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Bankruptcy Litigation

Can a Debtor That Has No Ongoing Business Operations Reorganize Under Chapter 11 In Good Faith?

In a recent decision, the U.S. Bankruptcy Court for the Southern District of Texas (the court) addressed whether a debtor that has no independent assets or ongoing business operations can reorganize under Chapter 11 in good faith.

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Under Section 1112(b)(1) of the Bankruptcy Code (the code), a bankruptcy court may convert or dismiss a Chapter 11 case for “cause,” including, for example, when a debtor files a bankruptcy petition in bad faith. In a recent decision, In re HONX, No 22-90035 (Bankr. S.D. Tex. Dec. 28, 2022), the U.S. Bankruptcy Court for the Southern District of Texas (the court) addressed whether a debtor that has no independent assets or ongoing business operations can reorganize under Chapter 11 in good faith.

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