La Casa de la Raza Files for Bankruptcy
Longtime community center La Casa de la Raza filed a Voluntary Petition under Chapter 11 of the Bankruptcy Code on February 17, 2016, case number 9:16-bk-10283-PC.
It was filed in order to stop the foreclosure of its building at 601 East Montecito Street in Santa Barbara, scheduled for later that day.
Although a bankruptcy filing requires detailed disclosure of financial information, at this point not much is known from its current bankruptcy filing. It filed what is known as an “emergency filing,” in which only a handful of documents are filed with the Court. In such cases, the remaining documents must be filed within 14 days, unless the court extends the deadline for cause. If not timely filed, then the case could be dismissed. However, this case could be dismissed much sooner as the “emergency filing” was not completed properly. According to a Deficiency Notice issued by the Clerk of the Court, La Casa de la Raza has 72 hours to correct the “emergency filing.”
If it is able to cure the “deficiency,” and file all of the other remaining documents, then it is scheduled to have its “meeting of creditors” on March 24, 2016. The “meeting of creditors” is conducted by the Office of the United States Trustee, a part of the United States Department of Justice, and provides an opportunity for creditors to question a debtor regarding its finances and other related issues. By then, much more could be known about La Casa de la Raza and its financial situation.
Chapter 11 bankruptcy cases can be extremely complicated and costly, but allow the flexibility needed by larger entities and individuals with several properties or an ongoing business. Chapter 11 cases also require administrative oversight and the Court must approve most actions unless they are in the normal course of business. Additionally, if a lender has a security interest in a debtor’s income stream, then even normal and essential expenditures must be approved by the court.
The potential complexity of the Bankruptcy Code and the Deficiency Notice issued in this case (and the very short deadline that it imposes) highlight the importance of consulting with an experience bankruptcy attorney, especially if considering a filing under chapter 11.
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