A Texas bankruptcy court has ruled that an individual acted improperly in attempting to file for personal Chapter 11 protection recently. According to the ruling, the individual attempted to use Chapter 11 protection to avoid posting bond in another legal matter that was scheduled for the courts. The Texas bankruptcy court has found that the individual filed his Chapter 11 case in bad faith and never intended to reorganize his debts under the plan. The individual has also lost an $8 million dollar lawsuit for debts he owes to a partner and a corporation.
Court Rules Against Individual
The Texas bankruptcy court ruled that the individual had made no reorganization attempt as required under Chapter 11 bankruptcy law, and that he had shown no proof of ever seriously intending to reorganize under the plan. The conclusion of the court was that the individual had filed the Chapter 11 spuriously in order to avoid having to post half his net worth as bond for a legal matter involving the appeal of an $8 million judgment that went against this individual in 2010.
The reports that are surfacing out of bankruptcy court indicate that this individual had not made good on several loans that he had taken out as a businessman and which were personally guaranteed by him. The amount of the outstanding balance is between $8.4 and $8.7 million, much too high to file Chapter 13 or Chapter 7, so the individual filed a Chapter 11 bankruptcy petition which would have limited his assets and hurt his net worth. According to the courts, the individual’s plan was to use the bankruptcy as a shield to avoid paying the bond, and the entire thing was thrown out with prejudice.