Edward B. Scharfenberger

1

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF NEW YORK
__________________________________________
In re:

EDWARD B. SCHARFENBERGER, Chapter 11
Case No. 25-11477-1 (PGR)
Debtor.
__________________________________________

APPEARANCES:

BOND, SCHOENECK & KING, PLLC ANDREW SCOTT RIVERA, ESQ.
Counsel for Debtor Edward B. Scharfenberger
One Lincoln Center, Syracuse, New York 13202

OFFICE OF THE U.S. TRUSTEE HARRISON E. STRAUSS, ESQ.
11a Clinton Avenue, Suite 620, Albany, New York 12207

MORITT HOCK & HAMROFF, LLP THERESA A. DRISCOLL, ESQ.
Special Counsel to the Office of NYS Attorney General
400 Garden City Plaza, Garden City, New York 11530

LIPPES MATHIAS, LLP LEIGH A. HOFFMAN, ESQ.
Counsel to AARP Foundation on behalf of the St. Clare’s Pensioners
677 Broadway, Albany, New York 12207

MEMORANDUM-DECISION AND ORDER CONVERTING CASE

As this Court has previously recognized, bankruptcy cannot be used solely to
bypass a bond pending appeal, its “ultimate aim must be reorganization or orderly
Signed this 11 day of August, 2026.
Patrick G. Radel
_______________________________
United States Bankruptcy Judge
So Ordered.
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liquidation.” In re Grasso, No. 25-10548 (PGR), 2025 WL 2827765, at *1 (Bankr.
N.D.N.Y. Oct. 3, 2025).
Edward B. Scharfenberger (“Debtor”) is a former bishop of the Roman Catholic
Diocese of Albany. ( Docket No. 80-1, at ¶1). In December of 2025, a jury in
Schenectady, New York awarded $54.2 million to 1,124 former employees of St.
Clare’s Hospital (the “St. Clare’s Pensioners”). ( Docket No. 66-2, at ¶ 2 & 66-3). The
jury found that several defendants, including the Debtor, failed to properly
administer the hospital’s pension plan. (Id.). The Diocese and Debtor are jointly and
severally liable for the damages award, subject to a pending appeal. (Id.).
The New York State Attorney General and AARP Foundation litigated the
case, obtained the verdict, and are defending the appeal in state court.
Presently pending are a Motion to Convert this Case to a Case under Chapter
7 filed on behalf of the St. Clare’s Pensioners (Docket No. 66); a Motion to Dismiss or
Convert filed by the United States Trustee (Docket No. 70); and the Debtor’s Motion
for Suspension of this Case. (Docket No. 76). For the following reasons, this case is
converted to a case under Chapter 7.
Jurisdiction
This Court has core jurisdiction over the parties and the subject matter of this
contested matter under 28 U.S.C. §§ 1334(b) and 157(b)(2). Venue is proper in this
Court pursuant to 28 U.S.C. §§ 1408 and 1409.
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Background
The Debtor is a defendant in two lawsuits alleging breach of contract and
breach of fiduciary duty regarding the management of a pension fund intended for
the benefit of the St. Clare’s Pensioners. (Docket No. 66-2, at ¶ 2 & Docket No. 66-3,
at p. 1-2 ). The first lawsuit was filed in September of 2019 by Mary Hartshorne and
174 other pensioners. (Docket No. 66-3, at p. 1-2 ). The second suit was filed in May of
2022 by Letitia James, the Attorney General of the State of New York. (Id.). The
cases were consolidated for all purposes by the Honorable Vincent W. Versaci, Acting
Justice of the New York State Supreme Court. (Id.)
The consolidated lawsuit was tried before a jury in November and December
of 2025, with Justice Versaci presiding. (Id.). The jury returned a verdict finding that
the St. Clare’s Pensioners were entitled to $54.2 million in damages. (Id.).
The jury did not find the Diocese directly liable. (Docket No. 66-3 , at ¶ 6).
However, the jury determined that some of the other defendants (including the
Debtor) were employees or agents of the Diocese and committed wrongful conduct in
furtherance of the Diocese’s business and within the scope of their employment or
agency. (Id.).
The Debtor, by and through his counsel, filed a voluntary petition for relief
