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Debt Management Law News

March 25, 2010

Luxury car dealer files bankruptcy

New Luxury Motors Bankruptcy Cases to Stay in Houston

The parent company of Luxury Motors of Franklin Park has declared Chapter 11 bankruptcy.

Chapter 11 allows for a business to hold off from paying its creditors while it tries to reorganize and become profitable again.

A judge in the Southern District of Texas is overseeing the bankruptcy. New Luxury Motors is headquartered in Houston and also has locations in Oakland, Calif., and Las Vegas.

Luxury Motors in Franklin Park, 3311 Charles St., sells upscale new and used vehicles ranging from Mercedes and BMWs up to Bentleys and Maseratis. It does most of its sales online and will send live video of a vehicle to a potential buyer over the Internet.

The company has more than 100 creditors according to court papers. Locally it owes $306,000 in county property taxes and $40,212 in sales taxes to the state of Illinois.

The company filed bankruptcy on Feb. 1.

Bankruptcy Judge Letitia Z. Paul of the Southern District of Texas entered an opinion and order today denying the motion of GMAC Inc. (later joined by MB Financial Bank, N.A.) to transfer the bankruptcy cases of New Luxury Motors, LLC and four affiliates to the Northern District of Illinois bankruptcy court. New Luxury Motors, LLC and its affiliates operate a website (www.luxurymotors.com) and three car dealerships selling high-end luxury vehicles and Infiniti automobiles. The website claims that it is the "World's Largest Online Luxury Car Retailer" and the three dealerships are:

* New Luxury Motors of Las Vegas, NV
* New Luxury Motors of Chicago/Franklin Park, IL
* Infiniti of Oakland, CA
* New Luxury Motors of Houston, TX is listed on the website as "coming soon"

GMAC is the largest secured creditor of the debtors and holds a security interest in "all of the personal assets of the three Debtors that operate motor vehicle dealerships and asserts a security interest in intellectual property owned by" one of the other debtors, New Luxury IP, LLC. MB claims a security interest in the property on which the Chicago/Franklin Park dealership is located and the monthly lease payments that the relevant debtor makes for use of the property.

Despite none of the debtors' current dealerships being located in Houston, the bankruptcy cases were commenced there on the basis that the parent company (New Luxury Motors, LLC) is headquartered in Houston, "all of the Debtors are managed from Houston and the nexus of the operations for all Debtors are in Houston." GMAC and MB disputed those contentions, asserting that "Houston is not the principal place of business or the location of the principal assets of [the] Debtors." Even if Houston were the debtors' principal place of business (making venue appropriate pursuant to 28 U.S.C. section 1408), GMAC and MB asserted that Houston was an inconvenient venue and that the cases should still be transferred to Chicago in the interest of justice and convenience.

Judge Paul rejected GMAC and MB's contentions, finding that Houston is the principal place of business of the parent company. Because venue is therefore appropriate in the Southern District of Texas for New Luxury Motors, LLC, Judge Paul also found that venue was proper for each of the affiliate debtors because "each may commence its bankruptcy case in the district in which there is a pending case concerning an entity’s affiliate." The court also rejected the claims that the cases should be transferred for convenience of the parties, stating that "GMAC has not shown that the economic and efficient administration of these estates would be promoted by transferring the cases to the Northern District of Illinois."

Sometimes, debt can be overwhelming, and bankruptcy becomes necessary.
Bankruptcy can sometimes be difficult. If you are considering bankruptcy, contact the Houston bankruptcy lawyers of Weston & Associates, PLLC at 713-623-4242

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