Former New York City Mayor Rudy Giuliani has filed for protection under Chapter 11 of the Bankruptcy Code for the purpose of evading his obligations under the jury verdict entered on December 15, 2023 awarding $148 million in damages for his defamation two former Fulton County, Georgia election workers, Ruby Freeman and Shaye Moss, and discharging other debts.

The filing of Giuliano’s bankruptcy petition resulted in an automatic stay of all civil proceedings against him, the commencement of new proceedings based on his pre-petition conduct, and prohibits any efforts to exercise possession over his property.

In a Chapter 11 case, the filer is called a debtor in possession (DIP) and retains control over his or her property under the supervision of the Bankruptcy Court and the Office of the United States Trustee (UST).

The DIP must comply with obligations imposed by the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and local bankruptcy court rules.

These obligations include setting up a separate debtor in possession account, filing monthly reports of income and expenses, and proposing a plan of reorganization by which the DIP outlines a proposal for the repayment of creditors over a period that should be no greater than five (5) years from the date of the bankruptcy filing.

Giuliani is likely to face a number of obstacles in pursuing his bankruptcy case. A failure to meet his obligations as a DIP or to provide the required level of transparency may result in the case being dismissed, converted to a liquidation proceeding under Chapter 7, or the appointment of a Chapter 11 Trustee.

Freeman and Moss may also filed a lawsuit within the bankruptcy case to prevent Giuliani’s debt to them from being discharged.

Section 523 of the Bankruptcy Code states multiple grounds to exclude a debt from a discharge, including “for willful and malicious injury by the debtor to another entity or to the property of another entity”.

It is probably that defamation constitutes such an injury.

It is less clear if the Bankruptcy Court will consider the determination of liability for failure to comply with discovery as a decision on the merits that will be given preclusive effect in the Bankruptcy Court or if the election workers will need to demonstrate liability on the merits of their defamation claim.

The bankruptcy case was filed in the United States Bankruptcy Court for the Southern. district of New York.

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