Life Partners creditors look to submit plan for subsidiaries’ cases

By Caroline Salls

Pittsburgh, June 22 – Life Partners Holdings, Inc. creditors John Gissas, Dean Vagnozzi and Frank Bice asked the U.S. Bankruptcy Court for the Northern District of Texas to terminate the exclusivity period of subsidiary debtors Life Partners, Inc. and LPI Financial Services, Inc. to allow the creditors to file a Chapter 11 plan for those debtors, according to a motion filed Monday.

“In this case, for all practical purposes, the debtor is no longer in possession as the cases are being administered by a single trustee,” the creditors said in their motion.

“Thus, the purpose of the exclusivity period – to give a debtor in possession a limited first chance to reorganize its business – does not apply.”

Under the creditors’ proposed plan, proponents would purchase assets and assume obligations as necessary to conduct the business formerly controlled by LPI, with changes.

The creditors said the plan proponents would concede that the sale of fractional interests in insurance policies constitutes the sale of securities.

Fractional interest holders who wish to retain their interests would have their interests recognized and administered in return for a service fee and compliance by the interest holders with their obligations to pay premiums.

Meanwhile, the creditors said fractional interest holders who wish to exit their arrangements would, upon appropriate notice, have their agreements rescinded and monies refunded, including premiums paid.

According to the motion, for those who no longer hold fractional interests but believe they were defrauded or have other claims related to their previous purchase of those interests, the proponents would create a limited fund to help pay attorney’s fees for a litigation trust, which will have the right to sue the perpetrators of any fraud or prosecute other causes of action.

LPI trade creditors would be paid in full under the creditors’ plan, as would administrative expenses attributable to LPI.

Waco, Texas-based Life Partners is engaged in the secondary market for life insurance. Its subsidiaries filed for bankruptcy on May 20 under Chapter 11 case number 15-40289.

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