Pillar Capital Holdings, LLC v. Williams (In re Living Hope Southwest Medical Services, LLC)

Case No. 12-2044 (8th. Cir. Court of Appeals - Western District of Arkansas) (April 26, 2013 - Unpublished)
AFFIRMING the judgment of the bankruptcy court and district court that post-petition payments to creditor-insider was a transfer avoidable by the chapter 7 trustee.
Procedural context:
Appeal from the district court to the court of appeals, which affirmed the bankruptcy court's ruling stating that post-petition payments totaling $111,200 to a creditor and interested member post-petition were avoidable by the chapter 7 Trustee since no court approval was obtained for the transfer and the transfers were not in the "ordinary course of business."
The debtor, Living Hope Southwest Medical Services LLC, filed for Chapter 11 bankruptcy on July 18, 2006 and converted to Chapter 7 on August 15, 2008. The debtor was indebted to Northern Health Capital (NHC) $3.25M. Post-petition, NHC contacted Pillar, a New York LLC specializing in financing troubled businesses, regarding the possibility of obtaining an interest in the debtor. Pillar, through it's sole member Jack Goldenberg, thereafter provided a line of credit to the debtor of $250,000 and commenced with an initial payment of $25,000 and additional financing, in exchange for becoming a 50% member in the debtor. Over the course of the restructuring, debtor repaid a total of $111,200 to Pillar. Based on Pillar, there remained an outstanding balance of $88,500. When the case was converted to Chapter 7, the Trustee filed a complaint against Pillar and Golderberg seeking to avoid the post-petition transfers while the debtor operated as a debtor-in-possession under Chapter 11.
Smith, Beam and Gruender.

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