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What is the mechanism for Ch 11 Debtor to pay small consumer deposit
The chapter 11 case is in early stages--the disclosure statement and plan
have not been filed yet. The debtor operates an apartment building and is
holding three security deposits that were due to be returned prepetition.
This involves three individuals with a $600 grand total of deposits. The
debtor has been in chapter 11 for 3 months and it might be another 4 months
before the plan is confirmed. The sum total of consumer deposits is tiny
compared to Debtor's other debts or its operating budget, and individuals
likely need the money. Debtor's management wishes to return the deposits
to individuals before the effective date of the plan.
Debtors frequently make "critical vendor" motion to pay critical vendors
before the plan is confirmed, but that approach does not fit here.
- First, there is no expectation of repeat business from these tenants
who have moved out.
- Second, the motivation to return the deposits before the plan's
effective date is humanitarian (intended to benefit the individual
consumers) rather than commercial (intended to benefit the debtor).
- Third, the cost of making the motion will exceed the amount to be
refunded to the consumers
What is the right approach here?
Alik Segal
Alik.Segal@gmail.com
310-362-6157
California Central District
The chapter 11 case is in early stages--the disclosure statement and plan have not been filed yet. The debtor operates an apartment building and is holding three security deposits that were due to be returned prepetition. The debtor has been in chapter 11 for 3 months and it might be another 4 months before the plan is confirmed. The sum total of consumer deposits is tiny compared to Debtor's other debts or its operating budget, and individuals likely need the money. Debtor's management wishes to return the deposits to individuals before the effective date of the plan.
Debtors frequently make "critical vendor" motion to pay critical vendors before the plan is confirmed, but that approach does not fit here. First, there is no expectation of repeat business from these tenants who have moved out.
Second, the motivation to return the deposits before the plan's effective date is humanitarian (intended to benefit the individual consumers) rather than commercial (intended to benefit the debtor).Third, the cost of making the motion will exceed the amount to be refunded to the consumers
What is the right approach here?-- Alik SegalAlik.Segal@gmail.com310-362-6157California Central District
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