Live Well Financial Ordered into Involuntary Bankruptcy Protection

A bankruptcy court judge in the state of Delaware has ordered Live Well Financial into Chapter 7 bankruptcy protection, while also appointing an interim trustee to oversee the company’s remaining operations during the associated liquidation process. This is according to court documents obtained by RMD and first reported by the Richmond Times-Dispatch.

In a document filed with the Delaware Bankruptcy Court on July 1, Judge Laurie Selber Silverstein granted an order for relief under Chapter 7 of Title 11 of the United States Bankruptcy Code, a motion that was introduced in June by three Live Well creditors – Flagstar Bank, Mirae Asset Securities Inc. and Industrial and Commercial Bank of China Financial Services LLC –  to put the company into involuntary bankruptcy protection.

Chapter 7 bankruptcy differs from the more typical Chapter 11, in that it is initiated by creditors that feel the debt-holder in question has the ability to pay its outstanding obligations but elects not to.

Live Well had until Monday to answer the involuntary petition based on the applicable bankruptcy laws, but documents related to the certification of counsel in the case state that the company never did so.

“Pursuant to section 303(b) of the Bankruptcy Code, Live Well’s deadline to answer the Involuntary Petition is July 1, 2019,” the court document dated July 1 reads. “Live Well has not answered or otherwise responded to the Involuntary Petition.”

However, Live Well filed a preliminary objection to the involuntary petition on June 17, with its counsel saying at the time that a lapse of communication may have indicated an error in judgment, but not necessarily any wrongdoing on its part.

“Certainly prior to the Filing Date, Live Well could have been more forthcoming in its ‘dealing with the Petitioning Creditors,’” the company’s counsel writes in the June 17 objection. “Delayed communications during a period when Live Well was in severe financial distress, however, is not evidence of management mismanagement and is not the basis for the ‘extreme remedy’ of the appointment of an interim trustee.”

While Live Well also stated that it was working to liquidate its assets outside of the bankruptcy process, a June 26 letter from the Government National Mortgage Association (GNMA, or “Ginnie Mae”) Office of Issuer and Portfolio Management to Live Well’s current CFO Glen Haddock indicated that Ginnie Mae began the process of terminating Live Well’s interests in the entity’s mortgage-backed securities pools, which includes Live Well’s loan servicing and origination rights.

“Ginnie Mae is entitled to terminate Live Well’s authority to act as a Ginnie Mae issuer and to complete the extinguishment of any redemption, equitable, legal or other right, title and interest of Live Well in the mortgage pools,” the letter reads in part.

This is the latest in a series of unfolding events concerning the abrupt closure of Live Well Financial, which RMD learned about on May 3. The closure was followed by more than 100 lay-offs at the company’s Richmond, Va. headquarters, which led to the filing of a class action lawsuit from a former employee attempting to recover lost wages. Live Well intends to challenge that suit.

Flagstar Bank had previously filed a lawsuit against Live Well, seeking repayment of more than $80 million in delinquent loans and interest, according to a court filing made with the U.S. District Court for the Eastern District of Michigan.

Counsel for the creditors involved with the forced bankruptcy filing have also indicated that Live Well’s financial activities have gained the attention of both the Federal Bureau of Investigation (FBI) and the Securities and Exchange Commission (SEC), both of which are conducting separate investigations into the company and its former CEO Michael Hild, according to court documents.

An additional creditor for Live Well, Five Elms Capital, also recently joined the bankruptcy suit as of mid-June.

Multichannel lender Open Mortgage also recently announced that it had hired the core team of mortgage lending executives from Live Well, in addition to approximately 50 former Live Well sales and operations employees to expand its retail, wholesale, principal agent and closed-loan seller mortgage channels.

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