Steve Clary Bankruptcy Case Remains Open

by Mark Friedman  on Monday, Nov. 18, 2013 12:00 am  

Steve Clary

The Clarys’ bankruptcy attorney, Frederick Wetzel III of Little Rock, said last week that he thought the bankruptcy case “was all wrapped up and done.”

Wetzel referred questions about who has been paid to the trustee in the case, M. Randy Rice of Little Rock. Rice didn’t return several phone calls or an email.

Wetzel also said that he didn’t have any information about Clary’s statement made about reducing the debt during his sentencing hearing on Oct. 30.

At the hearing in front of U.S. District Judge J. Leon Holmes, Clary was sentenced to 30 months in federal prison. He pleaded guilty in February to one count of mail fraud in connection with misusing almost $1.6 million of a $4.5 million loan that he received from Banc of America.

Clary told the court that he and his wife wanted to settle all their debts, even if they aren’t legally obligated to do so. Holmes granted Clary’s request for a delay to report to prison until March 10 in order to complete some transactions that might lower the outstanding debt on his bankruptcy case. It is unclear from Clary’s criminal and bankruptcy filings what the pending transactions are.

A spokeswoman for the U.S. Attorney’s Office for the Eastern District of Arkansas said she didn’t have a comment on Clary’s statement.

Silverstein, the law professor, said the bankruptcy case will move forward even with Clary in prison.

In a Chapter 7 case, the trustee will gather all the assets from the debtor and then distribute them to creditors at the end of the case. But some creditors could be paid before the case is closed. Secured creditors will be paid first.

In the Clary case, most of the debt, or $138.5 million, was held by unsecured creditors. Still, if Clary wants to pay all the creditors, he could enter into a binding agreement to repay the debts, even though they would have been forgiven in bankruptcy.

But if he made the deals, that might not make the public record.

“All of that takes place outside the bankruptcy process,” Silverstein said. “So I wouldn’t expect to see too much of that being discussed in any bankruptcy docket sheets or even in most filings.”



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