John Tidrow & Associates, Inc.

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE: CASE NO.
JOHN TIDROW & ASSOCIATES, INC. 05-05709-8-ATS
DEBTOR
ORDER DENYING MOTION TO DISMISS
The matter before the court is the motion to dismiss filed by
Edwards & Associates, Inc. ("Edwards"). A hearing took place in
Raleigh, North Carolina on October 26, 2005.
John Tidrow & Associates, Inc. filed a petition for relief under
chapter 7 of the Bankruptcy Code on July 26, 2005. Edwards filed the
instant motion to dismiss, contending that the debtor does not qualify
as a debtor pursuant to 11 U.S.C. § 109(a) because it is a dissolved
corporation with no assets. Edwards also argues that the debtor’s
filing is for an improper purpose and in bad faith.
The debtor opposes dismissal, contending that under North Carolina
law, a dissolved corporation is authorized to file bankruptcy after
dissolution. In addition, the debtor contends the filing was a good
faith effort to consolidate competing litigation.
According to 11 U.S.C. § 109(a), "only a person that resides or
has a domicile, a place of business, or property in the United States,
or a municipality, may be a debtor." 11 U.S.C. § 109(a). "Person" is
defined in § 101(41) to include corporations. Because John Tidrow &
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Associates, Inc. dissolved prior to filing for bankruptcy, Edwards
contends that it has no remaining corporate existence and therefore
does not qualify as a debtor pursuant to § 109(a).
John Tidrow & Associates, Inc. filed its articles of dissolution
with the North Carolina Secretary of State on August 6, 2004.
According to North Carolina General Statute § 55-14-03(b), "[a]
corporation is dissolved upon the effective date of its articles of
dissolution." N.C. Gen. Stat. § 55-14-03(b).
Under North Carolina General Statute § 55-14-05(a)(3), "[a]
dissolved corporation continues its corporate existence but may not
carry on any business except that appropriate to wind up and liquidate
its business and affairs, including: (3) [d]ischarging or making
provision for discharging its liabilities." N.C. Gen. Stat. § 55-14-
05(a)(3).
Absent any North Carolina case law interpreting this statute, the
plain meaning of the statute permits dissolved corporations to
discharge liabilities in a chapter 7 bankruptcy proceeding.
Accordingly, John Tidrow & Associates, Inc. is eligible to be a debtor
under § 109(a).
With respect to the bad faith argument, the debtor is involved in
approximately three pending lawsuits and has approximately 29 unsecured
creditors with claims totaling close to $1,900,000. One of the pending
lawsuits is to recover fraudulent transfers; another is for the
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appointment of a receiver. It is not bad faith to file a bankruptcy
petition to bring any remaining assets of the debtor into bankruptcy
court and to have the proceeds fairly distributed to all creditors
under the supervision of a trustee.
Based on the foregoing, Edwards’ motion to dismiss the debtor’s
chapter 7 case is DENIED.
SO ORDERED.
DATED: October 27, 2005
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