Summit Financial bankruptcy case converted to Chapter 7; trustee appointment denied

By Caroline Salls

Pittsburgh, June 19 – Summit Financial Corp.’s Chapter 11 bankruptcy case was converted to Chapter 7 on Wednesday by the U.S. Bankruptcy Court for the Southern District of Florida.

In April, the company asked the court to convert the case if no consensual resolution was reached by key case constituents.

“The debtor’s bankruptcy case was filed close to a year ago with no end in sight, despite the best efforts of the debtor to expedite a resolution,” the motion said.

“Given this court’s observations concerning the lack of progress made, which has been raised at every hearing over the past few months, the debtor believes that the time has come to convert the case, unless a consensual global resolution to the issues can be reached by the key constituent parties prior to the next hearings on various motions.”

Summit said it believes that, in light of the court’s “inclination to grant stay relief” to lenders, the additional time and expense associated with the official committee of general unsecured creditors’ efforts to attain approval of a non-consensual plan of reorganization, and the “speculative recoveries” associated with the proposed runoff plan submitted by the committee, general unsecured creditors’ recovery, if any, would likely come from undetermined claims that require further investigation.

As a result, the company said it believes the best method to generate any recovery for general unsecured creditors is in Chapter 7, with the oversight of a Chapter 7 trustee.

Also on Wednesday, the court denied a request made by Summit’s official committee of unsecured creditors for appointment of a Chapter 11 trustee to oversee the case, ruling that the committee’s motion was moot as a result of the conversion.

In its trustee appointment motion, the committee argued that “an independent fiduciary is required to make his or her own determination on the best course of action with respect to whether this case should remain in Chapter 11 or be converted to Chapter 7.”

The committee also said a trustee could determine the best course of action regarding the disposition of Summit’s loan portfolio.

The creditor group said it “has become abundantly clear,” given alleged misconduct of the company’s current officers and directors, that those individuals cannot be trusted to maximize recovery for unsecured creditors.

Plantation, Fla.-based Summit provides financing by purchasing and servicing retail installment sales contracts. The company filed bankruptcy on March 23, 2018 under Chapter 11 case number 18-13389.

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