Chapter 10 Recovering on Consumer Claims From Merchant in PL94Ch10

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Chapter 10 Recovering on Consumer Claims From Merchant inBankruptcy

10.1 Expedited Motion for Appointment of Committee of ConsumerCreditors

United States Bankruptcy CourtFor the Eastern District of Pennsylvania

In re Suburban Furniture Galleries, Inc.Debtor

Chapter 11Bankruptcy No.

Expedited Motion for Appointmentof Committee of Consumer Creditors

Movant, by her attorneys, hereby requests that the Court order the appointment of a

committee of consumer creditors on the following grounds:

1. Movant is a creditor of the Debtor.

2. Movant's claim arises from her prepetition payment of $1,150.00 to the Debtor forhome furniture which was never delivered.

3. Movant's claim is entitled to priority, at least in part, pursuant to 11 U.S.C. 507(a)(6).

4. There are a minimum of 150 to 200 other consumers who made prepetition depositpayments to the Debtor for furniture or other goods for personal, family or household use thatwas not delivered (hereinafter "consumer creditors").

5. Approximately 70 consumer creditors have already filed priority claims in thisBankruptcy Court.

6. The precise number of consumer creditors is unknown because the Debtor failed toidentify any such creditors on its schedules and statement of affairs.

7. At the meeting of creditors held on February 5, 1991, the Debtor's attorney stated thatthe names and addresses of all the consumer claimants were not identified because the Debtor'srecords have been seized by law enforcement authorities.

8. According to the schedules filed by the Debtor, there are no assets in the bankruptcyestate available for distribution to unsecured creditors.

9. The U.S. Trustee has not appointed a committee of general unsecured creditors or acommittee of consumer creditors.

10. Presently, the interests of the consumer creditors are not represented in this case.

11. In the apparent absence of any unencumbered assets in this bankruptcy estate and theabsence of any creditors' committee, a committee of consumer creditors is necessary to protectthe interests of consumer creditors. Many consumer creditors paid their deposits as many as sixmonths before the Debtor ceased operating its business, thus raising serious questions about


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propriety of the conduct of the Debtor and its principals. A committee of consumer creditors willbe of material assistance in conducting an investigation into the affairs of the Debtor and inpursuing any appropriate legal actions to recover funds which may have been wrongfully divertedfrom the estate or which may otherwise be subject to recovery by the estate.

12. The consumer creditors require their own committee as their claims are entitled to

priority, at least in part, and their interests are diverse from those of the general unsecuredcreditors.

13. The appointment of a committee of consumer creditors will not drain the estate ofassets which would otherwise be available for distribution to creditors as it appears no suchassets presently exist. In essence, there will be no estate unless the Court appoints the committeeand the committee can create an estate.

14. Due to the possible misconduct on the part of the Debtor and/or its principals orothers, the public interest and the integrity of the bankruptcy process requires that there be ameaningful inquiry into the facts of this case. Such inquiry may not take place unless this Courtappoints a committee of consumer creditors.

WHEREFORE, Movant requests that the Court order the appointment of a committee ofconsumer creditors in this case.

Reasons for Expedited Treatmentof This Motion

15. Movant, by her counsel, learned on Wednesday, February 13, 1991 at 4:45 p.m thatthe U.S. Trustee would not be appointing a creditors' committee of any kind.

16. A hearing on a Motion for Relief from Stay Filed which has been filed by a securedcreditor is presently scheduled for February 27, 1991.

17. From the information presently available, it appears that the secured creditor's motion

seeks relief to proceed against the principal assets of the Debtor. The outcome of the February27, 1991 hearing may substantially affect the ability of the consumer creditors to recover thefurniture which, pursuant to the Uniform Commercial Code, they purchased and which they ownfree and clear of any interest of the secured creditor or the Debtor.

18. It is critical to the interests of the consumer creditors that they be represented at theFebruary 27, 1991 hearing. Therefore, expedited treatment of this motion is needed.

19. Due to the hearing scheduled for February 27, 1991, Movant requests that a hearingbe scheduled by the Court no later than Wednesday, February 20, 1991.

WHEREFORE, Movant requests that the Court order the appointment of a committee ofconsumer creditors and that her motion be considered on an expedited basis.

Date:Attorney for Movant


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10.2 Employment of Counsel By Official Committee of Consumer Creditors

United States Bankruptcy CourtFor the Eastern District of Pennsylvania

In re Suburban Furniture Galleries, Inc.

DebtorChapter 11Bankruptcy No.

APPLICATION OF THE OFFICIAL COMMITTEE OF CONSUMER CREDITORSFOR APPROVAL OF EMPLOYMENT OF ATTORNEYS

The application of the official Committee of Consumer Creditors ("the Committee")

respectfully represents:

1. Debtor filed a voluntary petition under chapter 11 of the Bankruptcy Code on

December 27, 1990.

2. On February 26, 1991, the Committee was appointed.

3. At a scheduled meeting of the Committee at which a majority of the members were

present, it was decided that the Committee would seek approval of the court of its employment of

Eric L. Frank, Henry J. Sommer and Community Legal Services, Inc. (hereinafter referred to

collectively as "the attorneys").

4. The attorneys are duly admitted to practice in this court.

5. The Committee has selected the attorneys for the reason that they have experience in

matters of this character and the Committee believes that they are well qualified to represent it in

this proceeding.

6. The professional services that the attorneys are to render include:

a. to give the Committee legal advice with respect to its duties and powers in this

case;

b. to assist it in its investigation of the acts, conduct, assets, liabilities, and financial

condition of the debtor, the operation of the debtor's business and the desirability


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United States Bankruptcy Court

For the Eastern District of Pennsylvania


Debtor

Chapter 11

Bankruptcy No.

DECLARATION OF ATTORNEYS

Eric L. Frank, Esquire and Henry J. Sommer, Esquire hereby declare:

1. We are attorneys duly admitted to practice before all of the courts of the

Commonwealth of Pennsylvania as well as this court, the United States District Court for the

Eastern District of Pennsylvania and the Court of Appeals for the Third Circuit.

2. We are attorneys employed by Community Legal Services, Inc. ("CLS"). All of the

CLS attorneys who will be working on this matter are similarly duly admitted to practice in this

commonwealth and before this court.

3. CLS is well qualified to represent the Official Committee of Consumer Creditors

("Committee") in connection with the matter described in the application and is willing to accept

employment on the basis set forth in the application.

4. CLS represents two individual consumer creditors Marsha D. Johnson and Shebra

Oates in this bankruptcy case. The interests of these individual creditors is not adverse to the

interest of other creditors represented by the Committee or to the estate and CLS is a

disinterested person as defined in 11 U.S.C. 101(13).

5. We declare under penalty of perjury that the foregoing is true and correct to the best of

our knowledge, information and belief.

DATE:

[signature of attorneys]


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OBJECTIONS OF THE OFFICIAL COMMITTEE OF CONSUMER CREDITORS

TO DEBTOR'S DISCLOSURE STATEMENT

The Official Committee of Consumer Creditors, by its attorneys, hereby objects to the

Disclosure Statement filed by the Debtor in this case on the following grounds:

1. The Debtor failed to give parties in interest 25 days notice of the time for filing

objections to the Disclosure Statement, as required by Bankruptcy Rule 2002(b).

2. The Disclosure Statement is not in plain English understandable by large numbers of

consumer creditors to whom it is directed, who are not knowledgeable in commercial

transactions or bankruptcy law and seems, in fact, to be designed to obfuscate rather than

disclose.

3. The Disclosure Statement does not tell consumer creditors or other creditors anything

about the likelihood of their receiving distributions under the plan, much less that there is little

likelihood of any distributions to unsecured creditors.

4. The Disclosure Statement does not inform its readers that the Debtor has not

found any appropriate party to serve as a disbursing agent and that without such a disbursing

agent the plan is not feasible.

5. The Disclosure Statement does not inform creditors that the plan cannot be confirmed

if it is rejected by any consumer creditor.

6. The Disclosure Statement does not inform creditors that without the acceptance of

creditors holding allowed secured claims the plan cannot be confirmed, and that such creditors

have not to date accepted the plan.

7. The Disclosure Statement inaccurately states that a priority consumer creditor may be

denied the right to vote on the plan based simply on the unfounded assertion that such creditor is

not impaired because the debtor "will attempt to complete the furniture orders."


