAPTER 11 PLAN OF REORGANIZATION

The debtors, Linda M. and Michael J. Armellino, by and

through the undersigned counsel, hereby propose the following

Plan of Reorganization (Plan) pursuant to 11 U.S.C.

1121(b)and(c).

ARTICLE I

CLASSIFICATION OF CLAIMS AND INTERESTS

For the purpose of this Plan, claims and interests are

placed into the following classes:

Class 1: Class 1 comprises those creditors who have

administrative claims, including, but not limited to, the

debtors’ attorney and accountant, and any other professionals, to

the extent that their fees and expenses are approved by the

Bankruptcy Court, such quarterly fees as may be due the Office of

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the United States Trustee, and any tax debts incurred during the

administration of this case after the date of filing.

Class 2: This class consists of all other creditors holding

non-administrative priority claims. This Class contains two

Subclasses, (a) the Commonwealth of Virginia and (b) the City of

Alexandria.

Class 3: This class includes the secured claim of Wells

Fargo Bank, N.A., which holds a first trust on the debtors’

principal residence.

Class 4: This class consists of two Subclasses. Subclass

4(a) includes the secured claim of Fairfax County, Virginia,

arising from property taxes due on the debtors’ principal

residence, and Subclass 4(b) consists of the City of Alexandria

which has a secured claim arising from property taxes due on

investment property owned by Michael J. Armellino, and known as

409 Old Town Court, Alexandria, Virginia 22314.

Class 5: This class consists of all unsecured creditors

without priority who were listed on the debtors’ schedules or who

have filed proofs of claim, with the exception of those creditors

who were listed on the debtors’ schedules as either “disputed”,

“contingent” or “unliquidated” and who did not file a proof of

claim.

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Class 6: This class includes all creditors whose claims were

scheduled by the debtor as either disputed, contingent, or

unliquidated, and who did not file a proof of claim.

ARTICLE II

IMPAIRMENT OF CLASSES AND CORRESPONDING VOTING RIGHTS

Impaired Classes: All classes, with the exception of Class 5

are unpaired by this Plan. Class 5 is potentially impaired.

To the extent that a class is unimpaired, it shall be deemed

to have accepted the Plan. However, to the extent that any class

in this Plan is impaired, or should it be determined that any

class is impaired, an impaired class shall have accepted this

Plan if the holders of at least two-thirds in amount and more

than one-half in number of those actually voting within that

class vote to accept the Plan.

ARTICLE III

TREATMENT OF CLASSES OF CLAIMS AND INTERESTS

Class 1: The Class 1 claims shall be paid in such amounts as

may be approved by the Bankruptcy Court upon application, notice,

and approval. However, in the case of the Quarterly Fees due the

United States Trustee, these amounts shall be paid upon

assessment, or, in the case of administrative tax debts, upon the

timely filing by the estate of the return giving rise to these

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debts. These claims shall be paid in full promptly as they

become due apart from and in addition to the distribution to

other creditors as provided for in Article IV. 

Class 2: Class 2 claimants shall be paid in full

contemporaneously with the first distributions made to Class 5

claimants. These distributions will be paid with interest at the

statutory rate applicable for each jurisdiction. In the case of

the Subclass 2(a) claimant, that rate shall be 10%, and the case

of the Subclass 2(b) claimant, that rate shall also be 10%. 

Class 3: Class 3 under the Plan consists of the secured

claim of Wells Fargo Bank, N.A. This claimant shall retain its

lien, and shall be paid outside the Plan under its contract terms

without alteration.

Class 4: The class four claimants shall retain the liens on

their collateral. These claims shall be paid in full with

interest at the statutory rate contemporaneously with the first

distributions made to the Class 5 claimants, if not paid at sale

after the filing of this Plan in the case of Subclass (b). 

 Class 5 The Class 5 claimants, shall receive a pro rata

distribution of such funds that are available from the sale of

the debtors’ property at 409 Old Town Court, Alexandria, Virginia

22314 (hereafter Old Town Court) after payment in full of the

Class 1, 2 and 4 Claims. The first payments to Class 5 claimants

shall be made consecutively with payments to Classes 2 and 4. In

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essence, the Class 5 claimants, shall receive all funds remaining

from the sale of the property after the claims of the Classes 1,

2, and 4 have been paid in full. Should there be sufficient

funds to pay all the claims in Class 5, then to the extent there

are remaining funds from the sale of Old Town Court to allow it,

the Class 5 claims shall receive simple interest on their claims

at 4.00% per annum from, November, 2020, the date the first

petition was filed. 

Class 6: The Class 6 claimants shall receive no distribution

under the Plan.

ARTICLE IV

 EXECUTION OF THE PLAN 

The debtors shall act as their own disbursing agent under

the Plan.

 At any time up to 30 days after the effective date of the

Plan, the Debtor may commence an adversary proceeding against a

creditor if the debtors believe the creditor was the recipient of

an avoidable transfer. In such case, for purposes of this Plan,

the order confirming this Plan shall be deemed to grant the

Debtor full authority to settle and compromise the adversary

proceeding, without further notice or order of the Court, by

treating the defendant as having an allowed claim in an amount

which includes the amount of the alleged avoidable transfer and

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as having received a distribution equivalent to the amount of the

avoidable transfer.

