U.S.A. Parts Supply, Cadillac U.S.A. Oldsmobile, 619 B.R. 619

Debtor U.S.A. Parts Supply (antique Cadillac/Oldsmobile parts retailer) operated for ~30 years and owned real property with a long-term mortgage; revenue continued in 2018–2019 despite no online sales platform.
Prepetition judgments: Smith Trust obtained judgment (~$189,804 plus fees); Creditors (Corrado & Chiacchieri) obtained summary judgment in Maryland receivership action for $300,000; Maryland court appointed Cheryl E. Rose as receiver.
As receiver, Rose inspected books, hired an auctioneer, and negotiated with management but did not take possession of the business or its assets.
Debtor filed a Subchapter V Chapter 11 petition (Mar 22, 2020) and filed a plan proposing to pay 100% of allowed claims; a Subchapter V trustee monitors the estate.
Creditors moved to dismiss under 11 U.S.C. § 1112(b) for bad faith and alternatively asked the court to excuse Receiver Rose from § 543 obligations under § 543(d). An evidentiary hearing was held; only Rose and debtor principal Michael Cannan testified.
The bankruptcy court denied the creditors’ motion: it found creditors failed to prove objective futility or subjective bad faith and declined to excuse the receiver under § 543(d).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Chapter 11 case should be dismissed for bad faith under § 1112(b)	Creditors: Debtor (via principal Cannan) filed to delay/impede collection, abused partnership for personal benefit (mismanagement, Smith Loan), so filing was in bad faith	Debtor: Filed to reorganize (implement online sales), has realistic likelihood of rehabilitation, proposes 100% payment to allowed claims, honest intent to reorganize	Denied — creditors failed to show objective futility or subjective bad faith; evidence supports a realistic chance of reorganization and an honest intent to reorganize
Whether Receiver Rose should be excused from § 543(a)-(c) under § 543(d) so she can continue state-court liquidation	Creditors/Rose: State-law receivership can achieve similar results; permitting Rose to continue preserves creditors’ interests	Debtor: Rose did not possess or control debtor property at petition date and thus is not a custodian entitled to remain; § 543(d) exceptions inapplicable	Denied — court found Rose does not meet § 543(d)(1) or (2); not in creditors’ best interest to leave her in possession, and she is not an assignee for benefit of creditors

In re Premier Auto. Servs., Inc., 492 F.3d 274 (4th Cir. 2007) (articulates objective‑futility and subjective‑bad‑faith tests for dismissal of Chapter 11 petitions)
Carolin Corp. v. Miller, 886 F.2d 693 (4th Cir. 1989) (explains twin‑pronged good‑faith inquiry and purpose of Chapter 11)
In re Sundance Corp., 83 B.R. 746 (Bankr. D. Mont. 1988) (state court receiver is not the same as an assignee for benefit of creditors under § 543(d)(2))
In re Bestwall LLC, 605 B.R. 43 (Bankr. W.D.N.C. 2019) (emphasizes caution before dismissing a bankruptcy petition at the outset)