By Ryan C. Wood
There are a number of updates below with a more detailed history of this chapter 13 bankruptcy filing. There is no shame in merely following the law to seek relief in bankruptcy. Please keep in mind that Mr. Paul Teutul Sr. is paying 100% of his debts in his chapter 13 debt adjustment or reorganization case. There are many myths and fake news floating around about bankruptcy and Mr. Teutul’s bankruptcy case. I am confident what follows is the most accurate analysis of what has taken place to date. In this case Mr. Paul Teutul, Sr. proposed and the Court approved the sale of his 38 acre estate to pay ALL allowed creditor claims. This is Bankruptcy Case No. 18-35310 filed in the Bankruptcy Court for the Southern District of New York on February 27, 2018.
As of November 15, 2019
On July 1, 2019, the Court entered an order approving the sale of Mr. Paul Teutul Sr.’s New York 38 acre property along with some personal property for $1.5 million. The sale included some of the equipment to maintain the property such as a couple plastic boats, an ATV, bulldozer and JD tractor. So that is more or less that assuming the sale is closed.
American Chopper’s Paul Teutul, Sr. is now free to hit more home runs. Yes, home runs. See, Mr. Paul Teutul, Sr. keeps swinging the bat. He hit some home runs and then struck out a couple of times. He then followed the law to seek relief from his creditors to sell his house to pay off all his debts and move on. It is just that simple. It is impossible to hit a home run each time you come to the plate. You do have to keep swinging or you will never hit a home run. Keep swinging Paul Teutul Sr. Keep swinging!!!!!!
June 20, 2019 Update
On June 5, 2019, a Fourth Amended Chapter 13 Plan was filed to incorporate terms governing the sale of Mr. Teutul’s real property. As required as part of the chapter 13 plan and required by the Bankruptcy Code, on May 20, 2019, a motion to sell Mr. Teutul’s 38 acre estate was filed, and on June 18, 2019, a hearing was held regarding Mr. Teutul’s motion to sell his 38 acre property and sell other personal property along with it to fund his chapter 13 plan of reorganization. I am please to report the court granted the motion to sell. Unlike some other articles with click-bait titles this chapter 13 case is not a nightmare and the case was never neglected. Sure, no one really wants to file for bankruptcy protection. It is the law though and Mr. Teutul just like anyone else seeking bankruptcy protection is just following the law. Many times bankruptcy is a last resort and that means bankruptcy cases get filed at the last second or without months and months of planning. Large corporations filing chapter 11 cases to reorganize their debts even have agreements with creditors already worked out prior to the chapter 11 even being filed. For us small fish that is not how it goes down. Nevertheless, Mr. Paul Teutul, Jr. is now waiting for his Fourth Amended Chapter 13 Plan filed on June 5, 2019, to be confirmed or approved by the bankruptcy court. The chapter 13 plan should be wrapped up in August or September 2019 now that the motion to sell was granted and the plan can be funded. There should not be too many more issues in this case. Congratulations Mr. Paul Teutul, Jr. and we wish you well in your future endeavors.
May 27, 2019 Update
This might be a little premature, but I would like to congratulate Mr. Paul Teutul, Sr. on successfully reorganizing his debts. Sadly most of the mainstream media will just provide that Mr. Teutul filed bankruptcy without any real information about what took place. These are sadly click-bait type articles that I see all the time. So, this might be a little premature, but I have the pleasure to report Mr. Teutul, Sr. filed a motion to sell his real property 38 acre estate to fund the proposed chapter 13 plan in which his creditors will be paid in full on May 20, 2019. The hearing on the motion to sell the property is scheduled for June 18, 2019, at 10:30 a.m. Assuming the motion to sell the real property is granted and the chapter 13 plan will fund as a result this case is all but wrapped up. Unfortunately prior to the motion to sell the real property was filed the chapter 13 trustee filed a motion to dismiss the case for undue delay that is prejudicial to creditors pursuant Section 1307(c)(1). I really do not like these motions filed by chapter 13 trustee’s given in reality no creditor is complaining and no creditor is prejudiced. The successful completion of and funding the chapter 13 plan on file in this case is the single most efficient and quickest ways creditors of Mr. Paul Teutul, Sr. will get paid what they are owed at this point. Creditors have filed claims to be paid what they are owed and do not have to continue to pursue their claims under state law. This will save the creditors thousands and thousands of dollars in attorneys’ fees and costs with a guarantee of payment of the amounts they are owed. The problem is this case was timing though. It took too long for the real property to be sold and fund the proposed chapter 13 plan. So arguably creditors are or were prejudiced. I just do no like chapter 13 trustee’s stepping into the shoes of creditors and making this argument and filing a motion to dismiss a case. At the same time a chapter 13 case cannot just be out there barring creditors from seeking payment if there is no reasonable likelihood of a chapter 13 plan being confirmed or approved. It is a delicate balance and creditors should enforce their rights and seek dismissal of cases rather than the chapter 13 trustee; my two cents. Hopefully the court in this case will continue the hearing on the motion to dismiss the case and allow the hearing on the motion to sell Mr. Teutul, Sr.’s real property so the chapter 13 plan can fund and be approved……….