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8. The Disclosure Statement fails to inform creditors that an Official Committee has been

appointed to represent consumer creditors and that consumer creditors may address questions

about the plan to that committee.

9. The Disclosure Statement fails to inform creditors that much information about

the Debtor is unavailable due to the fact that the Debtor's principal has refused to answer any

questions by invoking the Fifth Amendment.

10. The Disclosure Statement inaccurately states that the Debtor will receive a

discharge, when such discharge is unavailable in a liquidating plan.

11. The Disclosure Statement refers to a cash fund to be created by AT&T Commercial

Finance Corporation ("AT&T"), without giving any information about the size of such fund or

whether AT&T has agreed to create such a fund.

12. The Disclosure Statement fails to disclose that the Debtor's plan would eliminate

consumer creditors' claims against AT&T.

13. The Disclosure Statement fails to disclose the likely results of a liquidation.

14. The Disclosure Statement states that the plan provides for assumption of consumer

creditors' contracts, when in fact the plan proposes altering those contracts by requiring

consumers to pay the remainder of the purchase price on their furniture prior to delivery and by

providing delivery that is so untimely that it would be considered an independent breach of the

contract, and not a prompt cure as required by the Bankruptcy Code.

15. The Disclosure Statement should be disapproved because the Debtor's Plan is not

confirmable.

WHEREFORE, the Official Committee of Consumer Creditors prays that the Debtor's

Disclosure Statement be disapproved.

Counsel for Official Committee

of Consumer Creditors


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10.4 Objections to Confirmation of Debtor's Proposed Chapter 11 Plan




Debtor

Chapter 11

Bankruptcy No.

THE OFFICIAL COMMITTEE OF CONSUMER CREDITORS' OBJECTIONS TO

CONFIRMATION OF THE DEBTOR'S PROPOSED CHAPTER 11 PLAN

The Official Committee of Consumer Creditors, by its attorney hereby objects to

the chapter 11 plan proposed by the debtor. The basis for the objections are as follows:

1. The plan does not propose to pay priority claims in full if they do not consent to other

treatment, as required by 11 U.S.C. 1129(a)(9). Since many holders of priority claims will not

consent to such treatment, this defect alone bars confirmation.

2. The plan is not feasible in that no appropriate person has agreed to act as a disbursing

agent for the debtor. In fact, the Committee does not believe that the debtor has approached any

governmental agency about acting as disbursing agent or that any such agency would perform the

role envisioned by the debtor.

3. The plan is not feasible in that the debtor does not have the means to complete

furniture orders as proposed, since the remaining balances on most of the orders would not be

sufficient to pay the debtor's cost of obtaining the furniture.

4. The plan unlawfully attempts to release the claims of consumer creditors against a third

party (AT&T).

5. The plan does not pay claims with priority under 11 U.S.C. 507(a)(6) in full before

paying claims with lower priority, and improperly places all priority claims in the same class.

6. The plan is not filed in good faith and is filed solely for purposes of delay.


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creditors or any of the other unsecured creditors in this case, and because it believed that it could

devise a plan that could, with the assistance of the Pennsylvania Bureau of Consumer Protection,

give consumer creditors an opportunity to obtain substantial benefits and also increase the

possibility that other creditors could get some benefit from the case.

Your Right to vote on the Plan

As a creditor or interest holder, you have the right to vote on the Committee's Plan, as

well as on any other plan proposed in this case, and your vote is important. You may vote by

using the ballot attached to this Disclosure Statement.

The Committee of Consumer Creditors recommends that you vote to approve the plan

that it has filed because the Committee believes that its plan provides the best opportunity for

consumer creditors and possibly other creditors to obtain a benefit from this bankruptcy case.

A.Purpose of the Disclosure Statement

The purpose of the Disclosure Statement is to provide creditors and holders of interests

with such information as would enable them to make informed judgments in voting on the Plan.

This Disclosure Statement does not purport to be a complete description of the plan, the financial

status of Suburban, the applicable provisions of the Bankruptcy Code or of other matters that

may be deemed significant by creditors or of other matters that may be deemed significant by

creditors or other parties in interest. This Disclosure Statement necessarily involves a series of

compromises between extensive "raw data" and the legal language in documents or statutes on

the one hand and considerations of readability and usefulness on the other. For further

information, you should examine the Plan directly and you may want to consult your legal and

financial advisors.


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If you are a consumer who made a deposit for furniture that was never delivered and have

a question about the Plan, this Disclosure Statement, or the voting procedure, you may call or

write to the lawyers for the Committee of Consumer Creditors, Community Legal Services, 1315

Walnut Street, 4th Floor, Philadelphia, PA 19107, (215) 790-7250. Be sure to indicate that you

are inquiring about the Suburban Furniture case.

You are urged to carefully read this Disclosure Statement before making your decision to

accept or reject the Plan. Particular attention should be directed to the provisions of the Plan

affecting or impairing your rights as they existed before the filing of this case.

NO REPRESENTATIONS CONCERNING SUBURBAN'S OPERATIONS,

PARTICULARLY AS TO THE VALUE OF ANY OF ITS PROPERTY, ARE AUTHORIZED

BY THE COMMITTEE EXCEPT AS SET FORTH IN THIS DISCLOSURE STATEMENT. IN

DECIDING WHETHER TO ACCEPT THIS PLAN, YOU SHOULD NOT RELY UPON ANY

REPRESENTATIONS OR INDUCEMENTS OTHER THAN THOSE IN THE DISCLOSURE

STATEMENT.

B. Voting and Confirmation

The Bankruptcy Court has fixed August 7, 1991 as the date by which holders of claims

against, and holders of interests in, Suburban must vote to accept or reject the Plan. Creditors

may vote by filling out the enclosed ballot and sending it in the envelope provided for that

purpose to Community Legal Services, Inc., 1315 Walnut Street, 4th Floor, Philadelphia, PA

19107. In order to be counted, Ballots must be received by 4:30 p.m. EDT onAugust 7, 1991.


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THE VOTE OF EACH CREDITOR IS IMPORTANT. If you hold a claim for a

consumer deposit or other priority claim, the plan cannot be confirmed if you do not vote for it.

With regard to general unsecured claims and equity interests, the Plan can be confirmed if it is

accepted by the holders of two-thirds in amount of claims and more than one-half in number of

claims in each class of claims voting on the plan, and if it is accepted by the holders of two thirds

in amount of interests voting on the plan. If the necessary votes from general unsecured creditors

or interests are not obtained, the Court may nevertheless confirm the Plan if the court finds that it

accords fair and equitable treatment to the class or classes rejecting it.

C.Notice of Hearing

OnAugust 13, 1991 at 9:30 a.m., a hearing will be held before the Honorable David A.

Scholl, Bankruptcy Judge at the United States Bankruptcy Court, United States Courthouse, 601

Market Street, Philadelphia, PA, to consider the Committee's request for confirmation of the Plan

("Confirmation Hearing"). The Confirmation Hearing may be continued from time to time

without further notice, by announcement in open court on the day of the scheduled hearing or any

continuance thereof.

Any creditor or party in interest who wishes to object to confirmation of the Plan must

file a written objection with the Clerk of the Bankruptcy Court, United States Courthouse, 601

Market Street, Philadelphia, PA 19106, and serve copies on counsel for the Committee whose

name and address appear at the end of this Disclosure Statement. The objections must be filed

with the United States Bankruptcy Court and received by counsel on or before 4:30 p.m. EDT onAugust 7, 1991.


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II. THE DEBTOR

A. General Information about Debtor's Business

1.Brief History and Description of the Business

Suburban Furniture Galleries, Inc. was incorporated in September, 1987 and commenced

operations as a retail furniture store at Broad and Cheltenham Avenues in Cheltenham,

Pennsylvania in early 1988. The sole shareholder of Suburban is Samuel Jacobs who,

immediately prior to the formation of Suburban, had been a principal in another furniture retail

business that had filed a chapter 11 bankruptcy case and left many unpaid debts. That

bankruptcy case was ultimately dismissed and no chapter 11 plan was ever confirmed.

In October, 1988, Suburban decided to liquidate its business. However, for many months

prior to that Suburban had been taking furniture orders from consumers that were never fulfilled,

often collecting large deposits of 50%-100%. Many suppliers and other creditors also went

unpaid during this period. Nonetheless, Jacobs continued to draw his salary, at a rate in excess of

$100,000 per year.

As a result of the complaints of consumers, the Cheltenham Police have begun a criminal

investigation of Suburban's operations.