under Chapter 13 of the Bankruptcy Code on December 16, 2025. (Docket No. 1). The
filing occurred while the St. Clare’s jury was still empaneled and preparing to fix the
amount of punitive damages. On December 18, 2025, this Court entered a Consent
Order that lifted the automatic stay to permit the State Court to enter an Order
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confirming the jury’s verdict, with the St. Clare’s Pensioners agreeing to waive the
proceeding for a determination of the amount of punitive damages. (Docket No. 13).
In a post-trial Order dated December 23, 2025, Justice Versaci confirmed the
jury’s verdict. (Docket No. 66-3 ). On March 25, 2026, Justice Versaci denied a motion
to set aside the verdict. (Docket No. 66-5 ). The Debtor has appealed both decisions to
the New York State Supreme Court, Appellate Division, Third Judicial Department.
(Docket No. 66-6).
On March 27, 2026, this Court entered an Order granting Debtor’s motion to
convert this case to a case under Chapter 11. (Docket No. 42).
The New York State Attorney General and AARP Foundation, acting on behalf
of the St. Clare’s Pensioners, moved to convert this case to a case under Chapter 7 on
June 3, 2026. (Docket No. 66). The United States Trustee moved to dismiss or convert
the case on June 12, 2026. (Docket No. 70). On June 17, 2026, the Debtor moved for
suspension of this case pending the outcome of the State Court appeal. (Docket No.
76). The St. Clare’s Pensioners and United States Trustee oppose the suspension
motion. (Docket Nos. 78 & 79). The Debtor opposes the dismissal/conversion motions.
(Docket No. 81).
This Court heard oral argument on July 8, 2026, in Albany, New York, with
appearances as indicated above, and reserved decision.
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Analysis
“Bankruptcy is an equitable remedy whereby a debtor is clothed with the
protection of an automatic stay, preventing his creditors from acting against him for
a period of time, in order to facilitate rehabilitation or reorganization of his finances
and to promote a ‘fresh start’. . . .” 9261 Shore Rd. Owners Corp. v. Seminold Realty
Co. (In re 9281 Shore Rd. Owners Corp.), 187 B.R. 837, 848 (E.D.N.Y. 1995) (internal
quotation marks and citation omitted).
Section 1112(b)(1) of the Bankruptcy Code gives the court the power to dismiss
a Chapter 11 case, or convert it to a case under Chapter 7, “whichever is in the best
interests of creditors and the estate, for cause.” 11 U.S.C. § 1112(b)(1).
The Code provides examples of “cause” for dismissal or conversion, including
“substantial or continuing loss to or diminution of the estate and the absence of a
reasonable likelihood of rehabilitation,” and “gross mismanagement of the estate.” Id.
These examples are “illustrative, not exhaustive,” C- TC 9th Ave. P’ship v.
Norton Co. (In re C–TC 9th Ave. P’ship), 113 F.3d 1304, 1311 (2d Cir.1997), and, once
cause is established, the court has “wide discretion” in determining whether dismissal
or conversion is the right remedy. In re Dark Horse Tavern, 189 B.R. 576, 580 (Bankr.
N.D.N.Y. 1995).
C- TC Factors
The Second Circuit has explained that “[w]hen it is clear that, from the date of
the filing, the debtor has no reasonable probability of emerging from the bankruptcy
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proceedings and no realistic chance of reorganizing, then the Chapter 11 petition may
be frivolous.” C-TC, 113 F.3d at 1310.
Moreover, “an entity may not file a petition for reorganization which is solely
designed to attack a judgment collaterally—the debtor must have some intention of
reorganizing.” Id. (quoting Baker v. Latham Sparrowbush Assocs. (In re Cohoes
Indus. Terminal, Inc.) , 931 F.2d 222, 227 (2d Cir. 1991)).
Courts in this Circuit analyze whether cause exists under § 1112(b)(1) using
the factors identified in C-TC :
(1) the debtor has only one asset;