February 1, 2019 Update
Two issues were resolved recently. The first is regarding Leonite Capital, LLC. See below for more information about their claims. On December 19, 2018, the bankruptcy court entered an order denying Leonite Capital, LLC’s late filed proof of claim. The state court lawsuit against Orange County Choppers will continue though.
The other major development was Paul Teutul Sr. and JTM Motorsports entered into a settlement agreement for up to $30,000 after going through mediation. An initial payment of $11,726.15 will be paid to JTM upon the Court approving the settlement. After that invoices for parts totaling approximately $6,273.85 will be submitted to Paul Teutul Sr.’s bankruptcy attorney for payment. The remaining portion of the settlement amount will be held in trust to potentially pay other alleged outstanding invoices JTM is allegedly liable for unless the invoice holders provide releases saying JTM is not responsible for paying the invoices…….. Paul Teutul Sr. was supposed to pickup the 2009 Corvette ZR1 around January 19, 2019.
Issues Remaining
Mr. Paul Teutul Sr.’s chapter 13 debt adjustment or reorganization case is progressing and is running into an issue that is not uncommon under his circumstances. There are a number of ways to fund or pay a proposed Chapter 13 Plan and to meet obligations to creditors. The most common way is from normal monthly income. The bankruptcy filer makes a payment each month to the Chapter 13 Trustee assigned to the case and then the Chapter 13 Trustee disburses the funds to creditors according to the terms of the chapter 13 plan. The second most common way to fund a chapter 13 plan is by selling assets like real property. That is what Mr. Paul Teutul Sr.’s chapter 13 plan has turned into after unsuccessfully seeking to modify the terms of the secured loan on his property. The problem is you will only get so long to sell the asset to fund the chapter 13 plan. This is a jurisdictional and circumstantial issue so I will not get into how long someone will have to sell property, but generally it is not an open ended proposition. Part of filing for bankruptcy is bringing certainty to right to payment of debts so there generally will be no approval or confirmation of a plan to sell an asset to fund a plan that is indefinite.
December 13, 2018 Update
I wrote a previous article about American Chopper and Orange County Chopper’s Paul Teutul Sr.’s chapter 13 bankruptcy filing. There are various updates below as things have played out. You may have read that Paul Teutul, Jr. filed bankruptcy and I can confirm that it is technically true. Unfortunately the mass media does almost no research anymore and just spits out half-truths as fact. I have reviewed the bankruptcy documents filed and can tell you firsthand the filing is by who we all know as Paul Teutul, Sr., aka “Senior” but senior is actually legally a junior. The voluntary petition for bankruptcy protection under Chapter 13 of the Bankruptcy Code does not contain a scribers error and says Jr. because Paul Teutul, Sr. is actually a Jr. This case as it has progressed turned into a sale case and creditors will receive 100% of their allowed claims. This means Mr. Paul Teutul Sr. is paying all his debts according to bankruptcy code and applicable non-bankruptcy law through the sale of his real property.
