Flexible Funding: U.S. trustee favors conversion over consolidation

By Sarah Lizee

Olympia, Wash., Dec. 15 – Flexible Funding, LLC’s motion to consolidate its bankruptcy cases to save on quarterly fees drew an objection Tuesday from Region 6 U.S. trustee William T. Neary, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.

Neary said he objects to the motion because the debtors are attempting to consolidate the estates outside a plan of reorganization and without demonstrating that consolidation is appropriate under applicable law.

“To the extent that substantive consolidation is ordered, it should be accomplished pursuant to a plan of reorganization that enables creditors to make informed decisions about how the pooling of assets and liabilities would affect treatment of their claims,” Neary said in his objection.

The U.S. trustee also said that substantive consolidation would have little benefit even with entry of an order before the end of fourth quarter 2021.

Also, the reduction of administrative expenses alone doesn’t justify the “drastic remedy” of substantive consolidation, Neary said.

“If this is the debtors’ goal, conversion to Chapter 7 is the more appropriate remedy given it would save the estates the cost of running a plan process,” the U.S. trustee said.

The Fort Worth-based asset-based lending and factoring company is primarily focused on the staffing and transportation industries. The company filed bankruptcy on Sept. 19 under Chapter 11 case number 21-42215.

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