2. Property of the Debtor

Suburban owned no real estate. Its store was subleased from Silo, Inc., but that lease has

terminated. It also leases warehouse space in Philadelphia.


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All of the other property of the debtor is collateral for debts to AT&T Commercial

Finance Corp. and The Marian Bank which far exceed its value. These entities have not to date

consented to the use of any of the property to pay other creditors. The only possible funds that

may be available to pay other creditors in this case would result from litigation and Bankruptcy

Claims, as described below.

3.Likely results of a Liquidation Under Chapter 7

of the Bankruptcy Code

Because there are presently no assets not subject to liens, it is doubtful whether any

unsecured creditors would be paid anything in a liquidation under chapter 7 of the Bankruptcy

Code, except to the extent that consumer creditors prevailed in the litigation described below. It

is almost certain that no creditors holding a bankruptcy priority lower than consumer deposits

would receive any dividend in a chapter 7 case.

III. THE REORGANIZATION CASE

On December 27, 1990 Suburban filed a voluntary petition for relief under Chapter 11 of

the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of

Pennsylvania.

From the outset of the case, Suburban has made clear that it has no intention to continue

its business and that it intended to file a liquidating chapter 11 plan. The business has not

operated since the case was filed. Suburban filed schedules of debts and assets and a statement

of affairs, which may be examined at the office of the Clerk of the Bankruptcy court.


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At the meeting of creditors in the case, the only representative of Suburban to appear was

Samuel Jacobs. Mr. Jacob refused to answer any questions at the meeting of creditors on the

grounds that the answers might incriminate him and therefore were excused by the Fifth

Amendment. Creditors and other parties have therefore had to do their own investigation to

determine the facts of the case.

In April, 1991, the Committee of Consumer Creditors, AT&T, and Silo, Inc., Suburban's

former landlord, agreed upon a method of liquidating the debtor's inventory, with the assistance

of the Pennsylvania Bureau of Consumer Protection, in a way that the Committee believed would

provide substantial benefits to consumer creditors and possibly other creditors. Because

Suburban refused to agree to that method of liquidation, and because the Court decided that such

a liquidation of the property could not be carried out without Suburban's agreement at that stage

of the case, the property could not be sold at that time.

On April 24,1991, Suburban filed its proposed chapter 11 plan. The plan stated that some

of the furniture orders would be completed through the assistance of a consumer protection

agency such as the Pennsylvania Bureau of Consumer Protection, but no such agency had ever

agreed to perform this role as part of Suburban's plan. Because the plan appeared infeasible for

this reason, and unlikely to produce any benefit to consumer creditors while depriving them of

substantial rights, the Committee of Consumer Creditors sought the permission of the Court to

file its own plan, and that permission was granted.

The Committee of Consumer Creditors, along with two individual consumers, has also

brought a lawsuit against AT&T and Suburban, arguing that AT&T knew or should have known

about questionable past practices on the part of Suburban's principals when it granted credit, its

rights to the property of Suburban should not come ahead of the rights of the consumer creditors.

This lawsuit has not been decided by the Court. However, if the consumers are successful, the


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lawsuit will provide additional assets (AT&T's collateral) out of which their claims may be paid,

thereby decreasing their claims and increasing the chance that other creditors might be paid.

IV. SUMMARY OF THE PLAN

THE FOLLOWING IS A BRIEF SUMMARY OF THE PLAN. HOLDERS OF

CLAIMS ARE URGED TO READ THE PLAN IN FULL. CREDITORS ARE ALSO URGED

TO CONSULT WITH COUNSEL AND EACH OTHER IN ORDER TO UNDERSTAND THE

PLAN FULLY. THE PLAN REPRESENTS A PROPOSED LEGALLY BINDING

AGREEMENT. AN INTELLIGENT JUDGMENT CONCERNING THE PLAN CANNOT BE

MADE WITHOUT FULLY UNDERSTANDING IT.

The Liquidating Plan proposed by the Committee of Consumer Creditors is designed to

assure that consumer creditors have an opportunity to realize at least some benefit from this

bankruptcy case. That benefit would be provided by giving them a special right to purchase

items in Suburban's inventory of furniture at a private sale administered by the Pennsylvania

Bureau of Consumer Protection for the estimated price that would be received at auction, which

represents a very substantial discount from retail prices. In addition, consumers who have

ordered identifiable property currently in Suburban's warehouse or showroom are given the right

to complete the purchases of that property if they wish. (The Committee estimates that there are

about thirty consumer creditors who could complete the purchase of property in Suburban's

warehouse or showroom.)

These procedures, as an alternative to a conventional auction or liquidation as proposed

by Suburban, will benefit not only the consumer creditors who choose to participate in them, but

also will potentially benefit other unsecured creditors. If a consumer completes a purchase of


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furniture, that consumer may no longer have a priority claim in the bankruptcy case which will

share in or come ahead of the distribution to other creditors. The plan also provides that if a

consumer purchases furniture at the special sale, that consumer's claim is reduced by the amount

that the items purchased cost less than the lowest retail prices marked on those items. Thus, the

amount of consumer deposit claims, which have priority over all other unsecured claims in the

case except administrative expenses, may be substantially reduced, so that whatever funds, if any,

are available for other creditors will be shared by a smaller number of creditors.

A.Property to be Administered Through the Plan

1. Disposition of Suburban's Inventory of Furniture

and Other Property

The disposition of Suburban's inventory, consisting mainly of furniture in its warehouse

and showroom, would be carried out in three phases under the Committee's Plan.

First, those customers who can be identified as purchasers of the property in the

warehouse or showroom would be notified that they have ten days to complete their purchases by

paying the balance of the purchase price on the items they ordered and arranging for delivery.

Notice of this right would be nailed to each such customer who can be identified. Any consumer

creditor who completed all purchases covered by his or her deposit would no longer have a claim

against the estate. The estate would assume the executory contracts with such consumers to the

extent they elect to complete their purchases.

Second, there would be a one day private sale of the furniture remaining in the warehouse

(which, if practicable, would be transported to the showroom) and the furniture in the showroom.


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This sale would be open only to the consumer creditors who have claims for deposits paid to the

debtor and who would be given two weeks notice of the sale and the terms of the sale.

The private sale would be administered by the Bureau of Consumer Protection of the

Pennsylvania Department of Justice, which has agreed to perform this role, in cooperation with

an auctioneer appointed by the court, who would make available credit facilities so that

purchasers who could not pay cash could use credit cards for a 3% surcharge or checks for a 2%

surcharge. The auctioneer would facilitate pick-up of the furniture on one weekend day after the

sale by purchasers unable to take their purchases on the day of the sale.

Consumer creditors who attend the private sale would have the right to purchase any item

in the showroom (and, if feasible, similar items from storage) for 35% of the lowest retail price

marked on the item, which is the estimated average price that would be received at an auction of

the property or other liquidation of the property. The following procedures would govern the

sale:

Admittance Sale

9:00 A.M. - 10:00 A.M.:

Only customers who paid deposits over $3500 will be admitted.

10:00 A.M. - 11:00 A.M.:


11:00 A.M. - Noon:


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Noon - 1:00 P.M.:


1:00 - 5:00 P.M.

All customers who paid deposits will be admitted.

For the purpose of compensating those people who have been waiting the longest, $25 for

each month over eight months from the time of deposit to the sale would be added to the deposit

as if it were an additional deposit. This change in the deposit amount is solely for the purpose of

determining the time of admittance to the sale and how much may be purchased during the first

four hours of the sale. It does not change the amount of the person's claim in the bankruptcy

case.

During the first four hours, no one will be permitted to spend an amount in excess of his

or her deposit. During the last four hours, any amount may be purchased, on a first-come-first-

served basis.

Each customer may bring one additional person (for example, a spouse) with him or her

into the sale.

Any consumer creditor who purchases at the private sale would have his or her claim


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reduced to the extent that the price paid for all items purchased is less than the lowest retail

prices marked on those items. However, the amount that such creditors may purchase would not

be limited by the amount of their claims.

Third, within one week after the private sale, all remaining tangible personal property of

the debtor would be sold at public auction by the auctioneer.

Proceeds of all sales would be deposited in an interest bearing account in the name of the

debtor in possession, pending further orders of the Court regarding their distribution, and could

not be withdrawn or distributed absent a specific order of the Court.

2. Other possible funds for distribution to creditors

The only other possible funds that may be available for distribution to creditors are those

which may be generated from claims, rights and causes of action owned by Suburban, including

those created in favor of Suburban under the Bankruptcy Code.