December 13, 2018 and Summary of Ongoing Issues
Here Comes Leonite Capital, LLC
A new development is Leonite Capital, LLC, storming onto the scene alleging an equity stake in Orange County Choppers. Uh oh, this could be trouble. It is kind of like plugging leaking holes, one with your left hand, another with your right hand, another with your right foot and then bam, Leonite comes in and you are standing on your left foot trying to plug the next leak. So Leonite provides it sued Orange County Choppers Holdings, Inc. for at least $500,000.00 plus interest in damages. Leonite alleges it was not given proper notice of Paul Teutul, Sr.’s bankruptcy proceeding and was not listed as a creditor. This is technically true given Leonite did business with OCC, a separate legal entity from the individual, Paul Teutul, Sr. Leonite alleges it has a senior secured promissory note on OCC with right to equity in OCC. Leonite is objecting to confirmation/approval of Paul Teutul Sr.’s amended chapter 13 plan as it may negatively effect their claim. Paul Teutul Jr. filed an opposition to the allowance of Leonite’s claim with many great arguments. The most compelling I think is that Leonite filed its objection to confirmation on May 14, 2018, but failed to file a proof of claim until five months later. Also, the claim of Leonite is unliquidated, contingent and disputed and unlisted. Paul Teutul, Jr. argues the disallowance or not allowing Leonite’s late filed claim does nothing since the claim cannot be discharged given it was unlisted or scheduled in the petition. We shall see what happens…..
The next hearing date for all continued matters is now December 20, 2018.
JTM Motor Sport, Inc.’s Alleged Secured Claim and Pending Mediation of Controversy
Paul Teutul’s chapter 13 bankruptcy is still progressing albeit with some issues not being resolved yet. The issues with JTM Motorsport, Inc’s alleged secured claim is still not resolved. As provided in more detail below JTM Motorsports, Inc. performed work in Mr. Teutul’s 2009 Corvette. The 2009 Corvette is being held hostage for payment for the work performed resulting in the alleged secured claim of JTM Motorsport’s Inc. The only thing that has changed is on October 30, 2018, a hearing was held on Mr. Teutul’s objection the JTM’s alleged secured claim and JTM requested mediation. Paul Teutul, Jr.’s attorneys objected to mediation, but the Court overruled their objection ordered mediation. On November 2, 2018, JTM Motorsports, Inc. filed a motion for an order of approval for this matter to be mediated. On November 12, 2018, Paul Teutul, Jr. filed a limited opposition to the motion for mediation and proposed order providing that despite Paul Teutul Jr.’s repeated requests to inspect the 2009 Corvette to evaluate the parts used and worked performed JTM has not made the 2009 Corvette available. Paul Teutul Jr. is just requesting as part of the mediation he be able actually inspect the 2009 Corvette. A very reasonable and essential request so why is JTM not making the 2009 Corvette available? I will let you speculate. Also, why did JTM want mediation at all when the bankruptcy judge could have ruled on Paul Teutul Jr.’s objection to their claim? Again I will let you speculate. On December 3, 2018, the Court entered the order approving the mediator and procedures for the mediation. We shall see what happens.
October 18, 2018 Update
There has not been a lot of movement in Mr. Paul Teutul Sr.’s chapter 13 bankruptcy case. All the issues listed below still remain. The objection to JTM Motor Sports, Inc. has a scheduling order but nothing else has happened. Any objections to approval or confirmation of Mr. Teutul Sr’s chapter 13 plan of reorganization have been continued to a new confirmation hearing date of October 30, 2018. Mr. Teutul Sr. still needs to find a buyer and sell his primary residence to fund the chapter 13 plan of reorganization. The October 30, 2018, hearing may provide some additional information as to how long Mr. Teutul Sr. will have to sell the house. Some jurisdictions will only allow 12 months to complete a sale to fund a chapter 13 plan of reorganization.
July 8, 2018 Update
Mr. Paul Teutul Sr.’s bankruptcy case is progressing for the most part normally at this point and the issues that remain involve the following:
1. Sale of Mr. Paul Teutul Sr.’s real property to fund the chapter 13 plan;
2. Objection to JTM Motorsport, Inc.’s alleged secured claim; and
3. The unknown value of filed Claim No. 9 given the claim is subject to ongoing litigation; more to come on this given the litigation is ongoing…… see below.
JTM Motor Sports, Inc.
As discussed and detailed below JTM Motor Sports, Inc. filed a motion for relief from stay and filed a claim for payment in Mr. Paul Teutul Sr.’s case alleging a secured claim and the claim was secured by Mr. Paul Teutul Sr.’s 2009 Chevrolet Corvette ZR1. Mr. Paul Teutul Sr. opposed the motion for relief from stay and objected to the claim of JTM. The hearing on the objection to JTM’s alleged secured claim is July 30, 2018.
