In re Schwalb, No. 25-12666-JGR (Nov. 25, 2025)

Case details
Full caption
In re: Avi Schwalb
Country
United States
Jurisdiction
Colorado (CO)
Court
Colorado Supreme Court
Decided
Nov. 25, 2025
Disposition
Motion Denied
In re: AVI SCHWALB, SSN: xxx-xx-XXXX, Debtor., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.12025 WL 3465948Only the Westlaw citation is currently available.United States Bankruptcy Court, D. Colorado.In re: AVI SCHWALB, SSN: xxx-xx-XXXX, Debtor.Case No. 25-12666-JGR|Filed:12/02/2025Editor's Note: This decision contains discussion of citationreferences that are incorrect or do not actually exist. Theseinvalid citations appeared in the original court opinion andhave been preserved as written since they are part of theofficial record. Any links to these invalid citations have beenremoved.Chapter 11ORDER DENYING MOTIONSFOR STAY PENDING APPEALJoseph G. Rosania, Jr. United States Bankruptcy Judge*1 THIS MATTER is before the Court on the EmergencyMotion for Stay Pending Appeal filed by the Debtor AviSchwalb on November 24, 2025 (Doc. 313) and his Motionfor Stay Pending Appeal filed November 25, 2025 (Doc.314) (collectively referred to as “Motion”) pending the appealof this Court's October 30, 2025 Order Converting Case toChapter 7 (Doc. 269). On December 1, 2025, responses tothe Motion were filed by Industrial Alliance Insurance andFinancial Services, Inc. (Doc. 319) and the chapter 7 trustee(Doc. 320). Jeffrey Swanson also filed a joinder to the chapter7 trustee's objection (Doc. 321). The Court, having reviewedthe Motion,DOES FIND the Motion was filed with the BankruptcyCourt pursuant to Fed.R.Bankr.P. 8007(a) claiming the stayis necessary to preserve the estate and prevent irreversibleharm during the pendency of the Debtor's appeal. The Debtorargues without a stay, the chapter 7 trustee may liquidateassets before the appeal is heard, rendering the appeal moot.BACKGROUNDThe Debtor filed a voluntary petition for relief under chapter11 of the Bankruptcy Code on May 2, 2025. At the time thecase was filed, the Debtor was a named defendant in multiplecivil actions arising from real estate transactions, constructionprojects, and real estate management activities. The Debtorwas also indicted by the Attorney General for the State ofColorado on 30 felony counts, including theft and organizedcrime, which the Debtor vehemently denies. The criminal trialis scheduled for February 2026.The Debtor claims the bankruptcy case was filed to obtainthe automatic stay preven the continuation of the state courtlitigation and centralize the disputes into one forum.As the case progressed, the Bankruptcy Court granted relieffrom stay for certain creditors to continue the state courtlitigation. The issues involved state law, the Plaintiffs wereentitled to a jury trial, and the civil actions included non-debtor third party defendants.On September 15, 2025, the Debtor filed a motion to dismisshis chapter 11 bankruptcy case. He alleged there was nolonger any purpose served by continuing in bankruptcy ascreditors were likely to obtain relief to pursue state courtactions and it was doubtful that he would succeed in anadversary proceeding seeking to extend the benefits of theautomatic stay to non-debtor entities in which he had aninterest.The Debtor's motion to dismiss drew objections from theOfficial Committee of Unsecured Creditors; Jeffrey Swanson;Uzi Berger; Fannie Mae; John Doe, Jane Roe; Brianna Tanner,Douglas Tanner; Benjamin Davidson, Karen Davidson; andDavid Amster-Olszweki, Kirby Lance Jones. In addition,Fannie Mae filed a motion to convert the case to chapter 7.On October 29, 2025, the Court conducted a preliminaryhearing on the motion to dismiss the responses and the motionto convert pursuant to L.B.R. 2081-3(c). The Debtor and theobjecting parties made offers of proof as to what the evidencewould show at an evidentiary hearing. The Debtor, throughcounsel, represented to the Court that he did not want theCourt to conduct an evidentiary hearing because he wouldlikely refuse to answer any questions based upon his rightsunder the Fifth Amendment to the United States Constitution.
