Walter Investment U.S. Trustee balks at proposed releases, payments

By Caroline Salls

Pittsburgh, Dec. 29 – The U.S. Trustee overseeing Walter Investment Management Corp.’s Chapter 11 bankruptcy case objected to the company’s proposed plan of reorganization and disclosure statement, according to a Dec. 29 filing with the U.S. Bankruptcy Court for the Southern District of New York.

The Region 2 U.S. Trustee, William K. Harrington, said Walter Investment has not heeded court warnings cautioning it from seeking estate releases that would cut off upstream claims against the company from creditors of non-debtor affiliates.

“The releases contained in the plan are at the very least overbroad,” Harrington said in his objection.

“Indeed, here, creditors may suffer real harm by abstaining from voting or not opting out of the releases as they are likely unaware of the effect of the releases and the elimination of their right to seek relief from non-debtor affiliates outside this bankruptcy.”

Harrington said he also objects to any payments to professionals that are not retained by the Bankruptcy Court, as those payments “conflict with the statutory standards and procedures for payment of administrative expenses without filing an application and meeting their evidentiary burden for payment.”

Walter is a Fort Washington, Pa., servicer and originator of mortgage loans and servicer of reverse mortgage loans. The company filed bankruptcy on Nov. 30 under Chapter 11 case number 17-13446.

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