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US Courts Withdraw Chapter 7 Bankruptcy Threat For Diamond Comics

US Courts withdraw Chapter 7 bankruptcy threat for Diamond Comic Distributors

In April, Bleeding Cool reported that the US Bankruptcy courts of Baltimore had issued new paperwork for Diamond Comic Distributors to move it from Chapter 11 bankruptcy to Chapter 7 bankruptcy. In layman's terms, that means moving from attempting to legally reorganise Diamond Comics to be an ongoing company again to liquidating its assets and closing it down for good.

The official reason given in the legal filing is that Diamond hasn't filed their paperwork, specifically their Monthly Reports, during the Chapter 11 procedure. The papers state that " Chapter 11 debtors-in-possession are required to file Monthly Operating Reports with the court and the U.S. Trustee on a monthly basis. The failure to file Monthly Operating Reports constitutes 'cause'… for the conversion or dismissal of this case".

They cite another case stating that "Monthly operating reports "are much more than busy work imposed upon a Chapter 11 debtor for no other reason than to require it to do something. They are "the lifeblood" of Chapter 11, enabling creditors to keep tabs on the debtor's post-petition operations. Failure to file them — and to file them timely — is a serious breach of the debtor's fiduciary obligations and "undermines the Chapter 11 process." It is well established, consequently, that a debtor's failure to submit monthly operating reports is "cause" to convert the case or dismiss it." That "refusal or inability to provide financial disclosure [through monthly operating reports] sounds the death knell of a chapter 11 case" And that Diamond has not filed any Monthly Operating Reports since commencing this case, with Monthly Operating Reports for January, February and March outstanding and overdue.

Diamond issued the following statement, saying, "You may have read or heard that the United States Trustee's office recently filed a request to convert Diamond's bankruptcy cases. This request was made due to Diamond's unfortunate, but unavoidable, delays in filing certain reporting information with the Court." Unavoidably not returning three monthly reports, for January, February and March? Diamond continues, "Diamond is in the process of finalizing the reporting information and will do so over the next few days. Once this has happened, we fully expect that the United States Trustee will withdraw its request."

A hearing to convert Diamond's Chapter 11 into Chapter 7 bankruptcy at the U.S. Bankruptcy Court in Baltimore was to be held on the 27th of May 2025. But looks like it will be no longer necessary. New paperwork filed with the Baltimore bankruptcy courts that read "Matthew W. Cheney, Acting United States Trustee for Region Four, which includes the District of Maryland, Baltimore Division (the "United States Trustee"), hereby withdraws the Motion to Convert to Chapter 7 or Dismiss Case filed as document 376 on April 28, 2025. The deficiencies noted in the motion have been cured."

Basically… they filed their paperwork.

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