{"id":348,"date":"2009-09-06T08:37:10","date_gmt":"2009-09-06T08:37:10","guid":{"rendered":"https:\/\/nybankruptcy.net\/main\/?p=348"},"modified":"2018-11-28T08:58:53","modified_gmt":"2018-11-28T08:58:53","slug":"lenny-dykstra-learns-more-about-chapter-11-as-trustee-appointed-in-the-case","status":"publish","type":"post","link":"https:\/\/nybankruptcy.net\/main\/lenny-dykstra-learns-more-about-chapter-11-as-trustee-appointed-in-the-case\/","title":{"rendered":"Lenny Dykstra learns more about Chapter 11 as trustee appointed in the case"},"content":{"rendered":"
\"DykstraFight\"
Dykstra battles with Trustee in losing effort to retain control of his Chapter 11 case. (Note: No trustees were hurt in the making of this post.)<\/figcaption><\/figure>\n

Previously, I posted about Lenny Dykstra<\/strong> and why someone like him would file for Chapter 11<\/a>, which is more typically used for business bankruptcies, rather than Chapter 7 or Chapter 13 which are for individual bankruptcies.<\/p>\n

Regardless of whether it was the right path strategically speaking, things don’t seem to be going so well for him at the moment.\u00a0 The bankruptcy judge recently decided to appoint a trustee to oversee the case because Dykstra could no longer administer his finances.<\/p>\n

While not a great development for Dykstra, it does provide a good opportunity here to highlight some of the different roles of a trustee in Chapter 7, 11 and 13 bankruptcies.<\/p>\n

So why was a trustee appointed?\u00a0 Shouldn’t there already be a trustee in a Chapter 11 bankruptcy case?\u00a0 Years ago the answer would be yes.\u00a0 A trustee was automatically appointed in Chapter 11 cases to oversee the case.\u00a0 However, since the 1978 bankruptcy law went in to effect, in most cases the debtor actually continues to administer its own finances.<\/p>\n

What?\u00a0 You mean the same debtor that got itself into trouble in the first place?\u00a0 Yep.\u00a0 It’s called “Debtor-in-Possession” or “DIP” for short.\u00a0 The idea is that, despite all the problems leading to the bankruptcy, the debtor is still likely the best positioned to know how to run the the debtor’s business.\u00a0 The ability to keep control of the case also served as an incentive to get companies to file for Chapter 11 to enable a reorganization so that both debtor and creditors could move forward with their lives and businesses rather than get tangled up for a long time.<\/p>\n

For a counterexample, look at Japan during the 1990s when it was completely stagnant.\u00a0 The lack of “attractive” bankruptcy laws, from a debtor’s perspective, led companies to stand pat and avoid reorganization.\u00a0 As a result, valuable assets stayed locked up in non-productive uses for a long period.<\/p>\n

Getting back to American soil, while typically a debtor in a Chapter 11<\/a> stays in control of the case as a Debtor-in-Possession, in some cases a bankruptcy judge will appoint a trustee to administer the debtor’s finances instead.\u00a0 This generally happens when the judge believes that the debtor is doing such a poor job, perhaps as a result of incompetence or fraud, that the debtor’s estate and creditors would fare better with an independent trustee at the helm.<\/p>\n

In Dykstra’s case, it sounds like he didn’t have much of a plan for moving forward, according to Stephen Grocer<\/strong> of\u00a0 the Wall Street Journal’s Deal Journal<\/strong><\/em> (“Lenny Dykstra Wiffs in Bankruptcy Case<\/strong><\/a>“).\u00a0 The judge recognized that and appropriately appointed a trustee.<\/p>\n

Go to Chapter 11 Bankruptcy Attorney Brooklyn NY<\/a> to learn more about Rosenberg Musso & Weiner LLP and\/or to set up a free consultation.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Previously, I posted about Lenny Dykstra and why someone like him would file for Chapter 11, which is more typically used for business bankruptcies, rather than Chapter 7 or Chapter 13 which are for individual bankruptcies. Regardless of whether it was the right path strategically speaking, things don’t seem to be going so well for …<\/p>\n

Lenny Dykstra learns more about Chapter 11 as trustee appointed in the case<\/span> Read More \u00bb<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-global-header-display":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":""},"categories":[16,26,22,31,7,36],"tags":[2,21,70,71,29,30,9,51,52,37],"acf":[],"yoast_head":"\nLenny Dykstra learns more about Chapter 11 as trustee appointed<\/title>\n<meta name=\"description\" content=\"Previously, I posted 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