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Creditor Challenges Debtor’s Transfer of Business Assets to Himself Prior to Chapter 13 Bankruptcy Filing

Cherokee14 on stock.xchngA business owner in Maine recently took the unusual step of filing individually for Chapter 13 bankruptcy with the intention, according to local news coverage, of forestalling certain business liabilities. This includes a pending eviction brought by Oxford County against the business, Oxford Aviation, Inc. Prior to filing the bankruptcy petition, the business owner, James Horowitz, reportedly transferred all of the company’s assets to himself for a nominal fee. Several matters are now awaiting the court’s attention, including an effort to remand the eviction matter to state court and a declaratory judgment action regarding the company’s right to assign the lease.

According to the Bangor Daily News, Horowitz is the president and sole shareholder of Oxford Aviation, an aircraft maintenance company. The company leases a 40,000-square-foot property at Oxford County Regional Airport, including several hangars and offices. The county reportedly filed a forcible entry and detainer action, more commonly known as an eviction, in state court in late October 2013, alleging that the company breached multiple terms of its lease agreement. The company faces several other legal difficulties, as reported by the Daily News, including a lawsuit for allegedly defaulting on a $62,500 loan and a $423,000 default judgment in a lawsuit claiming negligent aircraft maintenance.

On November 12, 2013, Horowitz reportedly transferred all of the assets of Oxford Aviation, including the leasehold interest, to himself for $1. He filed for personal Chapter 13 bankruptcy the same day. His petition claimed that he has between fifty and ninety-nine creditors and $500,000 to $1 million in debt. In Schedule G, filed several weeks after the petition, he identified Oxford County and Oxford Aviation as parties to the lease agreement for the airport property. The Chapter 13 petition imposed an automatic stay halting the eviction case. The Daily News reported that a hearing had been scheduled in the eviction case on November 13, the day after he filed.

The county maintains that Horowitz lacked the authority under the lease to assign Oxford Aviation’s obligations to himself. It further argues that the issue is moot because the eviction lawsuit terminated the lease. At the same time as the Chapter 13 petition, Horowitz filed a notice of removal with the court, which purported to remove the eviction matter from state court to the bankruptcy court. On November 21, he filed a complaint for declaratory judgment, asking the bankruptcy court to find that he has a valid interest in the lease as an individual. The county has moved the court to remand the eviction matter to state court, and Horowitz has filed an opposition. The eviction matter may still proceed in the bankruptcy court if it does not grant the remand motion.

The bankruptcy system offers relief to people in financial distress, providing them with a way to restructure and pay down their bills, sell assets to make payments, and even obtain a discharge of their debts. Bankruptcy attorney Devin Sawdayi has guided countless clients in the Los Angeles area through the process of personal bankruptcy since 1997, helping them rebuild their financial lives with respect and dignity. Contact us today online or at (310) 475-9399 to schedule a free and confidential consultation regarding your case.

More Blog Posts:

California Cities File for Bankruptcy, Although It’s Different from a Personal Bankruptcy, Los Angeles Bankruptcy Lawyer Blawg, December 4, 2013

Evictions During Bankruptcy Under California Law, Los Angeles Bankruptcy Lawyer Blawg, November 29, 2013

Quitclaim Deed Deemed a Fraudulent Transfer by California District Court, Los Angeles Bankruptcy Lawyer Blawg, November 26, 2013

Photo credit: Cherokee14 on stock.xchng.