In bankruptcy cases with assets for creditors to share, whether a Chapter 7, Chapter 13 or Chapter 11/12, creditors are required to file proof of claims with evidence detailing how much they are owed and why they are entitled to receive payment or a distribution of the bankruptcy filers assets. That is what JTM Motor Sports, Inc. did. They filed a claim alleging an estimated secured claim totaling $51,000, Claim No. 8, filed on May 7, 2018. The problems is there is no documentation attached to the claim evidencing the amount owed or basis for perfection of the alleged secured claim. See Federal Rule of Bankruptcy Procedure 3001 and specifically 3001(d) if you really want to do some reading. A secured claim filed with absolutely no documentation for the basis of the secured claim is troubling. This is exactly why Mr. Paul Teutul Sr. is objecting to JTM’s alleged secured claim and requesting the Court expunge the claim entirely. Mr. Paul Teutul Sr. is also alleging he owes no money to JTM at all. See below for more details in a prior update about why JTM is alleging it has a secured claim in this case and why Mr. Paul Teutul, Sr. argues he owes them no money at all.
A larger overreaching issue and even more troubling aspect of what is going on here is what FRBP 3001(f) provides: Evidentiary Effect. A proof of claim executed and filed in accordance with these rules shall constitute prima facie evidence of the validity and amount of the claim. Why should any bankruptcy filer and their counsel have to spend valuable time and money objecting to a claim that clearly has failed to meet the rules? If a filed proof of claim alleging a secured claim has no documentation attached, a barebones claim, how could the claim be given evidentiary effect and be prima facie evidence of validity of a claim? The barebones claim is of no evidentiary effect period……..
Filed Claims for Payment
So far the following claims filed in Mr. Paul Teutul Sr.’s Chapter 13 Bankruptcy:
Claim No. 1: Ally Bank; $15,283.50 secured by a 2011 Dodge Ram Pickup
Claim No. 2: Nationstar Mortgage LLC dba Mr. Cooper; $56,859.62 secured by real property
Claim No. 3: American Express c/o Becket and Lee LLP; $39,716.95 general unsecured claim
Claim No. 4: American Express c/o Becket and Lee LLP; $10,285.65 general unsecured claim
Claim No. 5: Midland Funding, LLC; $9,390.67 general unsecured claim
Claim No. 6: County of Orange c/o McCabe & Mark, LLP; $55,408.31 secured by real property
Claim No. 7: M&T Bank c/o Schiller Knapp Lefkowitz Hertzel LLP; $911,097.23 secured by real property
Claim No. 8: JTM Motorsports, Inc.; $51,000 secured claim allegedly secured by 2009 Corvette
Claim No. 9: Thomas Derbyshire c/o Bayard, P.A. Peter Ladig; NO AMOUNT LISTED GIVEN THIS CLAIM IS SUBJECT TO ONGOING LITIGATION ….. MORE TO COME REGARDING WHAT TAKES PLACE REGARDING THIS CLAIM
Claim No. 10: Cortland County; $8,363.59 secured by real property
Claim No. 11: New York Dept. of Taxation and Finance; $25,832.99 with $20,780.78 as priority claim and the remainder of $5,052.21 a general unsecured claim
June 13, 2018 Update
Things have generally died down in Mr. Paul Teutul, Sr.’s chapter 13 bankruptcy case. Mr. Teutul will sell his house, pay off all his debts and walk away with hopefully a boat load of money. Hopefully you are reading this and will know Mr. Paul Teutul, Jr. aka Paul Teutul, Sr. paid his debts in full.
