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F.T.L., Inc. v. Crestar Bank (In re F.T.L., Inc.)
United States Bankruptcy Court for the Eastern District of Virginia
152 B.R. 61 (1993)
FTL, Inc. (debtor) operated a car wash. Frank Lash, Jr. and Robyn Lash were FTL’s majority stockholders, officers, and directors. The Lashes’ primary assets were their ownership interest in FTL and their personal residence. Crestar Bank (creditor) was FTL’s primary secured creditor and held secured debt of roughly $785,000. The Lashes had personally guaranteed FTL’s debt to Crestar. In July 1991, FTL filed a chapter 11 bankruptcy petition. During the bankruptcy proceedings, FTL made monthly adequate-protection payments to Crestar. FTL began operating at a profit, and the payments to Crestar were likely to continue throughout the bankruptcy case. In January 1992, Crestar secured a judgment lien against the Lashes and perfected its lien against the Lashes’ residence, with a foreclosure sale on the residence scheduled for January 1993. In December 1992, FTL filed a reorganization plan that called for the Lashes to contribute all their home equity to the reorganization effort. The Lashes had obtained a home-equity loan commitment and were also working to finalize a small-business loan that was contingent on the Lashes’ personal guarantee and their continued ownership and management of FTL. FTL and the Lashes commenced an adversary proceeding against Crestar in bankruptcy court seeking to temporarily enjoin Crestar from foreclosing on the Lashes’ residence. The bankruptcy court considered whether to issue an injunction to protect the Lashes as nondebtor third-party guarantors in the bankruptcy proceeding.
Rule of Law
Holding and Reasoning (Tice, J.)
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