While the bankruptcy court deals with the laborious process of which creditors are owed what, and how much each is to be paid, any further claims will have to wait.
There are two types of bankruptcy proceedings in American law. In Chapter 7 bankruptcy, the debtor must liquidate his assets which are then used to satisfy creditors’ claims by a court-appointed trustee.
Under Chapter 11, a bankrupt firm can be reorganised under a trustee who operates the business to maximise future profits and repay debts.
With the Chapter 11 filing, Mr Salander and his wife, Julie, listed 53 creditors, with the 20 largest unsecured claims totalling at least $43m. All the claims were marked “disputed”.
In an affidavit submitted with the petition, Mr Salander said that the proceedings were “initiated to prevent the race to the courthouse” and to allow “an orderly process in a single forum… to address competing claims to ownership and other interests in paintings and other works of art I own”.
Mr Salander also faces a criminal investigation based on customer complaints about fraud by the Manhattan district attorney’s office, which recently obtained a search warrant for his computer records and documents.
According to John W. Moscow, the attorney representing Salander in the bankruptcy case, Salander-O’Reilly Galleries are also expected to file for Chapter 11 bankruptcy.
The gallery was ordered locked by a State Supreme Court justice last month.
Salander to go bankrupt
Lawrence B. Salander, the embattled Manhattan art dealer, has filed for Chapter 11 personal bankruptcy protection citing debts of between $50m and $100m.
