The U.S. Trustee assigned to the Kid Brands case filed with the U.S, Bankruptcy Court a motion to convert the Company’s Chapter 11 reorganization to a liquidation under Chapter 7.
The motion explains, “The Debtors have failed to comply with the United States Trustee Operating Guidelines and Reporting Requirements for Chapter 11 cases. A review of the docket in these cases indicates that, as of the filing of this Motion, the Debtors have only filed monthly operating reports through and including the month of April 2017. The Debtors’ failure to timely file monthly operating reports hinders the Court’s, the UST’s, and creditors’ ability to monitor the operations of the Debtors….The unexcused failure to satisfy timely any filing or reporting requirement is cause to convert pursuant to 11 U.S.C.”
In addition, “A review of the docket in this case indicates that, as of the filing of this Motion, no disclosure statement or plan of reorganization has been filed. As these cases continue in chapter 11, attendant administrative costs naturally follow. Upon the events of these cases, the Debtors’ assets have been sold, and operations have ceased. These cases have continued over a protracted period of time, and have failed to present an exit strategy from bankruptcy. Such circumstances present a substantial or continuing loss to or diminution of the estates and the absence of a reasonable likelihood of rehabilitation. Accordingly, cause to convert these cases to chapter 7, or alternatively dismiss the cases, is present….The UST further submits that conversion would be in the best interest of creditors. Conversion would result in the appointment of an independent trustee who would liquidate any remaining assets, investigate whether there are any outstanding recoveries to pursue, and disburse any remaining cash.”
The Court scheduled a November 6, 2017 hearing on the motion.
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