(2) the debtor has few unsecured creditors whose
claims are small in relation to those of the
secured creditors;

(3) the debtor’s one asset is the subject of a
foreclosure action as a result of arrearages or
default on the debt;

(4) the debtor’s financial condition is, in essence, a
two party dispute between the debtor and
secured creditors which can be resolved in the
pending state foreclosure action;

(5) the timing of the debtor’s filing evidences an
intent to delay or frustrate the legitimate efforts
of the debtor's secured creditors to enforce their
rights;

(6) the debtor has little or no cash flow;

(7) the debtor can’t meet current expenses including
the payment of personal property and real estate
taxes; and

(8) the debtor has no employees.

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Id. at 1311.
“A court should not apply the C-TC factors mechanically or in isolation, and
may choose to consider any one or all in its effort of analyzing the totality of the
circumstances.” In re Neilson, No. 17-10631, 2018 WL 6982228, at *3 (Bankr.
N.D.N.Y. Aug. 31, 2018), aff’d sub nom. Neilson v. Est. of Benedict, No. 1:18-CV-1101,
2020 WL 1140493 (N.D.N.Y. Mar. 9, 2020).
In the present case, the Debtor has limited available assets, consisting
primarily of retirement accounts and pension benefits (which are exempt),
investment accounts (at least some of which appear to be exempt), and a one-half
interest in a Florida condominium (which is the subject of a pending exemption
dispute between the parties). (Docket No. 18, at p. 3-11).
1

The only asset that might yield a meaningful recovery to creditors is an
unliquidated indemnification claim against the Diocese related to the jury’s verdict
in favor of the St. Clare’s Pensioners. (Docket No. 18, at p. 8).
As discussed further below, there are sound reasons for believing this asset is
better administered by a third party, rather than the Debtor.
This factor weighs in favor of finding cause to dismiss or convert. See In re
Syndicom Corp., 268 B.R. 26, 50 (Bankr. S.D.N.Y. 2001) (“Other than some flotsam
and jetsam furniture and fixtures in the Apartment, the Debtor’s only asset is its
interest, to the extent it has one, in the Apartment, and the bundle of alleged
contractual and litigation rights emerging from the Apartment option.”).

