The United States Bankruptcy Court on Friday dismissed the Chapter 11 bankruptcy case of former New York City mayor and Trump lawyer Rudolph Giuliani, citing his ongoing failure to comply with financial disclosure obligations.
Giuliani filed for Chapter 11 bankruptcy in December 2023, citing financial strain from a $148 million defamation judgment. This judgment stemmed from allegations by Ruby Freeman and Wandrea’ ArShaye Moss that Giuliani falsely accused them of election fraud during the 2020 federal election which led to severe personal and professional harm.
Two motions were under consideration in the present case. First, the trustee motion filed by the Official Committee of Unsecured Creditors sought the appointment of a Chapter 11 trustee due to Giuliani’s failure to meet financial disclosure obligations. Chapter 11 involves reorganization, which allows the debtor to keep their business alive and pay creditors over time.
On the other hand, the conversion motion filed by Giuliani requested the case be converted to Chapter 7, which involves liquidating the debtor’s assets to pay off creditors. The court found that Giuliani did not have an absolute right to convert his case to Chapter 7 because his actions demonstrated cause to consider other options. Specifically, the court noted his failure to comply with discovery demands, the submission of incomplete and inaccurate financial disclosures, and the untimely filing of monthly operating reports.
These failures suggested that converting to Chapter 7 might not be appropriate because they indicate the lack of transparency and cooperation that are typically needed for the effective liquidation of assets under Chapter 7. This is because any inaccuracies or omissions can lead to unfair distribution of assets and potentially hide assets that should be liquidated for creditors’ benefit. Additionally, non-compliance with court procedures such as delays or failures in reporting may point to the existence of mismanagement or disregard for the legal process, which also poses risks including the prolonging of bankruptcy proceedings. In all scenarios, the court found that a conversion to Chapter 7 would risk making a straightforward liquidation process more difficult. Therefore, other remedies such as dismissing the case or appointing a trustee were found to better address the issues and protect the interests of creditors.
Giuliani has agreed to the dismissal, which includes a one-year bar from refiling for bankruptcy. This decision allows creditors to pursue their claims outside the bankruptcy forum.
