The Final Say: Conversion From Chapter 11 To Chapter 7 Is Not A Given
It is well-settled that if you are a debtor in chapter 11, you do not have the unfettered right to convert the case to a chapter 7 liquidation. A recent 10th Circuit decision shows why. Kearney v. Unsecured Creditors Committee et al., BAP No. 20-33, 2021 WL 941435 (B.A.P. 10th Cir. Mar. 12, 2021).
The debtor had married into a family that owned real estate assets in New Mexico, Colorado and Arizona and lived off income from two spendthrift trusts formed by his late wife. The debtor and his two brothers-in-law served as co-trustees of both trusts. Despite receiving annual distributions from the trusts of approximately $800,000, Kearney sued his co-trustees in 2013, asserting improper management of the trusts.
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Patterson Belknap Webb & Tyler LLP by Lance Kodish and Daniel Lowenthal. Published April 7, 2021.