B. How Classes of Creditors and Interests Will Be Treated

The Plan proposed by the Committee of Consumer Creditors provides for differing

treatment of different types of creditors based upon different rights and priorities granted to those

creditors by the federal bankruptcy laws. In order to provide for this treatment, creditors and

interest holders are divided into seven classes. In addition, the plan provides for payments to

certain other parties who provided services during the bankruptcy case (unclassified claims).

These classes and their rights under the plan are described below:

1. Class 1 Claims (Wages and Employee Benefits)


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This class includes all allowed claims for wages and employee benefits given priority

under Bankruptcy Code 507(a)(3) and (a)(4). The documents filed by Suburban in the

bankruptcy case state that no such claims exist. If any such claims are allowed, they will be paid

in cash, on a pro-rata basis, from any funds remaining after satisfaction of the unclassified

claims.

2. Class 2 Claims (AT&T and Marian Bank)

This class consists of the claim of AT&T to the extent it does not exceed the proceeds of

the sale of Suburban's property, and of Marian Bank to the extent that those proceeds do exceed

AT&T's claim. The total estimated claims of AT&T and Marian Bank are approximately

$600,000. Whether these claims will be paid from the proceeds of the sale of Suburban's

property will depend on the outcome of the lawsuit filed by the consumers and the Committee of

Consumer Creditors against AT&T, and possibly a similar lawsuit to be filed against Marian

Bank. To the extent that AT&T and Marian Bank are not paid from the proceeds of that sale,

they shall be considered holders of Class 6 Claims.

3. Class 3 Claims

(Consumer Deposits to the extent they do not exceed $900)

Class 3 consists of all allowed claims for consumer deposits to the extent they do not

exceed $900 per individual consumer (the amount given special treatment under the bankruptcy

laws) and they have not been reduced below that amount through the sale process described

above. If an individual consumer's deposit is more than $900, the amount over $900 will be

considered a Class 5 Claim or Class 6 Claim, depending on the amount. To the extent that funds

remain after satisfaction of the unclassified claims and the Class 1 Claims, the Class 3 Claims

shall be paid, in Cash, on a pro-rata basis. Payment shall be made as soon as practical after the


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later of (a) the Consummationi Date or (b) on the entry of an order of the Bankruptcy Court

allowing such Claim. Suburban has estimated the original amount of the consumer priority

claims at $250,000 in its schedules filed with the Court. It is impossible at this time to know

whether any funds will be available to pay these claims under the plan.

4. Class 4 Claims (Priority Tax Claims)

Class 4 Claims are those tax claims that are entitled to priority treatment under

Bankruptcy Code 507(a)(7). To the extent that funds remain after satisfaction of all

Administrative Claims and Class 1 and Class 3 Claims, the holders of Class 4 Claims shall be

paid, in Cash, on a pro-rata basis. Payment shall be made as soon as practical after the later of

(a) the Consummation Date or (b) on the entry of an order of the Bankruptcy Court allowing such

Claim. Suburban has stated the amount of the priority tax claims to be $67,000 in its schedules

filed with Court. It is impossible at this time to know whether any funds will be available to pay

these claims under the plan.

5. Class 5 Claims (Nonpriority unsecured claims up to $1000)

Class 5 Claims are all other unsecured claims not entitled to priority under the

bankruptcy, laws that are $1000 or less. To the extent that funds remain after satisfaction of all

Administrative Claims, Class 1 Claims, Class 3 Claims and Class 4 Claims, the holders of Class

5 Claims shall be paid, in Cash, on a pro-rata basis. Payment shall be made as soon as practical

after the later of (a) the Consummation Date or (b) on the entry of an order of the Bankruptcy

Court allowing such Claim. In calculating the amount of a consumer deposit claim the amount

deducted from the claim under the sale procedures described above will not be included in the

claim. The Committee estimates that the amount of the Class 5 Claims is between $50,000 and


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$150,000. It is impossible at this time to know whether any funds will be available to pay these

claims under the plan.

6. Class 6 Claims (Nonpriority unsecured claims over $1000)

Class 6 Claims are all other unsecured claims not entitled to priority under the bankruptcy

laws that are over $1000. To the extent that funds remain after satisfaction of all Administrative

Claims, Class 1 Claims, Class 3 Claims, Class 4 Claims, Class 5 Claims, the holders of Class 6

Claims shall be paid, in cash, on a pro-rata basis. Payment shall be made as soon as practical

after later of (a) the Consummation Date or (b) on the entry of an order of the Bankruptcy Court

allowing such Claim. In calculating the amount of a consumer deposit claim, the amount

deducted from the claim under the sale procedures described above will not be included in the

claim. The Committee estimates that the amount of the Class 6 Claims, including the unsecured

deficiency claims of Marian Bank and AT&T will be approximately $800,000. It is unlikely that

there will be any distribution to this class.

7. Class 7 Interests (Holders of stock of Suburban)

The Class 7 Interest consist of the rights of the holders of equity security interests (stock)

in Suburban. No holder of a Class 7 Interest shall receive any payment or retain any property on

account of that interest and all presently issued and outstanding shares of capital stock shall be

canceled.

C. Treatment of Certain Unclassified Claims


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1. Professional Fees

Attorneys, accountants, appraisers, auctioneers, or other professionals within the meaning

of section 327 of the Bankruptcy Code employed with the Bankruptcy Court's approval and other

persons who may be entitled to an allowance of fees and expenses pursuant to section 503 (b)(2)

of the Bankruptcy Code ("Professional Claims") shall receive cash in the amount awarded to

such persons by order of the Bankruptcy Court as soon as practical after the later of the Effective

Date and the date on which an order entered by the Bankruptcy Court pursuant to section 330 or

503 (b)(2) of the Bankruptcy Code approving allowance of compensation or reimbursement of

expenses becomes a final order as to any such person.

2.Administrative Claims

Holders of Administrative Claims (as described in the Plan) which claims are Allowed

Claims, shall be paid in cash the full amount of such Claims (1) as soon as practical after the

Effective Date; (2) at the option of the holder of any such Claim, at such time after the Effective

Date as the holder of such Claim may request in writing served upon the Committee as long as

such request does not accelerate payment to such holder; or (3) at such other time after the

Effective Date as the Committee and the holder of such Claim shall agree.

3.Disbursing Agent

All funds will be distributed by the Pennsylvania Bureau of Consumer Protection, which

has agreed to perform this role, in accordance with Orders of the Court and the Plan.


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D.Funding of the Plan

After the Effective Date, the cash necessary to effect the payments as provided by the

Plan shall be generated from the liquidation of all other property of Suburban including, but not

limited to, all claims, rights, causes of action created in favor of Suburban under the Bankruptcy

Code, if any.

E. Summary of Other Provisions of the Plan

1.Executory Contracts

All executory contracts, except for those of consumers who wish to complete furniture

orders for identifiable furniture ordered by them in Suburban's warehouse or showroom, are

deemed rejected under the Plan. The parties to these contracts, including all other consumers

who have paid deposits, are thereby deemed to have claims in this bankruptcy case.

2.Retention of Jurisdiction

The Bankruptcy Court shall retain jurisdiction in this Chapter 11 case in order to allow

and reject Claims, to allow fees, to consider amendments or modifications to the Plan, to enforce

the terms of the Plan and close this proceeding, all of which are described in more particular

detail in the Plan.

3.Retention, Enforcement and Waiver of Claims


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Pursuant to section 1123 (b)(3) of the Bankruptcy Code the post-confirmation debtor or

the Committee shall maintain and may enforce any and all claims of Suburban and/or Suburban,

as debtor-in-possession, including Bankruptcy Claims, except such claims as are waived,

relinquished or released in accordance with the Plan.

4. Objections to Claims and Interests

Objections to Claims and interests shall be filed with the Bankruptcy Court and served

upon each holder of such claim or interest to which objection is made as soon as reasonably

practical after the Confirmation Date. The failure by the Suburban or the Committee to object to

object to or to re-examine any claim or interest shall not be deemed to be a waiver of the right to

object to or re-examine such claim or interest in whole or in part to determine its allowability for

payment.

5. Modifications

The Plan may be amended or modified at any time prior to the Confirmation Date. After

the Confirmation Date, the Committee may, with the approval of the Court and so long as it does

not materially and adversely affect the interests of creditors, remedy and defects or omissions or

reconcile any inconsistencies in the Plan or in The Confirmation Order in such a manner as may

be necessary to carry our the purposes and intent of the Plan.

