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Creditors Committee Seeks Wipe Out of UMB Bank’s Alleged Unperfected Liens

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July 12, 2022, US Bankruptcy Court for Northern Texas – The Official Committee of Unsecured Creditors (the “Committee”) of Northwest Senior Housing Corporation, et al. (the “Debtors”), brings a lawsuit against UMB Bank, N.A. (the “Defendant”) to avoid alleged unperfected liens pursuant to section 544 of the Bankruptcy Code.  

In 1999, the Debtors and JP Morgan Chase Bank, N.A. entered into a Master Indenture Agreement pursuant to which the Debtors obtained certain bond debts to finance its business needs. JP Morgan Chase was the original Master Trustee but in 2017, Defendant UMB Bank, N.A. became the successor Master Trustee under the Master Indenture Agreement.  

Defendant was granted liens and security interests in certain personal property of the Debtors as collateral to Debtor’s performance of the obligations under Master Indenture Agreement. Defendant claims that the Debtors’ pre-bankruptcy obligations under the debt financing are due and owing to Defendant in the total amount of $111,728,919.00, as of the bankruptcy petition date. 

The Committee alleges that the Defendant has failed to provide the Committee with any evidence of its lien in the Debtors’ insurance policies or the proceeds thereof. The Committee alleges that the Defendant’s lien on the insurance policies is allegedly “unperfected” claiming that the Defendant did not allegedly take the requisite steps to have its liens noted as “Additional Insured” or “Loss Payee” on the Debtors’ insurance policies. 

Other allegations include: 

  • Defendant did not allegedly take any steps to note its security interests in any of the Debtors’ assets subject to a certificate of title.
  • Defendant did not allegedly take any steps to procure a deposit account control agreement or otherwise obtain control over any deposits maintained with a third party depository institution, including the escrow accounts maintained by the Debtors at Regions Bank.
  • Defendant did not allegedly file a UCC-1 financing statement describing in sufficient detail any commercial tort claims and causes of action owned by the Debtors.
  • Defendant did not allegedly take any steps to obtain control or possession of the Debtors’ money, cash equivalents or cash on hand.

The Committee pleads the Court to avoid all the unperfected liens on the collateral pursuant to 11 U.S.C. §544. The Committee also pleads that the value of the avoided liens must be preserved and recovered for the benefit of the bankruptcy estates pursuant to 11 U.S.C. §§ 550 and 551. 

Official Committee of Unsecured Creditors v. UMB Bank, N.A. (In re Northwest Senior Housing Corporation et al.), AP No. 22-3073 , US Bankruptcy Court for the Northern District of Texas.  

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