In re: AVI SCHWALB, SSN: xxx-xx-XXXX, Debtor., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.2*2 The objecting creditors adamantly opposed dismissalof the chapter 11 case, pointing to numerous discrepanciesin the Debtor's disclosures, listing of assets, and reportingto the Court. The creditors emphasized the need to appointan independent party to take control, safeguard, and preventdissipation of the Debtor's remaining assets. The creditorsargued a chapter 7 trustee would serve as a fiduciary forall creditors and investigate: (i) whether there are potentialavoidance actions against family members or other insiders ofthe debtor, including transfers of Debtor's 100% interest in 27limited liability companies to a holding company on the eveof bankruptcy; (ii) the value of a significant number of realproperties owned directly or indirectly by the Debtor; (iii) theuse of funds received by an insider entity, PHS Rent, LLC, inconnection with the management of the real properties; and(iv) inconsistencies between the Monthly Operating Reports,Schedules, and Statement of Financial Affairs. In addition,they asserted conversion to a chapter 7 bankruptcy case wouldallow for a review of claims asserted against the Debtor in animpartial fashion, facilitate the ordinary liquidation of assets,and prevent a chaotic race to the courthouse.The Debtor filed his motion to dismiss under 11 U.S.C. §1112(b)(1), which provides that “after notice and a hearing,the court shall convert a case under this chapter to a case underchapter 7 or dismiss a case under this chapter, whicheveris in the best interests of creditors and the estate ....”On October 30, 2025, the Court issued an oral ruling inopen court. The Court analyzed the facts to determinewhether dismissal or conversion was appropriate in thecase and determined that all of the salient factors favoredconversion. No creditors expressed support for dismissal,including creditors holding prepetition judgment liens. TheCourt determined that conversion would avoid a chaotic raceto the courthouse and allow for the equitable distribution ofthe Debtor's nonexempt assets to his creditors. The allegationsraised at the hearing pointed to numerous issues in need ofinvestigation by a fiduciary. Conversion to chapter 7 wouldcentralize the control and administration of estate property.Finally, the Debtor who sought bankruptcy protection was theonly party that would benefit from dismissal.ANALYSISThe Court considers four factors when analyzing a stay:(1) a strong likelihood of success on appeal;(2) the threat of irreparable harm if the stay or injunctionis not granted;(3) the absence of harm to opposing parties if the stay orinjunction is granted; and(4) that the public interest supports a stay.United States v. Peck, Nos. 23-4000, 23-4038, 2023 U.S. App.LEXIS 9782, at *2 (10th Cir. Apr. 17, 2023)(citing Nken v.Holder, 556 U.S. 418, 434 (2009)). “The party requestinga stay bears the burden of showing that the circumstancesjustify an exercise of [the court's] discretion.” 556 U.S. at433-34.Debtor is acting as a pro se litigant and the Court has liberallyconstrued and held the Debtor to a less stringent standard thanformal pleadings drafted by lawyers. See Haines v. Kerner,404 U.S. 519, 520-521, 30 L. Ed. 652, 92 S. Ct. 594 (1972)(1) A Strong Likelihood of Success on AppealThe Debtor argues conversion was not proper under 11 U.S.C.§ 1112(b) asserting there was no cause because: Debtor didnot act in bad faith; there was no continuing loss; no grossmismanagement; and multiple secured creditors supportedchapter 11. In the Debtor's second motion, he raises sixarguments that the appeal is likely to succeed on the merits.A.) Citing In re Gateway Access Solutions, 374 B.R. 556(Bankr. M.D. Pa. 2007), the Debtor argues the Court failedto identify any cause under 11 U.S.C. § 1112(b). In reGateway Access Solutions involved creditors filing a Motionto Convert opposed by the Debtor, who was seeking tocontinue with the chapter 11 case. The creditor's motion wasgranted, and the case was converted to chapter 7.Here, the Debtor is not seeking to continue with a chapter 11bankruptcy reorganization. Rather, the Debtor seeks dismissalof the case and to regain control of assets that became propertyof the estate.The oral ruling contained specific findings that conversion ofthe bankruptcy case to chapter 7 was in the best interest ofcreditors and the estate.*3 B.) The Minute Order Converting the Case contains nofindings or conclusions under Fed.R.Bankr.P. 7052.