V. FINANCIAL INFORMATION

The information contained in this Disclosure Statement is derived primarily from the

schedules and statement of affairs filed by Suburban in this chapter 11 case. Accordingly, the

Committee of consumer creditors is not able to warrant or represent that such information is


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complete or entirely accurate. In fact, the Committee doubts that the disclosures made by

Suburban in these filings are either complete or accurate. It is possible that information material

to complete disclosure has not been made available to the Committee , other creditors or the

Court and that all pertinent facts cannot be presented in this Disclosure Statement. Nonetheless,

the Committee believes that there is available sufficient information about Suburban's debts and

property to conclude that liquidation of Suburban's assets under the Committee's plan, which

takes control of the process out of the hands of Suburban and also provides the flexibility to

benefit consumer creditors and possibly other creditors that is not available in a chapter 7

liquidation, is in the best interests of all creditors.

VI. ACCEPTANCE AND CONFORMATION

At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of

the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for

confirmation of a plan are that the Plan are is (i) accepted by all impaired classes of claims and

interests or, if rejected by an impaired class, that the plan "does not discriminate unfairly" and is

"fair and equitable" as to such class, as described above, (ii) feasible, and (iii) in the "best

interests" of creditors and holders of interests impaired under the plan.

A.Feasibility

As a condition to confirmation of the Plan, section 1129(a)(ii) of the Bankruptcy Code

requires that confirmation of the plan is not likely to be followed by the liquidation of Suburban,

unless such liquidation is proposed in the plan. As the plan proposes to liquidate Suburban, and

the Bureau of Consumer Protection has agreed to facilitate the Plan, the Committee believes that

the Plan meets this "feasibility" requirement and that it will be able to make all payments

required to be made pursuant to the Plan.


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B. "Best Interests" Test

Confirmation of the Plan also requires that each claimant either (i) accept the Plan or (ii)

receive or retain under the Plan property of a value, as of the Effective Date of the Plan, that is

not less than the value such claimant would receive or retain if Suburban were liquidated under

chapter 7 of the Bankruptcy Code.

To determine what creditors and holders of interests would receive if Suburban was

liquidated under chapter 7, the Bankruptcy Court must determine the dollar amount that would be

generated from the liquidation of Suburban's assets and properties in the context of a chapter 7

liquidation case. Such cash amount would be reduced by the costs and expenses of the

liquidation and by additional administrative and priority claims that may result from the

termination of Suburban's business and the use of chapter 7 for the purposes of liquidation.

The Committee believes that comparing the value of the distributions available through a

forced sale under a chapter 7 liquidation to the value obtainable under the Plan--which reflects a

more commercially reasonable manner of selling the Inventory and provides an opportunity for

consumer creditors to obtain substantial benefits--reveals that creditors will receive greater value

under the Plan. According to the Committee, the Plan satisfies the "best interest of creditors"

test.

VII SPECIAL RISK FACTORS

Certain significant risk factors are present in the consummation of any plan of

reorganization in a chapter 11 case. In the instance of the liquidation plan proposed by the

Committee, one primary risk is that the assets may not realize their full value at distress

liquidation. However, since no party has suggested that the assets of the debtor exceed the liens


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on those assets, this risk is pertinent primarily to AT&T and Marion Bank, and the individual

guarantors on those debts, Samuel and Iris Jacobs.

There is also uncertainty regarding the outcome of pending and future litigation. The

benefits to consumer creditors arising out of this bankruptcy case depend significantly upon the

outcome of the lawsuit against AT&T discussed above. There is also the possibility of legal

actions being brought under the Bankruptcy Code, but at this point the likelihood of those actions

benefiting creditors is speculative.

However, regardless of the outcome of such litigation, consumer creditors will gain

significant benefits from the opportunity to purchase furniture at 35% of retail prices under this

plan. If this plan is not confirmed, the Committee believes that most consumer creditors may

very well obtain no benefit from this chapter 11 case except whatever benefit, if any, is produced

by the lawsuit against AT&T, and that other unsecured creditors will obtain on benefit at all.

VIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES

A. General Tax Considerations

The confirmation and execution of the Plan may have tax consequences to holders of

Claims and Interests. The Committee does not offer an opinion as to any federal, state, local or

other tax consequences to holders of Claims and interests as a result of the confirmation of the

plan. ALL HOLDERS OF CLAIMS AND INTERESTS ARE URGED TO CONSULT THEIR

OWN TAX ADVISERS WITH RESPECT TO THE FEDERAL, STATE LOCAL AND

FOREIGN TAX CONSEQUENCES OF THE PLAN. THIS DISCLOSURE STATEMENT IS


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NOT INTENDED, AND SHOULD NOT BE CONSTRUED, AS LEGAL OR TAX ADVICE

TO ANY CREDITOR.

IX. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN

If the plan is not confirmed and consummated the theoretical alternatives include (a)

liquidation of Suburban under chapter 7 of the Bankruptcy Code, or (b) an alternative plan of

reorganization.

A.Liquidation Under Chapter 7

If no plan can be confirmed, the Reorganization Case may be converted to a case under

chapter 7 of the Bankruptcy Code in which a trustee would be elected or appointed to liquidate

the assets of Suburban for distribution to its creditors in accordance with the priorities

established by the Bankruptcy Code.

B.Alternative Plan of Reorganization

If the plan is not confirmed, Suburban or other party in interest could attempt to formulate

a different plan. Such a plan might involve either a reorganization and continuation of

Suburban's or an orderly liquidation of its assets. The committee believes that the Plan described

herein enables the creditors and all parties-in-interest to realize the most value under the

circumstances.


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OTHER INFORMATION

Inquires regarding information not contained in this Disclosure Statement may be made

by contacting Community Legal Services, Inc., Law Center Northeast, 1315 Walnut Street, 4th

Floor, Philadelphia, PA 19107, (215) 790-7250.

CONCLUSION

The Official Committee of consumer Creditors urges you to vote to accept the Plan it has

proposed because it feels the Plan provides the only realistic method of assuring that all

consumer creditors have some opportunity to benefit from this case and is in the best interests of

the creditors of Suburban. You may do so by returning your Ballot, on or before August 7, 1991,

to the attorneys for the Committee at the address below.

Attorney for Consumer

10.6 Consumer Creditors' Committee's Liquidation Plan of Reorganization




Debtor

Chapter 11

Bankruptcy No.

CONSUMER CREDITORS'COMMITTEE'S LIQUIDATING PLAN OFREORGANIZATION

The Official Committee of Consumer Creditors proposes the following Liquidating Plan of

Reorganization with respect to the debtor, Suburban Furniture Galleries, Inc., in accordance with

chapter 11 of the Bankrutpcy Code.


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INTRODUCTION

Suburban Furniture Galleries, Inc., the Debtor in this bankruptcy case, filed a voluntary

petition under chapter 11 of the Bankruptcy Code on December 27, 1990. The Debtor, which

had operated a retail furniture business, had ceased operating its business prior to filing its

petition. On February 28, 1991, the Bankruptcy Court authorized the appointment of an Official

Committee of Consumer Creditors to represent the interests of consumers who had paid deposits

to Suburban Furniture Galleries for furniture which was never delivered. Because that

Committee does not believe that the chapter 11 plan proposed by the Debtor is in the best interest

of the consumers it represents or other creditors, and because it believes that the plan proposed

by the Debtor will not be confirmed, the Committee has proposed this liquidating plan of

reorganization.

ARTICLE I

DEFINITIONS

A.Defined Terms

1.1 The following definitions apply in this Liquidating Plan of Reorganization.

1.2 Administrative Claim. All costs and expenses of administration allowed under

section 503(b) of the Bankruptcy Code, including, without limitation, the actual


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and necessary costs and expenses of preserving the estate of the Debtor and

operating the business of the Debtor, any indebtedness or obligations incurred or

assumed by the Debtor, as debtor-in possession, all allowances of compensation

or reimbursement of expenses allowed by Final Order, and any fees or charges

assessed against the estate of the Debtor under chapter 124, title 28, United States

Code, ? 1930.

1.3 Allowed Claim or Allowed Interest. A Claim or Interest to the extent that:

1. a proof of such Claim or Interest was (i) timely filed, or (ii)if not filed,

deemed filed pursuant to 1111(a) of the Bankruptcy Code; and

2. such Claim or Interest is one (i) which is not a Disputed Claim, or (ii)

which is allowed (and only to he extent allowed) by a Final Order.

