Home -> Law Blog Directory -> State Law Blogs -> Showmeblawgs

State Law

: Showmeblawgs

By stan_sipple

Involuntary bankruptcy petition against Nova Star Home Mortgage. KC Business Journal.

American Interbanc Mortgage LLC is seeking to force a subsidiary of NovaStar Financial Inc. into bankruptcy to collect a judgment rendered in June that with interest has reached $48.9 million. Attorneys for American Interbanc Mortgage filed an involuntary Chapter 7 bankruptcy petition against NovaStar Home Mortgage Inc., a subsidiary of Kansas City-based NovaStar Financial (OTCBB: NOVS). The petition was filed Wednesday in U.S. Bankruptcy Court for the Western District of Missouri. American Interbanc, based in Irvine, Calif., won its judgment after a California court had ruled that NovaStar Home Mortgage engaged in false advertising and unfair competition. "(American Interbanc Mortgage) respectfully requests that a hearing be held for the appointment of an interim trustee on or before January 31, 2008," the court filing stated. "Unless a hearing is held on or before such date, AIM fears that the remaining assets of (NovaStar Home Mortgage) will be fully drained and diverted." NovaStar Financial said in its latest earnings report that NovaStar Home Mortgage had a negative net worth and no ability to pay the judgment. The earnings report stated that NovaStar Home Mortgage was appealing the judgment. "We do not believe that the plaintiff has a valid legal basis to hold (NovaStar Financial) or its subsidiaries other than (NovaStar Home Mortgage) responsible for the judgment," NovaStar Financial stated in the earnings report. "But should the plaintiff be successful at any such attempt, (NovaStar Financial) may be forced to consider bankruptcy." Robert Berry, attorney for American Interbanc, said Thursday that he hasn't ruled out the possibility of asking the court to hold NovaStar Financial responsible for the judgment against NovaStar Home Mortgage. "Based upon the information we've seen, we believe that legally there is a strong possibility we would prevail if we did that," Berry said. Berry also said American Interbanc is confident that NovaStar Home Mortgage's appeal will end with the jury's verdict being upheld. NovaStar Financial CEO Lance Anderson could not be reached for comment late Wednesday.

Full post as published by Showmeblawgs on January 27, 2008 (boomark / email).