Money placed with LandAmerica 1031 Exchange Services Inc. prior to its bankruptcy filing belongs to the estate and not to customers of the company, a judge ruled today.
The ruling essentially turns about 450 customers of the company into creditors who must vie for a portion of the company’s remaining assets.
The exchange company and its parent, Henrico County-based LandAmerica Financial Group Inc., filed for Chapter 11 protection in U.S. Bankruptcy Court in Richmond in late November.
The exchange company held proceeds from the sale of investment property as a way for investors to defer capital gains taxes. The investors had 180 days to buy a similar property in which to reinvest.
Customers of the exchange company had argued they had put their money in trust. LandAmerica disagreed.
Bankruptcy Court Judge Kevin R. Huennekens ruled late this morning in favor of the company.
At the time of the bankruptcy filing, LandAmerica owed $419.2 million to about 450 customers.