1.4 AT&T. AT&T Commercial Finance Corporation

1.5 Available Cash. The net cash proceeds from the collection and liquidation of all

property of the Debtor's estate after payment of allowed secured claims not

invalidated or subordinated to the rights of other creditors by the court.

1.6 Bankruptcy Claims. All claims, rights, and causes of action created in favor of the

Debtor under the Bankruptcy Code, including but not limited to all claims, rights,

and causes of action arising under Sections 542 through 553 of the Bankruptcy

Code.


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1.7 Bankruptcy Code. Title 11 of the United States Code.

1.8 Bankruptcy Court. The United States Bankruptcy Court for the Eastern District of

Pennsylvania, or, in the event that such court ceases to exercise jurisdiction over

this case, such court or adjunct thereof that exercises jurisdiction over this chapter

11 case in lieu of the United States Bankruptcy Court for the Eastern District of

Pennsylvania.

1.9 Bankruptcy Rules The rules governing procedure in the United States Bankruptcy

Court, as promulgated by the United States Supreme Court, for cases under

chapter 7, 9, 11, 12 and 13 of Title 11 of the United States Code, as such rules

apply to this bankruptcy case.

1.10 Bureau of Consumer Protection. The Bureau of Consumer Protection of the

Pennsylvania Department of Justice.

1.11 Cash. Cash and cash equivalents, and other readily marketable securities or

instruments.

1.12 Claim. A claim against the Debtor as defined in section 101(5) of the Bankruptcy

Code.

1.13 Committee. The Official Committee of Consumer Creditors appointed in this

chapter 11 case.

1.14 Confirmation Date. The date on which the Confirmation Order is entered.


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order of the Bankruptcy Court, the time for appeal, for purpose of this definition,

shall be the time permitted for an appeal to the district court.

1.23 Interests. The rights of holders of the equity security interests in the Debtor.

1.24 Inventory. The Debtor's furniture and accessory inventory, equipment and fixtures

which are presently on hand.

1.25 Marian Bank. The Marian Bank.

1.26 Person. An individual, corporation, partnership, joint venture, trust, estate,

unincorporated organization, a government or any agency or political subdivision

thereof, or any other form of legal entity.

1.27 Plan. This Liquidating Plan of Reorganization and any amendments or

modifications hereto.

1.28 Post-Confirmation Debtor. The Debtor on and after the Effective Date.

1.29 Professional Persons. Attorneys, accountants, appraisers, auctioneers, or other

professionals within the meaning of section 327 of the Bankruptcy Code

employed with the Bankruptcy Court's approval.

1.30 Pro-rata. A calculation meaning proportionately so that for any given distribution

the amount of consideration distributed on account of an individual Allowed

Claim in a particular class bears the same ratio to the amount of consideration


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distributed on such date on account of all Allowed Claims in the same Class plus

an amount reserved on such date on account of all Disputed Claims in the same

class, as the dollar amount of such individual Allowed Claim bears to the total

dollar amount of all Allowed Claims and Disputed Claims in that particular case.

1.31 Schedules. The Schedules of Assets and Liabilities and Statement of Financial

Affairs filed by the Debtor with the Bankruptcy Court pursuant to Bankruptcy

Rule 1007, and as may be amended from time to time.

1.32 Allowed Secured Claim. A Claim to the extent of the amount of such Claim which

is secured by a valid, unavoidable lien on or in property of the Debtor's estate (or

as determined pursuant to section 506(a) of the Bankruptcy Code) or based upon a

valid Claim for setoff pursuant to section 553 of the Bankruptcy Code.

1.33 Allowed Unsecured Claim. An allowed Claim to the extent of the amount of such

Claim which is not secured by any valid, unavoidable lien on or in the property of

the Debtor's estate.

B. Undefined Terms. A term used in Plan and not defined herein but defined in the

Bankruptcy Code has the meaning given to that term in the Bankruptcy Code.

ARTICLE II

CLASSIFICATION OF CLAIMS AND INTERESTS


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2.1 All Claims and Interests (except the unclassified Claims treated under Article III

of this Plan) are placed in the following classes:

A. Class 1 Claims

2.2 Class 1 consists of all Allowed Claims against the Debtor entitled to priority

pursuant to sections 507(a)(3) and (4).

B. Class 2 Claims

2.3 Class 2 consists of all Allowed Secured Claims against the Debtor held by AT&T

and Marian Bank.

C. Class 3 Claims

2.4 Class 3 consists of all allowed claims against the Debtor for consumer deposits entitled to

priority under section 507(a)(6) of the Bankruptcy Code.

D. Class 4 Claims

2.5 Class 4 consists of all allowed claims entitled to priority under section 507(a)(7)

of the Bankruptcy Code.

E. Class 5 Claims


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2.6 Class 5 consists of all nonpriority allowed unsecured claims against the Debtor

not in excess of $1000.

F. Class 6 Claims

2.7 Class 6 consists of all nonpriority allowed unsecured claims against the Debtor in

excess of $1000.

G. Class 7 Interests

2.8 Class 7 consists of all Interests.

ARTICLE III

TREATMENT OF CERTAIN UNCLASSIFIED CLAIMS

A. Professional Fees

3.1 Those Professional Persons and other Persons who may be entitled to an

allowance of fees and expenses pursuant to section 503 (b)(2) of the Bankruptcy

Code shall receive Cash in the amount awarded to such Professional Persons and

other Persons by order of the Bankruptcy Court as soon as practical after the later

of the Effective Date and the date on which an ordered entered by the Bankruptcy

Court pursuant to sections 330 or 503 (b)(2) of the Bankruptcy Code approving


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allowance of compensation or reimbursement of expenses becomes a Final Order

as to any such Professional Person or other Person.

Administrative Claims

3.2 Holders of Administrative Claims which claims are Allowed Claims, shall be paid

in Cash the full amount of such Claims (1) as soon as practical after the Effective

Date; (2) at the option of the holder of any such Claim, at such time after the

Effective Date as the holder of such Claim may request in a writing served upon

the Debtor as long as such request does not accelerate payment to such holder; or

(3) at such other time after the Effective Date as the Debtor and the holder of such

Claim shall agree.

ARTICLE IV

TREATMENT OF IMPAIRED CLASSES

A. General

4.1 The holders of allowed claims against the debtor shall receive the distributions set

forth in this Article on account of their Claims.

B. Treatment of Specific Claims


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4.2 Class 1 Claims. To the extent of the remaining available Cash, if any, after

satisfaction of all Unclassified and Administrative Claims, the holders of Class 1

Claims shall be paid, in Cash, on a pro-rata basis.

4.3 Class 2 Claims. The treatment of the Class 2 claims shall be governed by the

Orders of the Bankruptcy Court determining the rights of the parties asserting

class 2 claims against the holders of consumer claims and against the estate. To

the extent that the Court finds that the Class 2 Claimants have valid liens which

should be paid from the proceeds of the Inventory prior to other claimants, such

proceeds, after costs of sale, shall be made available to pay Class 2 Claims.

4.4 Class 3 Claims. To the extent of the remaining Available Cash after satisfaction

of all Administrative Claims and Class 1 Claims, the holders of However, if a

consumer deposit claim has been totally eliminated or reduced below $900

pursuant to Article V of this plan, the claim shall not be paid to that extent

pursuant to this paragraph.


4.6 Class 5 Claims. To the extent of the remaining Available Cash after However, to

the extent a consumer deposit claim has been reduced pursuant to Article V of this

plan the claim shall not be paid pursuant to this paragraph.


of all Administrative Claims and Class 1 Claims, the holders of Class 4 Claims


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shall be paid, in Cash, on a pro-rata basis. Payment shall be made as soon as

practical after the later of (a) the Consummation Date or (b) on the entry of an

order of the Bankruptcy Court allowing such Claim. However, to the extent a

consumer deposit claim has been reduced pursuant to Article V of this plan the

claim shall not be paid pursuant to this paragraph.

4.8 Class 7 Interests. No holder of a Class 7 Interest shall receive any payment or

retain any property on account of such Class 7 Interest, and all presently issued

and outstanding shares of capital stock of the Debtor shall be cancelled as of the

Effective Date.

