Deb Stores Holding U.S. Trustee seeks conversion of case to Chapter 7

By Caroline Salls

Pittsburgh, Dec. 18 – The U.S. Trustee overseeing Deb Stores Holding LLC’s Chapter 11 case is asking the U.S. Bankruptcy Court for the District of Delaware to convert the case to Chapter 7, according to a motion filed Monday.

Acting Region 3 U.S. Trustee Andrew R. Vara said in the conversion motion that Deb Stores sold substantially all of its assets shortly after it filed bankruptcy and, by the end of 2015, it appeared to have liquidated virtually all of its remaining assets other than Chapter 5 causes of action.

Vara said the company’s most recently filed monthly operating report indicates that its estates collectively have roughly $93,000 in cash and unpaid post-bankruptcy accounts payable in excess of $140,000, while the outstanding balance on Deb Stores’ pre-bankruptcy secured obligations exceeds $78 million.

“Although this case is now more than three years old, the debtors have not filed a proposed Chapter 11 plan and disclosure statement,” Vara said. “On information and belief, they have not done so because they cannot do so.”

In addition, the U.S. Trustee said ongoing administrative expenses continue to erode the company’s estates.

A hearing is scheduled for Jan. 10.

Deb Stores is the parent company of Deb Shops, a Philadelphia-based retailer that specializes in junior and plus-sized merchandise for women aged 13 to 25. Deb Stores filed for bankruptcy on Dec. 4, 2014. The Chapter 11 case number is 14-12676.

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