Chesterfield County-based Live Well Financial is officially operating under federal bankruptcy laws.
Judge Laurie Selber Silverstein with the U.S. Bankruptcy Court in Delaware on Monday granted a motion by three creditors of Live Well Financial to put the former mortgage lender and servicer into involuntary bankruptcy protection.
The judge also appointed an interim trustee to oversee Live Well’s operations. Live Well abruptly ceased operations in early May.
An involuntary bankruptcy petition differs from a voluntary bankruptcy case in that an involuntary petition is initiated by a creditor who believes the business can pay its debt but refuses to do so. A bankruptcy judge must determine the outcome.
The three creditors — Flagstar Bank, Mirae Asset Securities Inc. and Industrial and Commercial Bank of China Financial Services LLC — filed an involuntary Chapter 7 petition on June 10 to force Live Well into bankruptcy. The three creditors claim that Live Well owes them a total of more than $130 million.
Live Well had until Monday to answer the involuntary petition, based on bankruptcy laws. But the company “has not answered or otherwise responded to the involuntary petition,” court documents show.
But Live Well had filed a preliminary objection on June 17, saying that the petition by the three creditors was riddled with false statements, misleading statements of fact and material omissions.
The bankruptcy judge had signed a status quo order on June 17 directing Live Well Financial officials not to destroy documents or take any actions that are outside of the ordinary course of business without court approval.
Live Well has said in bankruptcy court documents that it has been working expeditiously on the liquidation of its assets outside of the bankruptcy process. It also said it has been attempting to negotiate productive resolutions with all of its creditors.
But court documents filed Monday show that the Government National Mortgage Association, commonly known as Ginnie Mae, began the process on June 26 of terminating and extinguishing Live Well’s interests in various Ginnie Mae mortgage-backed securities pools, including the company’s origination and servicing 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,” according to a letter Ginnie Mae sent to Live Well.
“In light of the foregoing developments, the alleged debtor [Live Well] has agreed to consent to the relief sought by way of the involuntary petition,” according to court documents, filed by the Delaware law firm Bayard, which is representing Live Well.
The judge appointed Delaware lawyer David W. Carickhoff as interim trustee. He works in the Wilmington, Del., office of the Archer law firm where his practice focuses on corporate bankruptcy and business reorganization matters.
In federal bankruptcy court documents, the three creditors claim that Live Well Financial is under investigation by the bank fraud division of the FBI and by the U.S. Securities and Exchange Commission.
Live Well Financial was once a fast-growing mortgage and reverse mortgage lender and servicer that shut down abruptly on May 3 because of what it called “sudden and unexpected developments.”
It laid off all the employees working at its corporate headquarters in the Boulders office park in Chesterfield.
Michael C. Hild, the company’s CEO, founded the company in April 2005. It was ranked No. 7 among the top reverse mortgage lenders by volume last year.