In re: AVI SCHWALB, SSN: xxx-xx-XXXX, Debtor., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.3The Debtor asserts failure to issue findings is reversible error,citing In re Plaza de Diego Shopping Ctr., 911 F.3d 820 (1stCir. 2018). This case does not exist. A similarly named case,In re Plaza de Diego Shopping Ctr., 911 F.2d 820 (1st Cir.1990) involved the reversal of an order appointing a chapter11 trustee where the district court disregarded the trusteenominated by the Office of the United States Trustee andindependently appointed a different chapter 11 trustee. It doesnot appear to be relevant.The Debtor is mistaken in his belief that no findings orconclusions of law were issued. The Minute Order Convertingthe Case incorporated the oral ruling, which containedfindings of fact and conclusions of law.C.) The Debtor argues that secured creditors supportedrehabilitation under 11 U.S.C. § 1112(b)(2). The Debtorclaims that certain secured creditors supported continuationof the chapter 11 case.This argument lacks merit. The Debtor is not seeking acontinuation of the chapter 11 case. He is seeking dismissal.No creditors, secured or unsecured, appeared at the hearing insupport of the Debtor's motion to dismiss. No creditors havefiled a motion seeking to continue the chapter 11 process. Nocreditors, secured or unsecured, appeared at the hearing ondismissal seeking a continuation of the chapter 11 process.Moreover, the Debtor has not filed a plan of reorganizationand made no offer of proof at the hearing to support a findingthat there is a reasonable likelihood that a plan would beconfirmed in a reasonable period of time as required under 11U.S.C. § 1112(b)(2).D.) Citing In re Orbit Petroleum, 395 B.R. 145 (Bankr.D.N.M. 2008), the Debtor contends that there is no evidenceof operating loss preventing conversion to chapter 7. OrbitPetroleum involved a case where the debtor had proposed a100% repayment plan and the court found despite continuinglosses, the debtor should be afforded the opportunity to pursueconfirmation of the plan. Again, the argument is misplacedas the Debtor is seeking dismissal of the chapter 11 case notcontinuation of the chapter 11 reorganization process.E.) The Debtor claims that most of the unsecured creditorshad improper motives in seeking conversion of the case.Conversion was sought for “punitive motives, not economicones.” This argument was not raised by the Debtor in hismotion to dismiss or at the hearing. This conclusory statementis unpersuasive as the offers of proof presented at the hearingestablished conversion was in the best interest of the creditorsand the estate and would prevent the dissipation of assets.Moreover, over $61 million of claims have been filed in thiscase.The Debtor states “[b]ankruptcy may not be as a weaponfor punishment.” The cases cited are inapposite. Marsch v.Marsch (In re Marsch), 36 F.3d 825 (9th Cir. 1994) involvedthe dismissal of a chapter 11 case for bad faith where the casewas filed when the debtor operated no business and had assetssufficient to pay the debt in question and to post bond whilean appeal of the judgment was being pursued. Marshall v.Marshall (In re Marshall), 403 B.R. 668 affirmed the denialof motions brought by an adverse creditor to recuse the judge,dismiss the case for bad faith, and to reject the confirmationof the debtors’ plan of reorganization.*4 F.) Lastly, the Debtor argues a stay is necessary to preventthe chapter 7 trustee from interfering with PHS Rent LLC.PHS Rent LLC manages the bankruptcy estate's real propertyand the Debtor's 50% membership interest in the LLC becameproperty of the bankruptcy estate when he filed the chapter11 bankruptcy case. Upon conversion, the chapter 7 trusteeholds and controls the membership interest in PHS Rent LLCand is entitled to interact with the company to investigatethe financial performance of the estate's real property. To theextent the Debtor argues the chapter 7 trustee actions withPHS Rent LLC are improper, the entity can exercise its legalrights as necessary.The Debtor has failed to establish any likelihood of successon appeal(2) The Threat of Irreparable Harm if the Stay orInjunction is Not Granted;The Debtor submits he will suffer irreparable harm as aresult of financial hardship imposed by: The chapter 7 trusteereplacing management (presumably in LLC's in which theDebtor held membership interests); his loss of rents andcontrol; interference with LLC operations; asset deterioration;and the prospect of the appeal becoming equitably moot.The Debtor's argument is unavailing. At the hearing onconversion, the Debtor argued there was no equity in thereal properties so conversion would be futile. The chapter 7trustee sought and obtained approval to operate the incomegenerating real estate business on a short-term basis pursuantto 11 U.S.C. § 704. Operation of the business, subject to the
