Rudy Giuliani’s bankruptcy reaches a crossroads

One way or another, Rudy Giuliani’s ability to leverage bankruptcy to retain control of his finances appears headed for an end.

But the question remains, what’s next?

U.S. Bankruptcy Judge Sean Lane at a Wednesday hearing is set to address three competing proposals from Giuliani and his creditors, any of which would drastically shift the status quo after months of rising tensions.

Giuliani filed for Chapter 11 bankruptcy reorganization in December after two Georgia election workers won a $148 million defamation judgment against the mayor-turned-Trump-attorney for spreading a baseless conspiracy that they were involved in mass election fraud in 2020. Giuliani has vowed to appeal.

Never mincing words, his creditors have portrayed Giuliani’s Chapter 11 proceedings as a delay tactic to keep control of his finances while avoiding paying the sum.

“Since day one, Giuliani has regarded this case and the bankruptcy process as a joke, hiding behind the façade of an elderly, doddering man,” a committee of creditors wrote in court documents filed Monday.  

Until now, Giuliani’s creditors remained united. They accused Giuliani of spending egregiously, hiding assets and stalling progress. They increasingly brought concerns to a head, filing motions seeking sanctions and an independent trustee to take control.

But as the bankruptcy case reaches a crossroads this week, the judge now must wade into an emerging split between those trying to collect from the former federal prosecutor.

The two Georgia election workers — Ruby Freeman and her daughter, Shaye Moss — shifted from a plan to appoint a Chapter 11 trustee. They now want to dismiss Giuliani’s bankruptcy entirely.

“Rudolph Giuliani’s bad faith now warrants dismissal of this case. For over six months, the Freeman Plaintiffs have waited patiently as Mr. Giuliani has abused the chapter 11 process by pursuing a self-serving, delay-oriented strategy,” Rachel Strickland, their attorney, wrote in court filings Monday.

Kicking Giuliani out of bankruptcy would enable the mother-daughter duo to begin enforcing their $148 million judgment. But it could leave out to dry other creditors — who didn’t join the election workers’ new idea — competing for Giuliani’s assets.

At Wednesday’s hearing, Lane is expected to mull the two proposals alongside yet another one put forward by Giuliani.

After weeks of fending off creditors’ requests for oversight, as those efforts gained steam, Giuliani changed strategy.

Last week, Giuliani personally signed a motion to convert his bankruptcy to Chapter 7. The move gives up proposing a Chapter 11 reorganization plan to instead liquidate his assets, effectively stripping Giuliani’s control of his finances.

It signaled a sudden twist. Just two weeks prior, Gary Fischoff, Giuliani’s attorney, said his client was “moving forward with purpose and direction” in Chapter 11.

The one-page motion abandoning that plan contained no explanation. Ted Goodman, Giuliani’s spokesperson, released a statement indicating Giuliani was “simply following available options.”

“I can promise you this. No matter what they do, they can’t take away Mayor Giuliani’s most important assets — integrity, courage and love for America,” Goodman said.

At a hastily scheduled hearing to sort things out, Fischoff told the judge the motion “speaks for itself” and asserted his client has an absolute right to convert to Chapter 7.

His creditors claim more cynical motives.

“We do not have a good-faith debtor. He has misbehaved every step of the way,” Philip Dublin, a lawyer representing a committee of creditors, said at last week’s hearing.

The creditors’ committee includes as members Moss, one of the two Georgia election workers; Dominion Voting Systems, an electronic voting machine company that also sued Giuliani following the 2020 election; and Noelle Dunphy, Giuliani’s former employee who sued him alleging sexual assault, harassment and nonpayment of wages.

Converting to Chapter 7 could make it more difficult for creditors to access Giuliani’s income he earned after filing for bankruptcy, such as revenue from his now-suspended radio show and new coffee deal.

The creditors also say it’s no coincidence Giuliani’s maneuver came three days after their motion to compel him to produce documents and seek sanctions — on top of the existing effort to appoint an independent trustee.

Giuliani’s proposal would sideline the creditors’ committee and their legal team, which has spent months familiarizing itself with and investigating the former New York City mayor’s finances.

“Giuliani may have seen the writing on the wall and come to the conclusion that if he is going to be ousted as a debtor in possession, then he might as well get rid of the Committee and its investigation on his way out and, among other things, get the benefit of further delaying disclosure of his and his businesses’ financial records,” Dublin wrote in the committee’s objection filed Monday.

The committee also invoked Giuliani’s recent disbarment in New York.

“The New York Supreme Court’s decision on Giuliani’s disbarment just as easily could have been written about Giuliani and this bankruptcy case. This chicanery is what he does and who he is,” Monday’s filing read.

At Wednesday’s hearing, the judge will choose which path to take. He could accede to Giuliani’s request to convert the bankruptcy to Chapter 7, accept the committee’s proposal to appoint a Chapter 11 trustee or agree with the election workers to toss the bankruptcy entirely.

Just as notably, no one proposes keeping the status quo any longer.