Defunct Zucker Goldberg, Creditors Reach 2nd Ch. 11 Plan

By Melissa Daniels

Law360, Los Angeles (March 14, 2017, 9:02 PM EDT) — Foreclosure law firm Zucker Goldberg & Ackerman LLC and its unsecured creditors have jointly filed a proposed Chapter 11 reorganization plan in New Jersey bankruptcy court, about 14 months after creditors objected to an initial plan.

Creditors had objected in January 2016 to a previous proposed liquidation plan, saying it appeared to be an ill-conceived attempt by the firm’s current leadership to retain control. The new, jointly administered plan filed Thursday seeks to liquidate all of Zucker Goldberg’s assets and distribute the proceeds to creditors.

“We are very pleased that, after a long and arduous process, we have finally reached agreement with the creditor’s committee on a joint plan of orderly liquidation,” Daniel Stolz of Wasserman Jurista & Stolz PC, who represents Zucker Goldberg, told Law360. “This plan will facilitate an orderly, cooperative process that we believe ill maximize the recovery for creditors.”

He also credited former U.S. Bankruptcy Judge Donald Steckroth, now at Cole Schotz PC, with helping negotiate the agreement.

In November, a report from Steckroth, who was appointed examiner, said the bankruptcy estate may have grounds to bring claims against managing member Michael Ackerman and his startup 4S Technologies in order to increase the assets the firm could use to cover its claims. A disclosure report filed Monday with the plan said “the plan administrator is to be appointed to pursue claims against 4S, Ackerman and other insiders.” Unsecured creditors will receive a pro rata share of the firm’s net estate assets once priority claims and secured claims are paid in full, according to the plan, though the firm has yet to estimate the potential distribution.

Zucker Goldberg’s financial troubles are rooted in the housing crisis of 2007 and 2008, when it took on many foreclosure cases. Those came to a close in 2015, but the firm was only being paid the low pre-market-crash rate of $1,300 per case and was stuck handling older foreclosures at a lower rate while fee structures nearly tripled. The situation forced Zucker Goldberg to secure a line of credit from JPMorgan Chase & Co., which is owed about $3 million. The firm’s trade debt had grown to $20 million by the time it filed for Chapter 11, according to a certification in support of first-day motions. Managing member Ackerman “poured” his personal funds into the firm to help keep it afloat, according to a certification in support of first-day motions.

Buckling under millions in debt to lenders, firm partners realized in June 2015 that the business would not be viable over the long term because it wasn’t receiving payments from mortgage service clients fast enough and those payments were small. Zucker Goldberg filed for Chapter 11 in August 2015, and around 50,000 cases were handed off to substitute counsel.

Though the firm collected around $4.8 million from its billings since it filed for bankruptcy through Dec. 31, around $6 million from former claims is still outstanding, according to Thursday’s disclosure statement. The firms hopes to use proceeds to pay off administrative and priority claims, and to pay unsecured creditors.

“Although it would be unrealistic to anticipate that there will be a complete recovery of these remaining accounts receivable, the debtor has experienced substantial success in its pursuit of accounts receivable,” the statement said. Priority claims include around $126,000 for ex-employees to compensate for unpaid and unused vacation pay, according to the disclosure statement.

The disclosure statement also spells out service fees incurred in the Chapter 11 so far, including around $584,000 in fees to bankruptcy counsel Wasserman Jurista & Stolz PC, around $444,000 to special litigation counsel Brown Moskowitz & Kallen PC and around $434,000 to creditors’ committee counsel McCarter & English LLP, among other service costs. Representatives for the unsecured creditors committee didn’t immediately respond to requests for comment on Tuesday.

Zucker Goldberg is represented by Daniel Stolz, Leonard C. Walczyk, Scott S. Rever and Donald W. Clarke of Wasserman Jurista & Stolz PC.

The unsecured creditors committee is represented by David J. Adler and Matthew B. Heimann of McCarter & English LLP.

The case is In re: Zucker Goldberg & Ackerman LLC, case number 2:15-bk-24585, in the U.S. Bankruptcy Court for the District of New Jersey.

–Additional reporting by Martin Bricketto, Aebra Coe and Jeannine O’Sullivan. Editing by Brian Baresch.

Buckling under millions in debt to lenders, firm partners realized in June 2015 that the business would not be viable over the long term because it wasn’t receiving payments from mortgage service clients fast enough and those payments were small. Zucker Goldberg filed for Chapter 11 in August 2015, and around 50,000 cases were handed off to substitute counsel.

Though the firm collected around $4.8 million from its billings since it filed for bankruptcy through Dec. 31, around $6 million from former claims is still outstanding, according to Thursday’s disclosure statement. The firms hopes to use proceeds to pay off administrative and priority claims, and to pay unsecured creditors.

“Although it would be unrealistic to anticipate that there will be a complete recovery of these remaining accounts receivable, the debtor has experienced substantial success in its pursuit of accounts receivable,” the statement said.

Priority claims include around $126,000 for ex-employees to compensate for unpaid and unused vacation pay, according to the disclosure statement.

The disclosure statement also spells out service fees incurred in the Chapter 11 so far, including around $584,000 in fees to bankruptcy counsel Wasserman Jurista & Stolz PC, around $444,000 to special litigation counsel Brown Moskowitz & Kallen PC and around $434,000 to creditors’ committee counsel McCarter & English LLP, among other service costs. Representatives for the unsecured creditors committee didn’t immediately respond to requests for comment on Tuesday.

Zucker Goldberg is represented by Daniel Stolz, Leonard C. Walczyk, Scott S. Rever and Donald W. Clarke of Wasserman Jurista & Stolz PC.

The unsecured creditors committee is represented by David J. Adler and Matthew B. Heimann of McCarter & English LLP.

The case is In re: Zucker Goldberg & Ackerman LLC, case number 2:15-bk-24585, in the U.S. Bankruptcy Court for the District of New Jersey.

–Additional reporting by Martin Bricketto, Aebra Coe and Jeannine O’Sullivan. Editing by Brian Baresch.