1
See Docket No. 59 (U.S. Trustee’s Objection to Exemption); Docket No. 64 (St. Clare’s Pensioners’
Amended Objection to Exemption); Docket No. 80 (Debtor’s Response to Objection).
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As to the second factor, the Debtor has only one secured creditor (an auto
lender being paid by the Diocese) and no significant unsecured creditors other than
the St. Clare’s Pensioners. (Docket No. 18, at p. 12-387).
The lack of a “significant creditor body. . .to be protected by the Debtor’s filing”
weighs in favor of finding cause to dismiss or convert. In re Ancona, No. 14-10532
(MKV), 2016 WL 7868696, at *4 (Bankr. S.D.N.Y. Nov. 30, 2016); see also Syndicom,
268 B.R. at 51 (“Other than Mr. Takaya (who welcomes, and seeks, relief from the
stay or dismissal), the Debtor has only two or three creditors who are not either
insiders or the Debtor’s lawyers. They represent less than 8% of the Debtor’s stated
total claims. There certainly is not a significant creditor body to protect.”).
The second factor weighs in favor of dismissal or conversion.
As to the third C-TC factor, although this case does not involve foreclosure,
this factor focuses on whether the bankruptcy filing is a litigation tactic to gain
advantage in a state court proceeding. See, e.g., Sapphire Dev., LLC v. McKay, 549
B.R. 556, 572 (D. Conn. 2016) (“The reason Factor Three focuses on pending
foreclosure is that such a scenario suggests that the filer’s only intent in seeking
bankruptcy protection was to stall the foreclosure. Evidence of virtually the same
intent is supplied by a different, yet similar, circumstance in this case: as noted, the
timing of Sapphire’s bankruptcy filing strongly suggests that Sapphire was using the
bankruptcy laws as a litigation tactic to stall the State Court Action, which
threatened, in effect, to divest it of its sole asset.”).
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New York law generally requires an appellant seeking a stay to post a bond to
protect the appellee during the pendency of the appeal. See N.Y. C.P.L.R. § 5519.
Here, the intent of Debtor’s filing was to obtain a stay of the St. Clare’s Pensioners’
collection efforts pending appeal without posting the supersedeas bond required
under applicable non-bankruptcy law. This factor weighs in favor of finding cause
for dismissal or conversion.
The fourth and fifth factors also weigh in favor of finding cause. These factors
ask whether the case is a two-party dispute and whether the timing of the case
evidences an intention to delay or frustrate collections.
This case is fundamentally a two-party dispute that can be — and can only be
— resolved in State Court, as Debtor acknowledges by seeking suspension of this case
to perfect and pursue the appeal. There is no question that Debtor filed this case to
delay the Pensioners’ collection efforts by obtaining a bankruptcy stay pending his
State Court appeal without providing the protection of a bond otherwise required
under state law.
The eighth factor also points toward a finding of cause.
This factor relates to a debtor’s ability to reorganize and/or proceed to an
orderly liquidation. See, e.g., In re Encore Prop. Mgmt. of W.N.Y., LLC, 585 B.R. 22,
30 (Bankr. W.D.N.Y. 2018) (dismissing case for bad faith where debtor had “no cash
flow and no employees” and debtor’s “only ‘business’ [was] to litigate with [the
judgment creditor]”); In re Artisanal 2015, LLC, No. 17-12319 (JLG), 2017 WL
5125545, at *11 (Bankr. S.D.N.Y. Nov. 3, 2017) (dismissing case where debtor had no
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cash flow, was not a “going concern,” and bankruptcy’s “only purpose a hope to
relitigate a state court action”).
While it is well-settled that “filing for chapter 11 relief to stay state court
litigation is not per se bad faith,” the case’s eventual end must either be
reorganization or orderly liquidation. Neilson, 2018 WL 6982228, at *3-4 (“[W]here a
debtor has minimal income, a court may find that such a case was filed as a litigation
tactic and not in an effort to reorganize.”).
Moreover, courts consistently recognize sound reasons for discouraging the
practice of using bankruptcy as a backdoor bond. See Syndicom, 268 B.R. at 53-55
(“ There is no question that many courts have considered a debtor’s need and ability
to reorganize, and a good faith purpose in seeking reorganization, as relevant to good
faith in filing, a view with which this Court concurs.”); see also In re Wally Findlay
Galleries, Inc., 36 B.R. 849, 851 (Bankr. S.D.N.Y. 1984) (“The debtor filed its petition
herein to avoid the consequences of adverse state court decisions while it continues
litigating. This court should not, and will not, act as a substitute for a supersedeas
bond of state court proceedings.”) .
In addition, courts have cited federalism concerns to caution against an overly
permissive posture with respect to filings designed to circumvent state supersedeas
bond requirements. See In re Smith, 58 B.R. 448, 451 (Bankr. W.D. Ky. 1986) (“State
law requirements of supersedeas bonds are not to be lightly ignored. The right to
appeal is not an absolute one, having neither common law nor federal constitutional
basis, but is a creation of statute, and its exercise should be strictly in accordance
