Plaintiffs-Debtors Auto Recyclers Seek Avoidance of Alleged Liens under Bankruptcy Code Sections 544 and 548 and Virginia State Law
February 1, 2022, Western District of Virginia – Plaintiffs-Debtors Auto Recyclers, LLC, and Auto Recyclers Holding Company I, LLC (collectively, Plaintiffs or AR) commence an adversary proceeding against Cornerstone Bank, National Association seeking the avoidance of certain liens under Sections 544 and 548 of the Bankruptcy Code and Virginia state law. The Plaintiffs asserted in their complaint that the Defendant holds proof of claims totaling $2,124,618.87 in the Debtors’ bankruptcy case.
Specifically, the complaint asserts that from 2010 through 2016, Debtors “borrowed” money from Cornerstone and other lenders in a “series of loan transactions”, with Defendant allegedly serving originally as the agent bank for a participated loan syndicate to find an expansion of their business. The complaint further argues that Cornerstone allegedly “took a variety of security interests through these transactions in the Debtor’s property.” The complaint claims that following a series of negotiations spanning the course of several weeks, including a mediation, Plaintiffs and Defendant executed a settlement agreement, under which Cornerstone allegedly “consented to the avoidance” of numerous alleged liens. Accordingly, AR argues that the Court must avoid the Defendant’s alleged “security interests for the benefit of the bankruptcy estate.”
In re Auto Recyclers, LLC, et.al., A.P. No. 22-05003