Just over three years after he filed for bankruptcy to evade responsibility for his egregious violations of Washington’s publishing laws, the case of scandal-ridden libertarian activist Tim Eyman was transformed from a Chapter 11 reorganization case to a Chapter 7 liquidation case.
Upon concluding that “pursuant to 11 USC Section 1112 (b) (4) there is a reason to convert this bankruptcy into a Chapter 7 case and that the conversion is in the best interests of the creditors,” the judge ruled the US Bankruptcy Court Marc Barreca on last week that Eyman’s case will be converted from Chapter 11 to Chapter 7 and a trustee will be appointed to liquidate his non-exempted assets.
Eyman’s attorney had moved to keep the case in Chapter 11, even though Eyman had failed to make his monthly payments to Washington State.
But the judge sided with Washington State, Eyman’s main creditor, represented by Attorney General Bob Ferguson’s office. Ferguson’s office moved for a Chapter 7 conversion after Barreca suggested during a hearing last month that Chapter 7 was the next logical step for Eyman’s bankruptcy.
“The state first applied for the appointment of a Chapter 11 trustee in accordance with the standard provisions of the plan in the hope that the Chapter 11 plan could continue,” said a letter filed by the state on December 13th. “The responding parties vigorously opposed the state’s request, arguing that a trustee was unnecessary as debtor Eyman was unable to make plan payments.”
“However, in response to the state’s conversion motion, the responding parties argue that the Chapter 11 plan is a better option as it ‘gives the debtor the ability to raise funds to meet their claims over time.” â
âDebtor Eyman cannot have both. He cannot request that the Chapter 11 plan remain in effect, but cannot make any plan payments. Debtor Eyman’s nonsensical position makes conversion the only viable option. “
Eyman’s money was still flowing, prosecutors found, but Eyman was late because he hadn’t made his installment payments.
“Eyman’s most recent quarterly report shows that he is collecting money, but he did not use those funds to make the planned payments,” the letter said.
âAs of September 2021, he continued to receive PayPal and check contributions from supporters and deposit them into his bank accounts several times a month, with many thousands of dollars in deposits. From July 7, 2021 to September 24, 2021, Debtor Eyman made fourteen deposits from backers totaling $ 39,286.79. He identified these deposits as “gifts from friends” or “gifts from friends for the Legal Protection Fund”. â
âGiven the amount of funds that Debtor Eyman has raised and received, the question arises as to whether Debtor Eyman has no money to make payments or has simply chosen not to make any payments. This puzzle alone creates ’cause’ and warrants the conversion to Chapter 7, as debtor Eyman has chosen not to adhere to the provisions of the Chapter 11 Plan. “
After the case was converted into Chapter 7, Judge Barreca appointed Virginia A. Burdette to be the trustee on the case. Here’s how the US Courts’ official website describes Burdette’s role:
The primary role of a Chapter 7 trustee in a property case is to liquidate the debtor’s non-exempted assets in such a way as to maximize the rate of return for the debtor’s unsecured creditors. The trustee accomplishes this by selling the debtor’s property when it is free of liens (so long as the property is not exempt) or when it is worth more than any security or liens attached to the property and any exemption the debtor has in the Property.
On Monday, Burdette filed a motion with the court to hire Thomas S. Linde and Schweet, Linde & Coulson, PLLC as the trustee’s attorney for the case.
“I have discussed with Thomas S. Linde and Schweet Linde & Coulson, PLLC as General Counsel and would now like to hire them to provide the services described above that are necessary and desirable for the administration of this estate,” wrote Burdette. âI selected Mr. Linde and Schweet, Linde & Coulson, PLLC because of their experience and legal knowledge in the above topics. Accordingly, I believe that they are well qualified to represent the estate. “
Barreca agreed to Burdette’s motion in an order signed this morning.
Chapter 7 debtors are allowed to keep a certain amount of property, e.g. B. Household items, clothing and qualified retirement accounts. All other assets are considered ânot exemptâ and are subject to liquidation.
Burdette’s next steps will be to review all of Eyman’s records, verify his identity, and determine what is excluded and what is not. Then Burdette will try to sell Eyman’s non-exempt property.
The most valuable asset that Eyman still owns (or co-owns) is the family home in Mukilteo’s Harbor Pointe district. Eyman has used the house as collateral several times to fund his destructive initiatives, himself admitted in an email update next week, but is now angry at the prospect of the house being sold to pay off his debt. Eyman has characterized Attorney General Bob Ferguson as “obsessed with making Karen and the children homeless.”
Ferguson, of course, does not want to take Eyman’s family shelter, but rather hold Eyman accountable for his breach of the law and make sure he pays what he owes. Eyman could have given up his ownership of the Harbor Pointe house years ago by dissolving his marriage and transferring sole ownership to Karen Eyman, but he did not. Instead, he left the divorce proceedings obsolete.
It is important to understand that everything that has happened so far has been largely determined by Eyman’s choices. Although he claims to have been a victim of a railroad, the situation Eyman finds himself in is self-made.
Just to sum it up:
- Eyman decided to break repeatedly and egregiously against Washington state laws on disclosure over a period of many years
- Eyman chose to irresponsibly mix his personal finances with those of his political bodies, which was extremely unwise
- Eyman decided to block the state’s investigation into this breach of the law, prolong it unnecessarily, and create a personal hell for himself
- Eyman decided to file for bankruptcy before actually going bankrupt in hopes of blocking the state’s investigation (that move failed).
- Eyman decided to hire very expensive lawyers like Richard Sanders to defend him ineffectively in both state and federal courts
- Eyman decided to stop his court-approved monthly payments, put him on default and move forward with the Chapter 7 conversion
If Eyman didn’t like chapter 11, he’ll like chapter 7 even less. But he has nobody but himself to blame for this predicament. He brought all of this to himself through a series of bad decisions dating back more than ten years.