ARTICLE V

MEANS FOR EXECUTION OF THE PLAN

A. Disposition of Inventory

5.1 Those Customers who can be identified as purchasers of the property in the

warehouse or showroom shall be notified that they have ten days to complete their

purchases by paying the balance of the purchase price on the items they ordered

and arranging for delivery. Notice of this right shall be mailed to each such

customer who can be identified. Any consumer creditor who completes all

purchases covered by his or her deposit shall no longer have a claim against the

estate. The estate will assume the executory contracts with such consumers to the

extent they elect to complete their purchases.


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5.2 There shall be a one day private sale of the furniture remaining in the warehouse

(which, if practicable, would be transported to the showroom) and the furniture in

the showroom property. This sale shall be open only to the consumer creditors

who have claims for deposits paid to the debtor and who will be given two weeks

notice of the sale and the terms of sale.

5.3 The private sale shall be administered by the Bureau of Consumer Protection of

the Pennsylvania Department of Justice, which has agreed to perform this role, in

cooperation with an auctioneer appointed by the court, who shall make available

credit facilities so that purchasers who cannot pay cash may use credit cards for a

3% surcharge or checks for a 2% surcharge, and facilitate pick-up of the furniture

on one weekend day after the sale by purchasers unable to take their purchases on

the day of sale.

5.4 Consumer creditors who attend the private sale shall have the right to purchase

any item in the showroom (and, if feasible, similar items from storage) for 35% if

the lowest retail price marked on the item, which is the estimated average price

that would be received at an auction of the property or other liquidation of the

property. The following procedures shall govern the sale:

Admittance to Sale

9:00 A.M.-10:00 A.M.:



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10:00 A.M.-11:00 A.M.:


11:00 A.M.-Noon:


Noon-1:00 P.M.:


1:00 P.M.-5:00 P.M.:

All customers who paid deposits will be admitted.

For the purchase of compensating those who have been waiting the longest, $25

for each month over eight months from the time of deposit to the sale will

be added to the deposit as if it were an additional deposit. This change in the

deposit amount is solely for the purpose of determining the time of admittance to

the sale and how much may be purchased during the first four hours of the sale. It

does not change the amount of the person's claim in the bankruptcy case.

During the first four hours, no one will be permitted to spend an amount in excess

of his or her deposit. During the last four hours, any amount may be purchased,

on a first-come first-served basis


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Each customer may bring one additional person (for example, a spouse) with him

or her into the sale.

5.5 Any consumer creditor who purchases at the private sale shall have his or her

claim reduced to the extent that the price paid for all items purchased is less than

the lowest retail prices marked on those items. However, the amount that such

creditors may purchase shall not be limited by the amount of their claims.

5.6 Within one week after the private sale, all remaining tangible personal property of

the debtor shall be sold at public auction by the auctioneer.

5.7 Proceeds of all sales shall be deposited in an interest bearing account in the name

of the debtor in possession, pending further orders of the Court regarding their

distribution, and shall not be withdrawn or distributed absent a specific order

of this court.

B. Funding and Distribution

5.8 After the Effective Date, the Cash to effect the payments provided by the Plan

shall be generated from the liquidation of all property of the Debtor including, but

not limited to, Bankruptcy Claims. All payments under the Plan shall be made by

the Bureau of Consumer Protection, which shall act without bond or indemnity.

ARTICLE VI


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EXECUTORY CONTRACTS

6.1 Except as otherwise provided herein, all executory contracts (including the

Furniture Orders) and unexpired leases shall be deemed rejected pursuant to the

provisions of sections 365 and 1123 of the Bankruptcy Code.

ARTICLE VII

RETENTION OF JURISDICTION

7.1 The Bankruptcy Court shall retain jurisdiction of this Chapter 11 case pursuant to

and for the purposes of the Bankruptcy Code and for the following purposes,

among others:

7.2 To determine any and all objections to the allowance of Claims or Interests;

7.3 To determine any and all applications for allowance of compensation and

reimbursement of expenses;

7.4 To determine the amount of damage, if any, suffered by a party to an executory

contract or unexpired lease arising out of the rejection thereof and the allowance

of any Claim resulting therefrom;

7.5 To determine and to rule upon any compromise of any and all controversies and

disputes arising under, in connection with, or related to this Plan;


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7.6 To correct any defect, to cure any omission or to reconcile any inconsistency in

the Plan or in the Confirmation Order as may be necessary or advisable to carry

out the intent and purposes of the Plan;

7.7 To determine the validity, priority and extent of liens, claims and encumbrances

upon property of the estate and to determine any questions and issues regarding

title to and interests in any order, including injunctions, necessary to enforce the

title, rights and powers of the Debtor or the debtor-in-possession;

7.8 To order the sale of any asset included in the estate, free and clear of liens, claims

and encumbrances, and to effectuate payments under and performance of the

provisions of the Plan;

7.9 To determine all applications, motions, adversary proceedings and litigated

matters initiated or commenced in this Court by the Debtor, or by parties in

interest;

7.10 To hear, determine and enforce collection of any Bankruptcy Claims as may be

pursued by the Debtor or by any other person on behalf of the Debtor;

7.11 To determine such other matters and for such other purposes as may be provided

for in the Confirmation Order;

7.12 To enter any Orders which may be necessary or appropriate to carry out the

provisions of this plan; and


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7.13 To enter a final decree closing this Chapter 11 case.

ARTICLE VIII

RETENTION, ENFORCEMENT AND WAIVER OF CLAIMS

8.1 Pursuant to section 1123(b)(3) of the Bankruptcy Code, the Post-Confirmation

Debtor shall retain and may enforce any and all claims of the Debtor and/or the

Debtor, as debtor-in-possession, including Bankruptcy Claims, except such claims

as are waived, relinquished or released in accordance with the Plan. To the extent

that the Post Confirmation Debtor fails to act within 10 days to enforce such

claims after demand by the Committee, the Committee may bring proceedings to

enforce such claims.

ARTICLE IX

OBJECTIONS TO CLAIMS

9.1 Objections to Claims and Interests may be filed by the Debtor, the Committee or

any party in interest and shall be filed with the Bankruptcy Court and served upon

each holder of such Claim or Interest to which objection is made as soon as

reasonably practical after the date of entry of the Confirmation Order. The failure

by the Debtor or Committee to object to or to re-examine any Claim or Interest

shall not be deemed to be a waiver of the right to object to or to re-examine such

claim or Interest in whole or in part to determine its allowability for payment. The


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Debtor shall not be required to object to any Claim or Interest where no purpose

would be served.

9.2 Unless otherwise ordered by the Bankruptcy Court, the Debtor shall litigate to a

Final Order, settle or withdraw objections to, Disputed Claims and Interests.

9.3 Payments and distributions to each holder of a Disputed Claim that ultimately

becomes an Allowed Claim shall be made in accordance with the provisions of

the Plan with respect to the class of Claims to which the respective holder

belongs. Such payments shall be made as soon as practical after the date that the

order or judgment allowing such Claim becomes a Final Order.

ARTICLE X

BAR DATE FOR FILING CLAIMS

10.1 Any and all prepetition claims asserted against the debtor must be filed on or

before October 1, 1991 to receive distribution from the Debtor's estate on account

of said proof of claim. A proof of claim need not be filed if the debtor has

scheduled a Claim in the correct amount and has not listed the claim as disputed,

contingent or unliquidated. Any and all postpetition administrative claims other

than Claims for reimbursement of professional fees and costs, asserted against the

Debtor, must be filed on or before October 1, 1991 to receive distribution from the

Debtor's estate.


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13.2 Headings The headings used in this Plan are inserted for convenience only and

neither constitute a portion of this plan nor in any manner affect the construction

of the provisions of this Plan.

13.3 Severability Should any provision in this Plan be determined to be unenforceable

following the Effective Date, such determination shall in no way limit or affect

the enforceability or effect of any and all other provisions of this Plan.

13.4 Governing Law Except to the extent that the Code or other federal law is

applicable, the rights, duties and obligations arising under this Plan shall be

governed by and construed and enforced in accordance with the laws of the

Commonwealth of Pennsylvania.

13.5 Successors and Assigns The rights, duties and obligations of any Person named or

referred to in this Plan shall be binding upon, and shall inure to the benefit of the

successors and assignes of such person.

Dated:

Official Committee of

Consumer Creditors

Attorney for Official Committee

of Consumer Creditors


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10.7 Complaint to Establish Priority Over Lien Creditor

UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE:

SUBURBAN FURNITURE GALLERIES, INC.