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with the controlling state law. Due regard for principles of federalism requires no less
than our unrelenting respect for the controlling state law on supersedeas bonds. . .
.”); Southmark Corp. v. Riddle (In re Southmark Corp.), 138 B.R. 820, 828 (Bankr.
N.D. Tex. 1992) (“Interference with the state statutory system regulating appeals and
the protection of judgment creditors should not be taken lightly.”).
In any event, no matter how broad or narrow the overall view, courts uniformly
insist on a connection to one of the two primary purposes of bankruptcy relief —
rehabilitation/reorganization or orderly liquidation. Compare In re Boynton, 184 B.R.
580, 583 (Bankr. S.D. Cal. 1995) (“Generally, two types of cases have allowed a
Chapter 11 filing in lieu of a supersedeas bond. These are: 1) where there is a
multinational company faced with mass tort litigation; or 2) where a large debt would
force the debtor to close its business and liquidate.”), and Margitan v. Hanna (In re
Hanna), No. BAP EW-17-1238-BJF, 2018 WL 1770960, at *6 (B.A.P. 9
th
Cir. Apr. 13,
2018) (“The bankruptcy court properly considered the viability of the Hannas’ Plan
as weighing heavily against dismissal.”), with In re Fox, 232 B.R. 229, 235 (Bankr. D.
Kan. 1999) (“The evidence suggests that the Debtor did not file this bankruptcy solely
to avoid posting a supersedeas bond, but was also motivated by a desire to reorganize
or liquidate in an orderly fashion.”), In re John V. Gally Fam. Protective Tr. Inc., No.
2:22-BK-05770-DPC, 2022 WL 18715956, at *6 (Bankr. D. Ariz. Dec. 21, 2022)
(denying motion to dismiss where debtor could not post appellate bond, but was
liquidating real estate “in an orderly fashion” and “evinced an intent to speedily and
efficiently confirm a feasible plan by filing a plan of reorganization within 90 days”),
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and In re Morris, No. 3:16-BK-3070-PMG, 2017 WL 3503651, at *4 (Bankr. M.D. Fla.
July 19, 2017) (“In summary, it does not appear that this is a two-party dispute in
which the Debtor filed the case solely to avoid paying the marital debt owed to
Stephens.... Instead, the Debtor in this case faced substantial third-party debt,
including several liens on his home and a ... debt to the Internal Revenue Service,
and has dealt with the claims through the provisions of Chapter 13.”).
Here, Debtor’s counsel’s protestations notwithstanding, neither reorganization
nor liquidation in Chapter 11 is reasonably in prospect — dismissal would be the
ultimate end of this case irrespective of the outcome of the appeal.
Debtor is retired, his income is passive (retirement funds and pension
payments), he does not face financial pressure from creditors other than the St.
Clare’s Pensioners, and most of his assets are exempt.
If Debtor’s appeal fails, he cannot satisfy the Pensioners’ claim or propose a
confirmable plan of reorganization. If the appeal succeeds, the Debtor can meet his
other obligations and bankruptcy will no longer be necessary. See In re Purpura, 170
B.R. 202, 207 (Bankr. E.D.N.Y. 1994) (“Purpura’s financial posture negates any
legitimate reorganization purpose. According to his bankruptcy schedules, he is
solvent and, apart from Maida, reports insubstantial debt in relation to his assets
held by a handful of creditors. Purpura presented no evidence that those creditors
were pressing for payment when he filed. He does not need Chapter 11 protection to
conduct his business affairs and pay his creditors.”); In re Banks, 241 B.R. 434, 437
(Bankr. E.D. Ark. 1999) (“The purpose of the Bankruptcy Code is to provide debt relief
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to debtors who require a ‘fresh start.’ It is not a forum to avoid the import of state
court decisions or other lawful obligations.”).
“[B]ankruptcy rehabilitation provisions are intended to benefit only those in
genuine financial distress and are not to be used strategically as an avoidance
mechanism to get out of particular obligations viewed by a debtor as having
undesirable consequences.” Purpura, 170 B.R. at 207.
Application of the C-TC factors results in a finding of cause to dismiss or
convert this case.
Conversion or Dismissal
“Once a party establishes cause, a court must examine whether dismissal or
conversion [to] a case under chapter 7 is in the best interests of the creditors and the
estate.” In re BH S & B Holdings, LLC, 439 B.R. 342, 346 (Bankr. S.D.N.Y. 2010).
The court has “wide discretion” in determining the right remedy. Dark Horse
Tavern, 189 B.R. at 580. While the “Code does not define the ‘best interests of
creditors,’. . .relevant case law makes it clear that courts are required to consider and
weigh the totality of facts and circumstances of the individual case when determining
what is in the best interests of creditors.” In re Hampton Hotel Invs., L.P., 270 B.R.
346, 359 (Bankr. S.D.N.Y. 2001).
Courts generally consider the following factors when weighing whether to
dismiss or convert a case:
(1) whether some creditors received preferential
payments, and whether equality of distribution
would be better served by conversion rather than
dismissal,
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(2) whether there would be a loss of rights granted
in the case if it were dismissed rather than
converted,

