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Summarizing by Lars Fuller

Kenny G Enterprises v. Casey (In re Kenny G Enterprises)

9th Cir. BAP (No. CC-13-1527-KiTaPa), August 20, 2014 (unpublished)
The bankruptcy court's order converting a postconfirmation chapter 11 case to chapter 7 was affirmed: the bankruptcy court had power sua sponte to convert the case, the Debtor received sufficient notice of potential conversion, and even if notice was inadequate, there was no prejudice since the Debtor had no meritorious basis to oppose conversion. Conversion was justified because, in addition to indications of fraud, the Debtor had sold the estate's only asset, instead of collecting rental income as provided under the chapter 11 plan.
Procedural context:
Approximately one-year post-confirmation, the Debtor made a Motion for Final Decree. At the hearing on the Motion, the bankruptcy court converted the case to chapter 7. The Debtor made a motion for reconsideration, which the bankruptcy court denied. The Debtor appealed. The BAP affirmed.
The Debtor LLC owned a single luxury residence, and obtained confirmation of a chapter 11 plan which provided for using the rental income to fund the plan. Without notice, the Debtor sold the property instead and (allegedly) used the funds for, among other things, to purchase a new property in Iran.
KIRSCHER, TAYLOR and PAPPAS, Bankruptcy Judges.

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