If such a compromise is agreed upon between the Debtor and

the defendant, the defendant’s claim will be decreased by the

amount of the avoidable transfer to determine the amount of the

allowed claim, and the amount of the avoidable transfer will be

treated as a credit against the amount to which the defendant

otherwise would have been entitled to receive pursuant to Article

III, above.

The Debtor, or any other party in interest, shall have the

right to object to any claim any time prior to the Plan’s

effective date. Any claim not objected to on or before the

effective date will be deemed finally allowed pursuant to Section

502(a) of the Code. The Debtor reserves the right to object to

any Claim, regardless of whether the debt was scheduled as

disputed, unliquidated, or contingent, and regardless of whether

the schedules to the Disclosure Statement list the claim as

allowed. Payment will not be made to any claimant whose claim is

objected to, but any distribution to that party will be held in

reserve pending resolution of the objection.

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If any claimant shall fail to cash or deposit their payment

within ninety (90) days after mailing a payment by check sent by

the debtor to the claimant’s address of record after the

effective date of the Plan, then that claimant’s share shall be

deemed to have been paid as provided for under this Plan, and the

share shall be redistributed to the other claimants as otherwise

provided for under this Plan on a pro rata basis from that point

in the manner of and to the limits described in Articles III and

IV.

The debtor shall sell the property at 409 Old Town Court,

Alexandria Virginia 22314 for the best price obtainable within

180 days after the confirmation of this Plan, if not sooner. The

net proceeds from the sale shall be held in the debtors’ Debtor

in Possession Account and shall be disbursed as follows:

(1) Upon the receipt of the funds from the sale of the

property, the debtors shall apply to the court, with notice to

all interested parties, for the entry of an order authorizing

distribution. This Application shall include as nearly as

possible the specific amounts to be paid to each claimant in subsections 2 and 3(a) below. 

(2) All Class 1, Class 2 and Class 4 claims shall be paid in

full as provided for above.

(3) The remaining funds will be disbursed to the Class 5

claims pro rata in two installments. 

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(a) First, a reserve equal to the anticipated United

States Trustee’s Quarterly Fee due on all disbursements under the

Plan to the closure of the case, plus fifteen-thousand dollars

for anticipated administrative expenses, shall be deducted from

the remaining funds, and the balance shall be distributed to the

Class 5 claims at once at the same time as payments are made to

the Class 1, Class 2, and Class 4 claims. 

(b) Next, upon the approval of a Final Report and

Account, should there be any remaining funds from the reserve,

those funds shall be distributed to the Class 5 claimants in

their pro rata shares to the extent of their entitlement under

Article III. 

ARTICLE V

 DISCHARGE/RELEASE 

The debtors will be discharged and/or released from all

debts and claims dischargeable under the Code at the time stated

in 11 U.S.C. section 1141 upon the entry of an order approving

the debtors’ Final Report and Account, and thereupon all property

of the estate shall be vested in the Debtor free and clear of

liens, except those liens preserved hereunder.

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ARTICLE VI

RETENTION OF JURISDICTION

The Court shall retain jurisdiction over these proceedings

after Confirmation for the following purposes:

1. To hear and determine objections to claims or

request for valuation.

2. To hear and determine causes of action by or against

Debtor arising proper to the commencement of or during the

pendency of these proceedings.

3. To hear and determine any dispute arising under this

Plan.

4. To grant extensions of any deadline set herein.

5. To enforce all discharge provisions under the Plan. 

6. To hear and determine any matter requiring

resolution by the debtors.

In addition, and at any time, the Court may make such orders

or give such direction as may be appropriate under Section 1142

of the Code.

The failure of the debtors to make any of the payments

provided for above, or any other payment required under the Plan,

shall constitute a default, and the claimants entitled to such

distribution shall have the right to enforce such payments under

applicable non-bankruptcy law, under its loan documents, or to

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apply to the court for such remedies as may be appropriate under

Article IV.

ARTICLE VII

 CRAMDOWN

The debtors hereby invoke the “cramdown” entitlement under

11 U.S.C. 1129(b) of the Bankruptcy Code. That is, as long as

the plan does not discriminate unfairly, and is fair and

equitable with respect to any class of claims or interest that is

impaired and has not accepted the Plan, the plan may be confirmed

by the Bankruptcy Court.

ARTICLE VIII

EFFECTIVE DATE OF PLAN

The effective date of this Plan shall be the fifteenth day

after the entry of an order of authorizing payments as described

in Article IV(1), above.

Dated: November 4, 2021

/s/Linda M. Armellino

Linda M. Armellino 

/s/Michael J.Armellino

Michael J. Amellino

 

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/s/ Richard G. Hall 

Richard G. Hall, Esquire

Counsel for the Debtors

7369 McWhorter Place, Suite 301

Alexandria, Virginia 22314

(703) 256-7159

richard.hall33@verizon.net

VA Bar No 18076

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