Monday, April 25, 2011

Chapter 11 case filed by owner of run-down motel could be dismissed on "continuing loss" theory.


In re Om Shivai, Inc., 2011 WL 1227773 (Bkrtcy.D.S.C.)

Chapter 11 case filed by owner of run-down motel could be dismissed on "continuing loss" theory. 

"Cause" existed to dismiss a Chapter 11 case filed by the owner of a 27-room motel, based on "substantial or continuing loss or diminution to the estate" and the "absence of a reasonable likelihood of rehabilitation." The debtor had experienced a positive cash flow, and then only in a minimal amount, in only four of past eight months while operating as a debtor-in-possession. Moreover, the debtor had been operating at a very low occupancy rate for some time and, absent an expenditure of funds that it did not have to make at least $95,000 in needed repairs, it appeared likely to continue along the same path, or even have its financial situation worsen as the motel fell further into disrepair due to a lack of funds.

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