Sunday, October 06, 2013
On February 4, 2008, Sliver State Helicopters filed a voluntary Chapter 7 petition. On December 29, 2009, I was the first and only person to publicly give an estimated value for the student creditor proof of claims in the Silver State Helicopters Bankruptcy Case. In a Q and A on this blog, I wrote, " My best estimate is that each one of the former SSH students proof of claim will be worth somewhere between $0 and $3,000.00." Based on this valuation, most of my clients traded their proofs of claims for tens of thousands of dollars in discounts on their student loans. This turned out to be a wise move, as on September 24, 2013 United States Bankruptcy Court Judge Mike K. Nakagawa issued his Order on the Trustee's Final Report and Application for Compensation and Expenses. This Order, made over my objection on behalf of the Student Creditors, confirmed that the Student Creditors will get nothing in the Silver State Bankruptcy. Judge Nakagawa's order notes that "The Student Creditors object to the lack of any payments on their . . . claims. They argue that professionals employed in the case are being paid an excessive amount and that professional fees generally should be reduced by the court so that funds will be available for distribution to general unsecured claims." The Silver State Helicopters case ended up being a liquidation proceeding for the benefit of the secured creditor Orix and for the benefit of the professionals (attorneys and accountants) and other administrative claimants, with no benefit to the unsecured creditors. Judge Nakagawa found that under the bankruptcy code, the secured and Administrative claim creditors had priority over the student creditors, and in total approved $8,106,011.54 in "approved administrative expenses of the bankruptcy estate, . . . including professional fees." Not one penny will be paid out for student creditor claims. Judge Nakagawa notes that "While the Student Creditors are perhaps unique victims of what may have been an airborne Ponzi Scheme, Congress has not afforded their claims a priority of payment ahead of the categories set forth in Section 507(a) that the Trustee must follow under Section 742(b)(2) and Section 726(a)(1).