E.D.N.C.: In re TP, Inc.- Involuntary Conversion of Chapter 11 to Chapter 7

Summary: Conversion from Chapter 11 to Chapter 7 is governed by 11 U.S.C. § 1112(b), based on the best interest of the creditors and estate for cause, including: (A) substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation; (B) gross mismanagement of the estate; (C) failure to maintain appropriate insurance that poses a risk to the estate or to the public; (D) unauthorized use of cash collateral substantially harmful to one or more creditors; (E) failure to comply with an order of the court; (F) unexcused failure to satisfy timely any filing or reporting requirement established by this title or by any rule applicable to a case under this chapter; (G) failure to attend the meeting of creditors convened under section 341(a) or an examination ordered under rule 2004 of the Federal Rules of Bankruptcy Procedure without good cause shown by the debtor; (H) failure timely to provide information or attend meetings reasonably requested by the United States Trustee (or the bankruptcy adminstratot, if any) (I) failure timely to pay taxes owed after the date of the order for relief or to file tax returns due after the date of the order for relief; (J) failure to file a disclosure statement, or to file or confirm a plan, within the time fixed by this title or by order of the court; (K) failure to pay any fees or charges required under chapter 123 of title 28; (L) failure to file a disclosure statement, or to file or confirm a plan, within the time fixed by this title or by order of the court; (M) inability to effectuate substantial consummation of a confirmed plan; (N) material default by the debtor with respect to a confirmed plan; (O) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan; and (P) failure of the debtor to pay any domestic support obligation that first becomes payable after the date of the filing of the petition. The bankruptcy court had found both that TP “has no substantial tangible assets other than its real estate” and has no employees or ongoing operations other than the rental of its real estate, which third parties are managing. (DE # 5-3 ¶ 12.) and that the value of of TP’s properties exceeds certain encumbrances against the properties and that the trustee has taken steps to sell the properties for the benefit of the estate and creditors. The District Court affirmed that re-organization was simply not a viable option, in terms of the creditors’ interest and conversion was appropriate. For a copy of the opinion, please see: TP, Inc.- Involuntary Conversion of Chapter 11 to Chapter 7.pdf