- Posted by Dan
- On September 27, 2011
- 0 Comments
- bankruptcy, Chapter 11, Chapter 7
You’ve likely heard of the high profile Chapter 11 bankruptcy case of Myrtle Beach lawyer and real estate developer Harry Pavilack. He filed his Chapter 11 case as a defensive measure when he was no longer able to service over $70 Million in debt. In a Chapter 11 case the debtor has an opportunity to propose a Plan of Reoganization to repay its debts over time.
In Pavilack’s case because of numerous questions that arose early in his case the bankruptcy court took the unusual step of appoint a Trustee. The Trustee was tasked with supervising the case and investigating the potential loss or concealment of assets. After over $72.5 Million in claims have been filed, the Trustee persuaded the bankruptcy judge to convert Pavilack’s case to a Chapter 7 case. In arguing that the case should be converted to Chapter 7, the Trustee asserted that Pavilack won’t live long enough to pay his creditors in full.
While a Chapter 11 case allows the debtor to continue to operate its business, a Chapter 7 calls for a liquidation of the debtor’s assets for repayment of creditors. Often in Chapter 7 cases creditors receive no distribution. Part of the reason for the lack of distributions to creditors is that often the assets of the debtor are encumbered by liens in excess of the value of the property owned by the debtor.
In Pavilack’s case, much of his holdings are in real estate. No doubt on liquidation, the many of the assets will not bring sufficient amounts to pay creditors.
So now Pavilack’s case will proceed as a Chapter 7 liquidation. Many of Pavilack’s partners will be called upon to give sworn testimony about what they know about transactions with Pavilack, including the location of his assets. The Trustee certainly has work to do.
So what happens to Pavilack. All is not lost. Pavilack should receive his discharge and be forgiven from the obligation to pay the shortfall.
You may not owe $72.5 Million but still be unable to pay your debts. Often bankruptcy is the best solution.
Contact a Knoxville – Sevierville Bankruptcy Attorney
If you have been harassed by creditors or are considering filing for bankruptcy, contact Knoxville – Sevierville Bankruptcy Attorney Dan Scott by calling 865-246-1050 for a free consultation today. We help people in Knoxville, Maryville, Sevierville, Jefferson City and surrounding areas.