(3) whether the debtor would simply file a further
case upon dismissal,

(4) the ability of the trustee in a chapter 7 case to
reach assets for the benefit of creditors,

(5) in assessing the interest of the estate, whether
conversion or dismissal of the estate would
maximize the estate’s value as an economic
enterprise,

(6) whether any remaining issues would be better
resolved outside the bankruptcy forum,

(7) whether the estate consists of a “single asset,”
[and]

(8) whether the debtor had engaged in misconduct
and whether creditors are in need of a chapter 7
case to protect their interests.

Id. (citing 7 Lawrence P. King et al., Collier on Bankruptcy ¶ 1112.04[6] (15
th
ed.
Revised 2000)).
Here, only the fourth and seventh factors are applicable and both favor
conversion. The Debtor’s indemnification claim against the Diocese is the only asset
with the possibility of providing meaningful recovery. The St. Clare’s Pensioners
reasonably question whether Debtor is truly incentivized to protect and pursue that
claim vigorously, particularly considering the Debtor’s limited resources, prior status
as an insider of the Diocese, and ongoing relationship with the Diocese (which
provides him with a residence in Albany, mobile phone, and motor vehicle free of
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charge). See In re Nat. Plants & Lands Mgmt. Co., Ltd., 68 B.R. 394, 396 (Bankr.
S.D.N.Y. 1986) ( granting conversion where there was “a question as to whether the
debtor would be as impartially motivated to collect the amounts due from its affiliates
and to determine whether or not preferential or otherwise avoidable transfers had
been made to these affiliates or to its principal shareholder” and the “debtor’s
principal shareholder is in no position to exercise undivided loyalty to the rights of
all interested parties”); In re BTS, Inc., 247 B.R. 301, 310 (Bankr. N.D. Okla. 2000)
(“At present, the major assets of the estate are causes of action which must be fixed
and liquidated to be of any value. Generally speaking, it is in the best interests of
creditors to have this done by a disinterested trustee, so the merits of the debtor’s
third-party claims can be evaluated dispassionately, and so the fruits of a successful
litigation can be preserved for ratable distribution.” (citation omitted)); In re Fleetstar
LLC, 614 B.R. 767, 789 (Bankr. E.D. La. 2020) (“Considering that dismissal would
give an insider and competing creditor the reins on the assets of the estate ... at this
point, creditors’ best hope for recovery is through conversion.”).
Both the United States Trustee (Docket No. 70, at p. 10) and the St. Clare’s
Pensioners (Docket No. 66, at ¶ 39) advocate conversion rather than dismissal. This
is an additional factor weighing in favor of conversion. See In re Ghaffari, No. 24-
10453-J11, 2025 WL 869518, at *11 (Bankr. D.N.M. Mar. 19, 2025)(“It is also
appropriate for the Court to consider the preferences expressed by parties in interest,
especially the UST, who serves as a neutral third party overseeing the bankruptcy
case.”); In re Mazzocone, 183 B.R. 402, 411-12 (Bankr. E.D. Pa. 1995) (“[W]here an
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interested party other than the debtor, particularly a completely neutral, ‘watchdog’
party such as the USTE, feels strongly enough about the proper disposition of a
bankruptcy case to move for dismissal, we are even more strongly inclined to dismiss
a case than if only the debtor is pressing for this result.”), aff’d, 200 B.R. 568 (E.D.
Pa. 1996); In re Gollaher, 463 B.R. 142 (B.A.P. 10th Cir. 2011) (“Courts also consider
the preferences expressed by creditors for either dismissal or conversion as they are
the best judge of their own best interests.”).
Debtor’s Motion for Suspension of this Case
The Debtor opposes dismissal and conversion and asks the Court to suspend
all proceedings in the case pending the outcome of the State Court appeal.
Section 305(a) of the Bankruptcy Code provides that “t he court, after notice
and a hearing, may dismiss a case under this title, or may suspend all proceedings
in a case under this title, at any time if ... the interests of creditors and the debtor
would be better served by such dismissal or suspension. . . .”
2

