Summary:
In Travis v. Adair Realty Group, LLC, Adv. Pro. No. 25-00040-5-PWM (Bankr. E.D.N.C. Oct. 8, 2025), Judge Pamela McAfee denied motions to dismiss filed by both the Chapter 7 trustee for Adair Realty Group (“ARG”) and its principal, Robin Shea Adair. The opinion clarifies two key issues for consumer bankruptcy practitioners: (1) when a debtor retains standing to pursue undisclosed claims after a dismissed Chapter 13 case, and (2) how North Carolina’s “foreclosure rescue” statutes can impose personal liability on individuals behind such schemes.
Background:
Melissa Travis—formerly known as Melissa Leigh Marek—purchased her Holly Springs home in 2015. After defaulting on her mortgage, she contacted Robin Adair, who promoted himself online as a professional who could “help homeowners avoid foreclosure.” In December 2022, Adair met Travis at a UPS Store, where she signed a quitclaim deed conveying a 50% interest in her home to Adair’s company, Adair Realty Group, LLC, in exchange for promises to reinstate her mortgage ($29,344.62), invest $10,000 in repairs, and split sale proceeds once the home was sold.
Adair never made the promised reinstatement payment and allowed the foreclosure to proceed in January 2023. On January 12, 2023, Travis filed a Chapter 13 case (No. 23-00091-5-PWM) to halt the foreclosure. That case was dismissed without discharge on March 11, 2024. Critically, her bankruptcy petition failed to disclose both the December 2022 property transfer and any potential claim against Adair or ARG—neither appearing on Schedule A/B nor in her Statement of Financial Affairs.
Despite the bankruptcy filing, Adair recorded the deed post-petition. When the property was later sold for $400,050, the surplus proceeds of $155,429.58 were split, with ARG receiving half. Travis then sued Adair and ARG in Wake County Superior Court under N.C. Gen. Stat. §§ 75-1.1 and 75-121 (the “foreclosure rescue” statutes), seeking to void the deed and recover damages. ARG’s subsequent Chapter 7 filing brought the case into bankruptcy court.
Chapter 7 Trustee’s Motion – Standing After Dismissed Chapter 13:
The Chapter 7 trustee for ARG argued that Travis lacked standing because her claims were property of her prior Chapter 13 estate and had never been disclosed or abandoned. Judge McAfee rejected that argument, adopting the Second Circuit’s reasoning in Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473 (2d Cir. 2014).
Under 11 U.S.C. § 349(b), dismissal “revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case,” including unscheduled assets. Unlike a closed Chapter 7 case, dismissal of a Chapter 13 terminates the estate entirely, restoring the parties to their pre-petition positions and leaving no property in custodia legis. Thus, even though Travis failed to disclose these claims, her right to pursue them reverted to her upon dismissal.
Adair’s Motion – Jurisdiction and Personal Liability:
Adair argued that the bankruptcy court lacked jurisdiction over claims against him personally and that any recovery would require piercing ARG’s corporate veil. The Court found “related-to” jurisdiction under In re Celotex Corp., 124 F.3d 619 (4th Cir. 1997), because any judgment against Adair would reduce Travis’s claim against the debtor estate.
The Court further held that Travis alleged Adair’s direct participation in a “foreclosure rescue transaction,” which under N.C. Gen. Stat. § 75-121(a) makes “any person or entity” personally liable for engaging in or promoting such conduct. No veil-piercing was required.
Claims Surviving Dismissal of Chapter 13:
-
Unfair & Deceptive Trade Practices (N.C. Gen. Stat. §§ 75-1.1 and 75-121): Survives. The statute expressly prohibits foreclosure-rescue conduct, whether or not the transaction was “isolated.”
-
Fraud: Survives. The amended complaint met Rule 9(b)’s particularity standard, detailing the misrepresentations, timing, and resulting injury.
-
Unjust Enrichment: Dismissed with leave to amend, as the benefit was alleged to have gone to ARG, not Adair personally.
Commentary:
Judge McAfee’s decision is significant for consumer practitioners. It reinforces that dismissal of a Chapter 13 case generally fully restores ownership of undisclosed claims to the debtor, preventing trustees from later asserting control. And it underscores that foreclosure-rescue statutes have real teeth, exposing individuals—not just their LLCs—to personal liability.
Professional Responsibility Note – Counsel’s Role in the Omission:
While the Court’s opinion did not directly address the performance of Travis’s prior bankruptcy counsel, the undisputed record raises a natural question: Should her former attorney have identified and disclosed these potential claims or the prepetition deed transfer?
The December 2022 transfer of a partial ownership interest, coupled with alleged misrepresentations by Adair, occurred weeks before the January 2023 bankruptcy filing. Under Rule 1007(b)(1) and Schedule A/B, such a transfer and any related contingent claims were required to be disclosed. Even if Travis did not fully appreciate the legal significance of the “foreclosure rescue” transaction, counsel arguably had a duty of reasonable inquiry under Fed. R. Bankr. P. 9011(b) to investigate any prepetition transfers or disputes.
That said, Judge McAfee’s application of Crawford spared both the debtor and her counsel the harsher consequence of a standing dismissal or judicial-estoppel bar—holding that dismissal of the Chapter 13 case “rewinds the clock.” Still, Travis serves as a quiet reminder that thorough intake and disclosure are the best defenses: even “rescues” gone wrong should be treated as potential litigation assets and properly listed.
For debtor’s counsel, however, the case carries a cautionary undertone: the best outcome is still to disclose everything. Had Travis’s prior case resulted in discharge rather than dismissal, the omission could have proven fatal.
To read a copy of the transcript, please see:
Blog comments