GENERAL OVERVIEW OF CHAPTER 7 BANKRUPTCY PROCESS

The Trustee has received many inquiries regarding how the chapter 7 bankruptcy process works, how claims should be filed, when claims should be filed, how distribution amounts will be determined, when distributions will occur, and related questions.  The below summary is intended as a very basic overview of how the Siskey-related bankruptcy cases may function within the chapter 7 framework.

Initiation of Case and Filing of Schedules:  After entry of the order for relief in an involuntary bankruptcy case filed against a corporate debtor, the corporate debtor is called upon to file bankruptcy schedules and a statement of financial affairs.  These bankruptcy papers are intended to disclose pertinent financial information about the debtor, including all assets, all liabilities, current income, current expenses, and certain historical data (e.g., past income, past transfers of assets, past lawsuits by or against the debtor).

Nuance in the Siskey-related cases:  Considering the death of Rick Siskey and potential criminal liability of others involved with the bankruptcy debtors, no representative of the debtors with actual knowledge of the information to be included in the bankruptcy schedules and statement of financial affairs is able and willing to prepare such papers.  This task has been left to the Trustee, who is in the process of preparing the schedules based on the best information reasonably available to the Trustee at this time.  The Trustee contemplates filing the bankruptcy schedules and statement of financial affairs for TSI Holdings, LLC by April 7, 2017 and within a few weeks thereafter for the other debtor-entities.

Meeting of Creditors:  After the bankruptcy schedules and statement of financial affairs are filed, Section 341 of the Bankruptcy Code (11 U.S.C. § 341) requires the Bankruptcy Administrator to convene a meeting of the debtor’s creditors and interest holders.  During the meeting of creditors and interest holders, the bankruptcy trustee typically asks the debtor questions about the bankruptcy papers and the debtor’s financial affairs more generally, which questions the debtor answers under oath.  Interested parties are also given the opportunity to question the debtor under oath.

Nuance in the Siskey-related cases:  Similar to the preparation of the bankruptcy schedules and statement of financial affairs, no representative of the debtors with actual knowledge is able and willing to participate in the § 341 meeting.  The Trustee contemplates providing interested parties a case update at the 341 meeting and an opportunity to ask the Trustee questions about his administration of these cases.  While no 341 meeting has been scheduled as of the date of this post, one will be scheduled within forty (40) days of the filing of the bankruptcy schedules and statement of financial affairs.  Once scheduled, the Trustee will post notice thereof on this website and a written notice will be circulated to interested parties.

Proofs of Claim:  Within ninety (90) days of the original date set for the 341 meeting (or 180 days for governmental entities), creditors must file a proof of claim in order to be entitled to a distribution from the assets of the bankruptcy estate.  Proofs of claim are filed electronically through the Bankruptcy Court’s website:  http://www.ncwb.uscourts.gov/creditor-filing .  Absent extraordinary circumstances justifying a delay, the failure to meet this deadline results in the disallowance (for purposes of the bankruptcy distribution) of any untimely claims.

Nuance in the Siskey-related cases:  The Trustee suspects that, like in typical Ponzi Scheme cases, the vast majority of the allowable claims in these cases will be based on restitution of the amount invested with the debtor-entities, less any pre-petition amounts received from the corresponding entity(ies).  The standard proof of claim form, however, is designed not for such restitution claims, but rather for claims more commonly filed in bankruptcy (e.g., tax debts, domestic support obligations, and contract claims).  To deal with this, the Trustee has developed a form addendum to the standard proof of claim form that will be posted on this website and on the official website for the U.S. Bankruptcy Court for the Western District of North Carolina (http://www.ncwb.uscourts.gov/).  The Trustee will seek court approval, after notice and opportunity for hearing, of the form addendum as a necessary attachment to any allowable proofs of claim submitted in these bankruptcy cases.

Claims Determination Process:  After the expiration of the deadline for filing all claims, the trustee will review all claims filed in the bankruptcy case and make recommendations to the court regarding the allowance or disallowance of any and all claims for the purposes of receiving a distribution from the bankruptcy estate.

Nuance in the Siskey-related cases:  None apparent at this time.

Investigation and Recovery of Assets:  Simultaneously with the claims filing and allowance process, and assuming the bankruptcy schedules and statement of financial affairs indicate that assets may be available for the distribution to general creditors, the trustee will investigate all tangible and intangible assets potentially available for the trustee to liquidate for the benefit of creditors and will pursue those assets (unless the value of the asset appears to be less than the anticipated cost of pursuing the asset, in which case the trustee will “abandon” the asset).  The timetable for this process varies widely, not only case-by-case, but also asset-by-asset.  For example, real property interests may be sold in a matter of months or may take years to sell, based primarily on uncontrollable and unpredictable market forces.  Similarly, any causes of action held by the trustee could be settled in a matter of months or may take years to resolve with formal litigation.  All proposed dispositions of assets of the estate by the Trustee (whether a proposed sale, a proposed settlement, a proposed abandonment, or otherwise), is subject to court approval, after a notice and an opportunity for hearing made available to all interested parties.

Nuance in the Siskey-related cases:  None apparent at this time.

Distribution Process:  After the claims have been determined and assets have been liquidated, the trustee will disburse funds collected by the trustee, after deducting all expenses incurred in the administration of the bankruptcy estate, pursuant to a statutory priority scheme set forth in Section 726 of the Bankruptcy Code (11 U.S.C. § 726).  With court approval, the Trustee can make an interim distribution, at such time as claims have been determined and some, but not all, assets liquidated.

Nuance in the Siskey-related cases:  None apparent at this time.

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2 thoughts on “GENERAL OVERVIEW OF CHAPTER 7 BANKRUPTCY PROCESS

  1. In order to electronically fill out a claim, a claim or case number is required. Can you please provide that to the creditors?

    Teresa L Hawkins, RLA, ASLA, LEED AP

    Teresa L Hawkins Landscape Architecture

    21326 Bethel Church Road

    Cornelius, NC 28031

    teresa_hawkins@att.net

    704/892-8625 (P/F)

    704/657-3838 (C)

    Like

  2. I am having great difficulty in attaching the support documents to the proof of claim. I have our original check made payable to TSI Holdings, LLC, our first quarterly statement dated June 30, 2011 and our last quarterly statement dated September 30, 2016. Can you assist me with this. Also there is not a way that a creditor can go back and review the Proof of Claim document. Thank you.

    Teresa L Hawkins, RLA, ASLA, LEED AP

    Teresa L Hawkins Landscape Architecture

    21326 Bethel Church Road

    Cornelius, NC 28031

    teresa_hawkins@att.net

    704/892-8625 (P/F)

    704/657-3838 (C)

    Like

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