Last month, Lumio petitioned for bankruptcy in the midst of ongoing allegations that it has defrauded consumers across the country. At the time, Lumio told the Court it intended to restructure through a Chapter 13 proceeding, with a company named White Oak footing the bill. But it seems the plans have changed as the Official Committee of Unsecured Creditors for the Lumio Bankruptcy proceeding filed a motion late in the evening on Friday, October 25 to convert the proceeding from a Chapter 13 to a Chapter 7.
Broadly speaking, Chapter 7 differs from Chapter 13 in that Chapter 7 is a complete liquidation, whereas Chapter 13 is intended to allow the bankrupt entity to reform and continue operations. There is, generally speaking, a far lower likelihood for consumers to recover money or continued services from a bankrupt defendant under Chapter 7 as opposed to Chapter 13. In short, this is not a positive development.
In its motion to convert the proceeding, the Committee states that White Oak has backed out of the deal, taking with it a $100 million credit bid which would have helped fuel the company’s reorganization. The Committee also asserts that it has been unsuccessful in reaching an agreement with an alternative purchaser. As a result, the Committee asserts that it is “left with no option other than to formally seek conversion to stop the bleeding.”
To be sure, the potential conversion of Lumio’s bankruptcy from Chapter 13 to Chapter 7 is not good news for consumers. But there remain other available lines of recovery. Notably, most solar transactions are financed. The Smith v. Lumio class action complaint identified the lenders as being part of Lumio’s RICO Enterprise and named one of the lenders without an arbitration clause as a defendant in the action. Other finance companies have arbitration clauses which prevent lawsuits, but still subject the companies to binding arbitration in which an arbitrator can award consumers monetary damages.
In sum, the Lumio Bankruptcy appears to be taking a bad turn for consumers, but there remain other options, including pursuing lawsuits and arbitration against the solar lending companies which helped to finance the transactions. Stay tuned to this blog as we will continue to monitor the bankruptcy proceedings, provide key updates as to same, and explore other available avenues of recovery for our clients.