The Current Drama
What is still going on is a fight picked by JTM Motor Sports, Inc. and Paul Teutul’s 2009 Chevrolet Corvette ZR1 in the possession of JTM Motor Sports, Inc. JTM is requesting the Bankruptcy Court give JTM the right to sell the Chevrolet Corvette ZR1 to satisfy JTM’s alleged garageman’s lien. Allegedly the deal was JTM would beef up the Corvette so Mr. Teutul Jr. could race it in an episode of “Street Outlaws” against “Farm Truck” and JTM would have their banners prominently displayed to get media attention. If you are not familiar with “Street Outlaws” Oklahoma City “Farm Truck” is a Chevrolet truck that has a camper shell and serious horsepower and set up to race, a sleeper truck or car. Both “Street Outlaws” and “American Chopper” are produced by Pilgrim Studios and are on the Discovery Channel. According to Paul Teutul the relationship with an associate of JTM, a Mr. Franco, that was helping to put the appearance together on “Street Outlaws” soured. To date Mr. Paul Teutul, Jr. has not appeared on “Street Outlaws” and raced “Farm Truck.” So now JTM is alleging they have a garageman’s lien in the vehicle for the parts and labor expended on the Corvette. They also asked for Mr. Teutul’s case to be dismissed which is ridiculous. From reading the declaration of Paul Teutul, Jr. and the attached emails it would seem JTM is going to have a tough time proving a garageman’s lien.
As of May 29, 2018
There have been many significant developments in Paul Teutul’s Sr. chapter 13 bankruptcy filing. There are a couple truly significant events that happened in May 2018. I was hoping American Chopper’s Paul Teutul, Sr. would save his home from foreclosure and work things out with M &T Bank, but his Third Amended Chapter 13 Plan no longer seeks loss mitigation to try and save his home. The Third Amended Chapter 13 Plan reduced the monthly plan payment to $750 a month for 60 months. That is a total pot of $45,000. The first chapter 13 plan filed proposed a pot of $146,928.60 to be paid at $2,448.81 for 60 months. This is a significant reduction.
Paul Teutul Sr.’s Third Amended Chapter 13 plan no longer requests loss mitigation regarding his home, but instead provides sell language as follows: “Debtor intends to sell Real Property having an address of 95 Judson Road, Montgomery, New York sold pursuant to 11 U.S.C. § 363(b). The Real Property is subject to a secured claim held by M&T Bank. Debtor has entered into an Exclusive Right to Sell Agreement with Ellis Sotheby’s International Realty to market the sale of Real Property. Once a Contract of Sale is entered into, the Debtor will amend this Plan accordingly. The net proceeds of the sale will be used to fund this Chapter 13 Plan and to pay all creditors in full. Debtor shall attach an affidavit containing all facts necessary for Court to approve the sale and should be prepared to address the requirements of 11 U.S.C. § 363 at the confirmation hearing. The Debtor shall submit an order approving sale upon confirmation of the Plan or the Court’s separate determination of the request, whichever is earlier.” This means the house we all saw on American Chopper is going to be sold and hopefully Paul Teutul, Sr. will walk away with some money from the sale after paying back property tax and M & T Bank missed mortgage payments. The Third Amended Chapter 13 Plan also provides all creditors will be paid in full. So those of you out there that are haters Paul Teutul Sr. is paying his creditors in full via the sale of his real property. This is not uncommon and what the Bankruptcy Code requires under Orange County Chopper Paul Teutul Sr.’s circumstances. It happens quite a bit actually, but all people seem to focus on is the person filed bankruptcy and do not take the time or educate themselves about what actually took place in the bankruptcy. I have no doubt Paul Teutul Sr. will continue to make good money and live a good life. He will also be 100% debt free upon completion of his Chapter 13 Plan.
Some History
If you do not know the huge building built as OCC’s headquarters was lost years ago and OCC leases a portion for the chopper business and restaurant OCC operates at the building. So you should have known then that things were not great. Unfortunately things did not improve for Paul Teutul, Sr. Not a whole lot has happened in the Chapter 13 bankruptcy filing. The original meeting of creditors was scheduled for March 28, 2018, was continued to April 11, 2018, at 12:30 p.m. Even in Chapter 13 cases few creditors show up to ask the debtor, Paul Teutul, Sr., questions. The meeting of creditors is a very limited forum and there is not a lot of time for creditors to ask questions after the trustee and/or their attorney asks their questions. If a creditor would like more time and request documents they may file an application for an order pursuant to FRBP 2004. I am sure there will be a couple creditors that show up because Paul Teutul, Sr. is the debtor and no other reason than that. I am a bankruptcy attorney and worked for a Chapter 13 Trustee. I would be the one questioning Paul Teutul, Sr. at this meeting of creditors. That was part of the job. Generally even under Paul Teutul, Sr.’s circumstances the meeting of creditors should not be too eventful.