In re: AVI SCHWALB, SSN: xxx-xx-XXXX, Debtor., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.4supervision of the chapter 7 trustee, will provide transparencyand accountability in connection with the receipt of revenuesand payment of expenses and will allow for the upkeep andpreservation of the real estate.The Debtor's argument highlights the creditors’ concernsexpressed at the hearing that the Debtor sought bankruptcyprotection as a litigation tactic, not acting in good faith, andthat the Debtor is only concerned with maintaining his abilityto control and manipulate the assets for his own benefit.Again, it must be emphasized that the Debtor seeks dismissalof the chapter 11 case, not an opportunity to proceed with aproposed reorganization.In re Charter Co., 829 F.2d 1054 (11th Cir. 1987), cited bythe Debtor for the proposition that the appeal may becomemoot in the absence of a stay, is distinguishable. That caseconcerned an appeal of sale order. When the sale closed, theappeal became moot.Lutin v. United States Bankr. Court (In re Advanced MiningSys.), 173 B.R. 467 (S.D.N.Y. 1994) stayed a bankruptcy caseto allow an appeal of the denial of an administrative expenseclaim to proceed. Absent the stay, distributions would havebeen made to the holders of other allowed claims dissipatingthe funds held by the bankruptcy estate.Here, the liquidation of assets in a chapter 7 bankruptcy caseis on orderly process with sales of properties and distributionsto secured and unsecured subject to notice and hearing in thefuture. There is no threat of immediate or irreparable harm.(3) The Absence of Harm to Opposing Parties if theStay or Injunction is GrantedThe Debtor argues the granting of the stay would not harmsecured creditors are fully protected, supported Chapter 11continuation, and remained adequately collateralized.No secured creditors appeared at the hearing in support ofthe Debtor's motion to dismiss. At the hearing, the Debtorargued that conversion to chapter 7 would not be beneficialto creditors of the estate because no equity existed in the realestate in direct contradiction of the argument raised in themotion for stay.The Court takes judicial notice of the related chapter 11 casesfiled by 1575 Galena LLC, Case No. 25-13853-JGR, and 8Buildings LLC, Case No. 25-14224-JGR.*5 The Statement of Financial Affairs filed by 1575 GalenaLLC disclosed distributions made to the Debtor and his wife,Shosh Schwalb, in the amount of $294,399 during the oneyear prior to the bankruptcy filing while the secured creditorwent unpaid for the six months prior to the bankruptcy filing,necessitating the filing of a state court receivership action.Similarly, the Statement of Financial Affairs filed in the8 Buildings LLC case disclosed distributions made to theDebtor and his wife in the amount of $335,455 in the one yearprior to the bankruptcy filing while the secured creditor alsowas forced to protect its rights through state court receivershiplitigation.The secured creditor, Industrial Alliance Insurance andFinancial Services, Inc., filed a response to the Motionindicating that contrary to the Debtor's allegation that“Industrial Alliance foreclosed on eight properties valuedat ~$7 million, satisfying the secured debt,” foreclosuresales have been scheduled to occur in January 2026. In theresponse, the secured creditor reserves its rights to assertunsecured deficiency claims and has no knowledge how thevaluation of $7 million was obtained.The Debtor argues unsecured creditors will not be harmed bythe imposition of a stay because the claims are unliquidated,no judgments have been obtained, and unsecured creditorswould suffer no present prejudice from a temporary pause.The unsupported conclusory statements ignore the fact thatthe administration of a chapter 7 bankruptcy case provides acentralized mechanism for the allowance of claims, and thefact that unsecured creditors would be prejudiced by the delayin the liquidation of assets.The Debtor's Motion does not offer to post a bond to preventpotential harm that may result from a delay in the liquidationof the assets.The reality of this case is the Debtor wants to remain in controlof the real properties and the rents generated therefrom.The effect of granting the stay would extend the benefitsof bankruptcy protection to the Debtor without bankruptcysupervision. Thus, the Debtor's creditors would be harmed bythe granting of a stay.(4) The Public Interest Supports a StayThe Debtor claims the public interest favors: The correctapplication of 11 U.S.C. § 1112(b); allows for proper appellate
In re: AVI SCHWALB, SSN: xxx-xx-XXXX, Debtor., Slip Copy (2025) © 2025 Thomson Reuters. No claim to original U.S. Government Works.5review; prevents premature liquidation of assets; preserves afunctioning rental business; and ensures chapter 7 trustees donot interfere with non-debtors.The argument is unpersuasive and merely rehashes argumentsdiscussed and rejected above. The Debtor has failed toestablish that the public interest supports a stay.Therefore, for the above reasons, Debtor's Emergency Motionfor Stay Pending Appeal and Motion for Stay Pending Appealare hereby DENIED.Dated this 2nd day of December, 2025.BY THE COURT:All CitationsSlip Copy, 2025 WL 3465948End of Document© 2025 Thomson Reuters. No claim to original U.S. Government Works.
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