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Nester v. Gateway Access Solutions, Inc. (In Re Gateway Access Solutions)

374 B.R. 556 (2007)

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Nester v. Gateway Access Solutions, Inc. (In Re Gateway Access Solutions)

United States Bankruptcy Court for the Middle District of Pennsylvania
374 B.R. 556 (2007)

  • Written by Philip Glass, JD

Facts

Gateway Access Solutions, Inc. (Gateway) (debtor), a small business, sought Chapter 11 reorganization but failed to file a disclosure statement or plan of reorganization during the exclusivity period. Andrew C. Nester, Benjamin C. Stelle, David F. Wiesner, Steele & Associates LLC, and Anchor Bay Corporation (collectively, the creditors) (creditors) sought to convert Gateway’s Chapter 11 reorganization filing to Chapter 7 liquidation filing. In bankruptcy-court hearings, Gateway conceded consequential income losses, yet speculated as to positive future income trends without providing testimony or written evidence. Gateway’s financial records filed in court evidenced negative cash flow and insolvency. Gateway failed to keep track of operating reports filed in this matter. Of the seven operating reports filed, Gateway had to amend five erroneous ones. Gateway did not satisfactorily inform the creditors about its financial status and even entered into loans without the creditors’ authorization. Evidence presented before the bankruptcy court placed responsibility for Gateway’s financial condition on Gateway rather than on the creditors, ultimately suggesting that Chapter 7 liquidation would better serve the creditors’ interests.

Rule of Law

Issue

Holding and Reasoning (Opel, J.)

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