Debtor.

MARY JOHNSON

1001 Main Street

Philadelphia, PA 19121

and

SUSAN OATES

1001 North Hollywood StreetPhiladelphia, PA 19138

Plaintiffs

[vs.]

AT&T COMMERCIAL FINANCE CORPORATION

P.O. Box 1008

Chadds Ford, PA

and

SUBURBAN FURNITURE GALLERIES, INC.

Broad Street and Cheltenham Avenue


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Philadelphia, PA 19126

Defendants.

CHAPTER 11

BANKRUPTCY NO.

ADVERSARY ACTION NO.

COMPLAINT

1. This adversary proceeding is brought by plaintiffs, consumer creditors of the debtor, to

establish the priority of their rights against the debtor's property over the rights of AT&T

Commercial Finance Corporation and their rights against AT&T, which claims to have first lien

priority with respect to the debtor's property. Plaintiffs assert that, because AT&T knew or

should have known of the past history of questionable business practices on the part of the debtor

and/or its principals, and under principles of the Uniform Commercial Code, plaintiffs' rights in

the property of the debtor should be found to have priority over those of the debtor.

2. This court has jurisdiction over this proceeding under 28 U.S.C. 1334. This

proceeding is a core proceeding.

3. Plaintiff Marsha Johnson is an individual who resides at 1000 Water Street,

Philadelphia, PA 19121.

4. Plaintiff Shebra Oates is an individual who resides at 1999 Grant Street, Philadelphia,

PA 19138.

5. Defendant AT&T Commercial Finance Corporation is a corporation doing business at

P.O.Box 1008, Chadds Ford, Pa.

6. Defendant Suburban Furniture Galleries, Inc. is the debtor in possession in this chapter

11 case and is sued as a representative of the estate and as fiduciary for the unsecured creditors of

the debtor.


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7. Plaintiffs are individuals who made prepetition deposit payments to the debtor for

furniture or other household goods which the debtor never delivered.

8. Subsequent to their dealings with the debtor, in trying to obtain delivery of the furniture

they had ordered, plaintiffs learned that the debtor had engaged in a variety of unfair and

deceeptive practices in the course of its business before closing down its operation.

9. Among other practices, the debtor had taken deposits from numerous consumers without

the ability or intent to deliver the merchandise ordered by those consumers. In the course of so

doing, the debtor made numerous false statements to plaintiffs and others about their furniture

orders.

10. Plaintiffs have learned that the debtor never even ordered the furniture for which some

consumers paid deposits amounting to thousands of dollars.

11. Plaintiffs have also learned that the principals of the debtor operated a very similar

business several years earlier, which similarly took deposits from numerous consumers for

merchandise and then abruptly closed down and filed a bankruptcy case without ever delivering

that merchandise.

12. Defendant AT&T knew or should have known of the debtor's prior business practices

when it extended credit to the debtor.

13. Defendant AT&T knew or should have known of the debtor's practices in operating

since it extended credit and was in a position to police the debtor's behavior.

FIRST CLAIM

14. Some of the furniture specifically ordered by plaintiffs may be presently stored in a

warehouse containing some of the debtor's property, which is under the control of defendant

AT&T.

15. As to all such furniture, plaintiffs have rights superior to those of defendant AT&T

under 13 Pa.C.S.A. 9307 as buyers in the ordinary course of business of identified goods.

SECOND CLAIM


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16. The rights of defendant AT&T in the debtor's property should be subordinated to those

of plaintiffs in this bankruptcy case pursuant to 11 U.S.C. 510.

THIRD CLAIM

17. The furniture held by the debtor is held in constructive trust for plaintiffs, and their

rights in the property pursuant to that trust are superior to those of defendant AT&T.

FOURTH CLAIM

18. AT&T 's actions in lending to the debtor and permitting it to carry out its scheme

caused damages to plaintiffs in the amount of their lost deposits.

19. AT&T's actions in failing to take steps to prevent the debtor from defrauding

consumers breached the standard of care owed to customers of a borrower that a lender in its

situation must comply with, resulting in damages to plaintiffs.

20. AT&T is therefore liable to plaintiffs for the damages they suffered due to the debtor's

conduct and therefore should not have priority over them with respect to the debtor's property.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray that this court enter an Order

1. Declaring that plaintiffs have rights superior to those of defendant AT&T in the debtor's

property;

2. Ordering such other relief as is just and proper.

Attorneys for Plaintiffs


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AMENDED COMPLAINT

1. This is an action under 11 U.S.C. 547(b), 548(a) and (b), 544 and 550, and 39 P.S.

351-360, to avoid the transfer by the debtor of certain property described below, and to recover

such property for the debtor's estate.

2. This adversary proceeding arises in and is related to the Chapter 11 bankruptcy case of

Suburban Furniture Galleries, Inc., filed 12-27-90, Case No. 90-15388S in this court. This court

has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. 157(b)(1) and 1334 and

11 U.S.C. 547 and 548. This is a core proceeding under 28 U.S.C. 157(b)(2)(F) and (H).

3. The plaintiff is the Official Committee of Consumer Creditors, which is authorized by

the chapter 11 plan confirmed by this court to exercise the trustee's avoiding powers in this case.

4. Defendants Robert and Helen Jacobs are individuals, and reside at 100 Central Steet,

Bala Cynwyd, PA.

5. Defendant Allstate Insurance Company is a corporation doing business at 1819 Electric

Road, S.W., P.O.Box 12055, Roanoke, VA.

6. Defendant American Express Travel Related Services is a corporation doing business at

Post Office Box 53793, Phoenix, AZ.


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7. Defendant Belmont Insurance Agency is a corporation doing business at Suite 239W,

One Bala Plaza, Bala Cynwyd, PA.

8. Defendant Citicorp Diners Club is a corporation doing business at P.O.Box 6003, The

Lakes, NV.

9. Defendant Harleysville National Bank & Trust Co. is a corporation doing business in

Harleysville, PA.

10. Defendant Hartford Insurance Company of the Midwest is a corporation doing business

at Hartford Plaza, Hartford, CT.

11. Defendant Provident National Bank is a corporation doing business at Broad and

Chestnut Streets, Philadelphia, PA.

12. Defendant Prudential Insurance Co. is a corporation doing business at 2500 Office

Center Drive, Willow Grove, PA.

COUNT ONE

vs. Defendants Robert and Helen Jacobs

13. Plaintiff reavers and incorporates herein by reference the facts averred in paragraphs 1

through 12 above.

14. Between January 5, 1990 and July 27, 1990, within one year of the filing of the petition

which commenced this case, defendant Robert Jacobs wrote checks totalling $19,500 to


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defendant Helen Jacobs, drawn on Suburban Furniture Galleries, Inc. The funds transferred by

these checks were made available for the joint use of defendants Robert and Helen Jacobs.

15. At the time the transfers described in paragraph 6 were made, defendant Robert Jacobs

was either president or vice president of, and was majority owner of, Suburban Furniture

Galleries, Inc.

16. At the time the transfers described in paragraph 6 were made, defendant Helen Jacobs

was Robert Jacobs' wife and therefore an insider.

17. At the time the transfers described above were made, defendant Helen Jacobs was

neither an employee nor an officer of Suburban Furniture Galleries, Inc.

18. At the time the transfers described above were made, Suburban Furniture Galleries, Inc.

was not indebted to Helen Jacobs or Robert Jacobs.

19. Suburban made the transfers described above with actual intent to hinder, delay, and/or

defraud either those creditors to whom Suburban Furniture Galleries, Inc. was indebted at the

time the transfers were made and to whom Suburban Furniture Galleries, Inc. was indebted at the

time of the commencement of this case.

20. Suburban Furniture Galleries, Inc. received less than a reasonable equivalent value in

exchange for the transfers described above.


was insolvent.


was engaged in business, or was about to engage in business, for which any property remaining

with the debtor was an unreasonably small capital.


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23. At the time the transfers described above were made, defendant Suburban intended the

debtor to incur, or believed that the debtor would incur, debts that would be beyond the debtor's

ability to pay as such debts matured.

24. Therefore, the transfers described above are avoidable transfers under 11 U.S.C.

548(a) and 544(b).

25. In the alternative, at the time the transfers described above were made defendant Helen

Jacobs was a principal of the debtor.

26. The debtor was insolvent at the time the transfers described ab

Documents

Chapter 10 Recovering on Consumer Claims From Merchant in PL94Ch10