By Alex Bridges -- firstname.lastname@example.org
HARRISONBURG -- Frederick County kennel owner Russell L. Ebersole faces more possible troubles in bankruptcy court.
The U.S. trustee in the Western District in Harrisonburg this week filed a motion to convert Ebersole's bankruptcy case from voluntary Chapter 11 to Chapter 7. Whereas Chapter 11 allows for the debtor to reorganize debt, Chapter 7 calls for liquidation under bankruptcy law. W. Clarkson McDow Jr, U.S. trustee for the region, filed the motion Tuesday.
Ebersole, representing himself, and other parties appeared before U.S. bankruptcy Judge Ross W. Krumm on Thursday for a hearing on several other motions. The judge has scheduled a hearing for March 7 on the motion to convert the case to Chapter 7.
Ebersole owns Aberdeen Acres Pet Care Center, 667 Walters Mill Lane, Stephenson. He filed a voluntary bankruptcy petition under Chapter 13 on Sept. 29, 2009, according to the motion to convert. The debtor asked the court to convert his petition to Chapter 11, which a judge granted Jan. 14, 2010.
McDow states no trustee has been appointed in Ebersole's bankruptcy filing. Ebersole has operated his business as a debtor-in-possession with powers, rights and duties of a trustee, according to McDow. A debtor-in-possession order entered in the court Jan. 15, 2010, directs Ebersole to follow guidelines and regulations and directives of the Office of the U.S. Trustee, including payment of required quarterly fees, McDow states.
"While the debtor has filed monthly quarterly operating reports, the reports themselves give rise to questions regarding the proper conduct of this case," the motion states.
McDow says the debtor failed to disclose a $400 monthly payment to the United States for restitution owed to the government for a criminal conviction. McDow states Ebersole makes payments by or on behalf of Meredith Oudt, who the trustee indicates is not an employee of the debtor. Ebersole also is making substantial payments on credit cards held by third parties, McDow notes.
The motion states Ebersole has not confirmed a reorganization plan. McDow states Ebersole's sole remaining, potentially unsecured creditor is the United States, to whom he owes more than $693,000 for restitution in his 2003 conviction on 25 counts of wire fraud and two counts of making false claims to the government.
"The debtor is no longer actively seeking to rehabilitate his financial circumstances," the motion states. "Rather, he is engaging in a pattern of being less than forthright with the Court."
Ebersole seeks to buy property at 161 Pastoral Lane, Berryville, but has not filed a motion to make the purchse or incur debt, the motion notes. Also, Ebersole filed a lawsuit against Bridget Kline-Perry and her business, Norsire Farms, now in U.S. District Court in Alexandria, seeking damages for alleged libel, without seeking leave of court, McDow states.
The trustee also argues Ebersole abused the discovery process and subpoena powers of the court.