Avenica’s bankruptcy case converted to Chapter 7
In line with earlier reports by FX News Group, the bankruptcy case of Avenica has been converted from a Chapter 11 case to one under Chapter 7 of the Bankruptcy Code.
The conversion order was signed by Judge Elizabeth S Stong of the New York Eastern Bankruptcy Court on March 12, 2021.
Esther DuVal will be released from her obligations as the Chapter 11 Trustee of the Avenica Estate upon the entry of this Stipulated Order. The Office of the United States Trustee will, upon entry of this Order, appoint a Chapter 7 Trustee for this estate.
According to a notice filed with the Court on March 15, 2021, there will be a meeting of Avenica’s creditors. The meeting is scheduled for April 26, 2021.
Let’s note that the filing of the case imposed an automatic stay against most collection activities. This means that creditors generally may not take action to collect debts from the debtors or the debtors’ property. For example, while the stay is in effect, creditors cannot sue, garnish wages, assert a deficiency, repossess property, or otherwise try to collect from the debtors. Creditors cannot demand repayment from debtors by mail, phone, or otherwise.
Creditors who violate the stay can be required to pay actual and punitive damages and attorney’s fees. Under certain circumstances, the stay may be limited to 30 days or not exist at all, although debtors can ask the court to extend or impose a stay.
The Chapter 11 case was filed early in 2017. Avenica Inc used to provide services and technical support to FX broker Gallant Capital Markets, which also filed for Chapter 11 relief in April 2017. In fact, the estates of Gallant and Avenica were administered jointly by Esther DuVal, CPA, as their Chapter 11 Trustee. Let’s also note that Salvatore Buccatello held 100% of the membership interest in Avenica and was the CEO of both debtors.
The reason for the case conversion is that the Avenica estate has no assets for the Trustee to administer, and thus cannot fulfill the requirements under Bankruptcy Code § 1129. Let’s recall that, back in May 2017, when the motion for the joint administration of the estates of Avenica Inc and Gallant Capital Markets was filed, the debtors estimated that there were more than 1,200 customers and parties-in-interest in these bankruptcy cases.
It is worth noting that Chapter 11 is often called the reorganization chapter, as it allows businesses and some individuals to reorganize, without having to liquidate all assets. In filing a Chapter 11, the debtor presents a plan to creditors, which, if accepted by the creditors and approved by the Court, will allow the debtor to reorganize personal, financial or business affairs, and again become a financially productive entity.
Chapter 7 is also known as the liquidation chapter. It is used by individuals and businesses that are unable to repair their financial situation. In Chapter 7, asset classes, the debtor’s estate is liquidated under the rules of the bankruptcy code. Liquidation is the process through which the debtor’s non-exempt property is sold for cash by a trustee and the proceeds are distributed to creditors.