The Debtor, as the moving party, bears the burden of showing that his
interests and his creditors’ interests would benefit from dismissal or suspension of
proceedings under § 305(a)(1). In re Monitor Single Lift I, Ltd., 381 B.R. 455, 462-
63 (Bankr. S.D.N.Y. 2008).
Courts consider whether to suspend proceedings under § 305(a) on a case-by-
case basis and some courts apply the following factors:
(1) the economy and efficiency of administration;

2
Congress originally intended this section to be used to prevent a few recalcitrant creditors from derailing an
otherwise popular out-of-court workout with an involuntary bankruptcy filing. In re Xinyuan Real Est. Co. Ltd., 678
B.R. 1, 12 (Bankr. S.D.N.Y. 2026).
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(2) whether another forum is available to protect the
interests of both parties or there is already a pending
proceeding in state court;

(3) whether federal proceedings are necessary to reach a just
and equitable solution;

(4) whether there is an alternative means of achieving an
equitable distribution of assets;

(5) whether the debtor and the creditors are able to work out
a less expensive out-of-court arrangement which better
serves all interests in the case;

(6) whether a non-federal insolvency has proceeded so far in
those proceedings that it would be costly and time
consuming to start afresh with the federal bankruptcy
process; and

(7) the purpose for which bankruptcy jurisdiction has been
sought.

Id. at 464-65.
Factors four and seven apply here and weigh against granting the Debtor’s
motion. Conversion to Chapter 7, as discussed above, is an alternate means of
achieving an equitable distribution of assets. The Debtor benefits from conversion
because he retains the protection of the automatic stay and the creditors benefit
from conversion because they can have confidence that Debtor’s assets (including, in
particular, the indemnification claim) will be protected, pursued, and liquidated in
an orderly manner. Suspension would not further the creditors’ interests and
would, in fact, be unfairly prejudicial as it would require them to await the appeal
without the protection of a bond.
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As previously discussed, this case was filed by Debtor to circumvent the
payment of a supersedeas bond in the underlying state court appellate process.
Permitting the Debtor to file a bankruptcy case and then suspend all proceedings
would enable an impermissible end run around the state court process to the unfair
prejudice of the St. Clare’s Pensioners.
Conclusion
For the foregoing reasons, the United States Trustee’s Motion to Dismiss or
Convert this case (Docket No. 70) is GRANTED and this case is converted to a case
under Chapter 7 for cause pursuant to 11 U.S.C. § 1112(b); the St. Clare’s Pensioners’
motion (Docket No. 66) is DENIED as moot; and the Debtor’s Motion for Suspension
of this Case (Docket No. 76) is DENIED.
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Case 25-11477-1-pgr Doc 90 Filed 08/11/26 Entered 08/11/26 16:40:41 Desc Main
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