AltosGroups: U.S. trustee calls for dismissal or conversion of case

By Sarah Lizee

Olympia, Wash., March 28 – AltosGroups, LLC should have its Chapter 11 bankruptcy case dismissed or converted to Chapter 7, the U.S. trustee overseeing the case said in a motion filed with the U.S. Bankruptcy Court for the Middle District of Florida.

Region 21 U.S. trustee Mary Ida Townson said that since their January petition, the debtors have been required by bankruptcy code and court orders to close prepetition accounts and transfer funds they control to debtor-in-possession accounts in authorized depositories.

The U.S. trustee said they have ignored that requirement, putting at risk more than $4.6 million dollars in deposits in the debtors’ control.

“As the court is no doubt aware, there has been recent instability in the banking system that heightens the already vital need to ensure that bankruptcy estate funds are properly protected, especially when those funds exceed FDIC insurance coverage,” Townson said in her motion.

“Furthermore, debtors’ flagrant non-compliance combined with the lack of recent account records leaves the $4.6 million dollars unaccounted.”

The U.S. trustee said the debtors provided her with what appears to be proof of opening DIP accounts at Regions Bank on March 23 and March 24, but they haven’t yet transferred the $4.6 million to the DIP accounts or closed the prepetition accounts.

She added that the debtors have also failed to maintain general liability insurance, provide proof of filing 2020 and 2021 tax returns, and file monthly operating reports for February.

Townson said she understands that debtors’ principal has been undergoing cancer treatments that may affect the debtors.

“If the principal’s illness renders debtors incapable of complying with this court’s orders or the bankruptcy code, then a Chapter 11 trustee should be installed,” Townson said.

“If the debtors believe that a Chapter 11 trustee is not necessary because the principal is still capable of carrying out his necessary obligations, then the debtors must fully comply with the bankruptcy code and this court’s orders timely.”

AltosGroups is a Davenport, Fla.-based hotel lender. It filed Chapter 11 bankruptcy on Jan. 9 under case number 23-00048.

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