Hearing Regarding Objection To Request For Loss Mitigation
A hearing that truly could be eventful and is the keystone for the entire Chapter 13 case is the hearing regarding Paul Teutul Sr.’s request for loss mitigation regarding his house pursuant to the terms of the Amended Chapter 13 Plan Paul Teutul, Sr. Please note for later Paul Teutul Sr.’s Chapter 13 petition starting this bankruptcy case was filed on February, 27, 2018. Paul Teutul, Sr. has checked the box for loss mitigation regarding his primary residence. Once creditors are served with the Chapter 13 Plan that may object to how the plan is treating them as a creditor.
On March 15, 2018, bankruptcy attorney Lisa Milas, on behalf of M&T Bank, the servicer of the loan and the owner Manufactures & Traders Trust Company, filed an objection to Paul Teutul’s Sr.’s request for loss mitigation. Loss mitigation is a fancy way of saying modification of the terms of the loan that can no longer be followed or have not been followed, deed in lieu of foreclosure with agreed upon terms or consensual sale. Paul Teutul, Sr. originally was loaned $1,500,000 from M&T Mortgage Corporation, another name used for the secured lender that I assume is Manufactures & Traders Trust Company since M&T Bank is the servicer, on September 27, 2005, secured by Paul Teutul Sr.’s primary residence. The mortgage was first modified October 10, 2013, and modified again on January 14, 2016. M&T Bank is objecting to Paul Teutul, Sr.’s request for loss mitigation given M&T Bank recently reviewed the loan and denied Paul Teutul, Sr.’s request for modification. There is a denial letter attached to the objection to Paul Teutul, Sr.’s request for loss mitigation as an exhibit and the rejection letter is dated December 18, 2017. This bankruptcy case was filed on February 27, 2018. M&T Bank’s objection says the loan was reviewed in January though. M&T Bank denied Paul Teutul, Sr.’s request for loss mitigation or modification given the monthly loan payment would increase significantly and the modification would not result in the requisite surplus income even if the interest rate was reduced and the term extended.
So yes, that is how most modifications work. The total owed with missed mortgage payments added in is spread out over an extended term with a reduced interest rate to make the monthly loan payment affordable again. Apparently after two prior modifications M&T Bank does not believe Paul Teutul, Sr. will be able to make the modified payment given his current income and expenses. M&T Bank is owed $905,448.00 and the property securing the debt is allegedly worth $1,800,000.00. So after applying the NYCPLR Section 5206 exemption of $137,950.00, Paul Teutul, Sr. has $756,602.00 without deduction the cost of sale or potential capital gains tax.
So unfortunately the Bankruptcy Court denied loss mitigation and the Third Amended Chapter 13 Plan seeks to sell Mr. Teutul Sr.’s real property to pay off all creditors in full.
Income and Debts
I am going to hold off on sharing any sharp bankruptcy attorney opinions other that what is provided in the filed schedules of Paul Teutul, Sr. Income of about $13,000 from Orange County Choppers, $5,500 from family support and about $2,600 from Social Security without deduction taxes and various other deductions before net income. One of the deductions that jumped out at me was the $1,034.45 a month for paying back retirement account loans. I am working on another article that discusses why to never take a loan from a retirement account. I hate to see retirement account loans and then a bankruptcy petition is filed anyway. Retirement account loans are the gateway drug to bankruptcy. Another monthly expense that jumped out at me was the monthly property tax of $4,166.00 and monthly insurance of $566.00. I am not familiar with property tax in New York but this seems extremely high. Paul Teutul, Sr. lists the value of the property as $1,800,000.00. One of the largest debts listed is for property taxes of $51,230.98. The Amended Chapter 13 Plan also provides that about $80,000.00 in mortgage payments were not paid prior to Paul Teutul, Sr. filing for bankruptcy. As it stands Pau Teutul, Sr. is seeking loss mitigation regarding the mortgage with M&T Bank and paying into the Chapter 13 Plan from monthly income $2,448.00 for 60 months for a total of $146,880.00 total pot. [Update: Since this was originally written Mr. Teutul, Sr. has significantly amended his schedules of assets to include value and many more assets.]