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v. Garcia v. Garcia (In re Garcia), 494 B.R. 799 (Bankr. E.D.N.Y. 2013)
Issue: Whether individual debtor's prepetition expulsion from limited liability companies ("LLCs") of which he was a member, with the remaining members' interests in the LLCs increased proportionately, involved a "transfer of an interest of the debtor in property."
Holding: The bankruptcy court held that an individual debtor's prepetition expulsion from the LLCs, where the remaining members' interest increased, involved a "transfer of an interest of the debtor in property" that could be subject to an avoidance action. The debtor's prepetition expulsion resulted from his admitted taking of about $715,000 in excess distributions. The court rejected any "blanket rule" protecting prepetition terminations of contracts with a debtor from avoidance actions. Such consideration should be made on a case by case basis. The court did, however, find that the transfer of the debtor's membership interest in the LLCs was not "on account of an antecedent debt" because debtor still owed the excess distributions even after his interest in the LLCs was transferred. Therefore, the court dismissed debtor's preference claim under 11 U.S.C. §547(b). The court also found that the debtor did not show the transfer of his interest in the LLCs was for less than "reasonably equivalent value" because, though still being litigated, his compensation for his interest under the operating agreements was established by a set calculation. In the end, the court dismissed the debtor's entire complaint.
i. In re YBA Ninteen, LLC, 505 B.R. 289 (Bankr. C.D. Cal. 2014).
Issue: Whether Chapter 11 case should be converted to Chapter 7.
Holding: Debtor was provided with sufficient notice and opportunity to be heard for order converting case to Chapter 7 to meet due process requirements. Conversion, for cause, of debtor's Chapter 11 case to Chapter 7 case was not abuse of discretion, where scheduling order and incorporated operating and reporting requirements mandated that debtor timely file monthly operating reports, file timely status reports, and otherwise comply with court's orders, debtor filed several operating reports late, failed to file one operating report, and failed to comply with order to file disclosure statement and plan prior to scheduled status conference. Debtor also failed to comply with order to amend its schedule, and debtor filed status report on day of conference, rather than filing it one week earlier, as ordered.
ii. In re Miller, 496 B.R. 469 (Bankr. E.D. Tenn. 2013)
Issue: Whether a debtor's motion to convert from Chapter 7 to Chapter 11 could be denied under 11 U.S.C. § 1112(b)(4) for "substantial or continuing loss" or "absence of reasonable likelihood of rehabilitation" theories, or due to the debtor's failure in filing tax returns.
©2014 William L. Norton III
