24 B 6598
Debtor Zarifian Enterprises, LLC filed a motion to convert its involuntary chapter 7 case to one under Subchapter V. The chapter 7 trustee objected. Trustee argued that cause under § 1112 exists thereby preventing conversion and that Debtor’s failure to “engage in commercial or business activities” required by the definition of “debtor” in § 1182(1)(A) rendered it ineligible for conversion to Subchapter V. HELD: First, though a motion to convert to chapter 11 may be denied if the case would simply be reconverted “for cause” under § 1112(b), the trustee did not show “a substantial or continuing loss to or diminution of the estate” as an element of “cause” required by § 1112(b)(4)(A). Rather, Debtor’s receivables, inventory, lawsuit, and sale of equipment would generate revenue for the estate. Second, § 1182(1)(A) does not require that a debtor maintain its core or historical business operations on the petition date; it requires a debtor engaged in commercial or business activities. Though Debtor no longer maintained its historical business as a carpentry and millwork, it maintained significant assets, a bank account, a 4-year, and a claim against its landlord for wrongful lockout. Debtor would have been engaged in business activities while liquidating its assets had the involuntary petition not been filed, and it intends to file a Subchapter V plan of liquidation.