Nussbaum Lowinger LLP - Chapter 11 Case Summary

Nussbaum Lowinger LLP and Mark J. Nussbaum and Associates, PLLC have filed for Chapter 11 bankruptcy amid mounting malpractice and fraud litigation and a stalled state-court assignment for the benefit of creditors. Beginning in mid to late 2022, most funds flowing into the firms' escrow accounts were directed to a single client that proved unable to repay, ultimately depleting the accounts; the debtors now seek to consolidate all claims in a single forum and maximize creditor recoveries through a liquidation plan.

Business Description

Nussbaum Lowinger LLP (the "Partnership") and Mark J. Nussbaum and Associates, PLLC (the "PLLC," and together with the Partnership, the "Debtors") are New York-based entities that provided legal services primarily in the area of commercial real estate and related business areas.

The PLLC was created by Mark J. Nussbaum ("Nussbaum") as a legal services practice. Nussbaum subsequently formed the Partnership with Samuel Lowinger ("Lowinger"), who had been working as an associate at the PLLC, and following the Partnership's formation, most or all legal services were conducted through the Partnership.

Beyond their core legal practice, the Debtors engaged in a number of other lines of business that ultimately precipitated the bankruptcy filing. These other lines of business can be categorized as follows:

Hard money lending, consisting of loans made where regular bank financing was either unavailable or not available on the required timeline, typically carrying higher interest rates and often secured with collateral.
Liquidity enhancement loans, consisting of loans to a party to a transaction who needed to demonstrate to third parties that it had sufficient funds as part of a proposed transaction.
Short-term bridge loans, made to bridge liquidity shortfalls at the time of a transaction closing.

The source of funds for these activities came from a number of discrete and distinct sources. Some funds were expressly loaned to the Debtors and deposited into their escrow accounts with the understanding that such funds would be lent out to third parties. Other funds were loaned to the Debtors with a caveat that the funds would not be explicitly used but would rather remain in the Debtors' escrow accounts. In either case, the providers of these funds were promised substantial returns and, in fact, received payments.

Over the years, hundreds of millions of dollars were "loaned," "interest" paid, and "principal" "repaid." The exact nature of these transactions has yet to be determined.

Corporate History

The PLLC is a New York private limited liability company formed in 2016 with Nussbaum as its sole member. The Partnership is a New York limited liability partnership formed in 2021 between Nussbaum and Lowinger.

In 2025, Lowinger withdrew from the Partnership, leaving Nussbaum as its sole partner.

Appointment of Chief Restructuring Officer

In late March 2026, Ephraim Diamond of Arbel Capital Advisors LLC was formally engaged to serve as Chief Restructuring Officer for each of the Debtors, though he had initially been approached approximately six months prior regarding the potential engagement.

Under the engagement letter, the CRO has complete authority over all aspects of administration of the Debtors' cases and cannot be removed by Nussbaum except by order of the Court, at which Nussbaum would be required to establish cause.
Accordingly, Nussbaum has no ability to provide any direction to the CRO and has no control over the Debtors.

Operations Overview

The Debtors ceased all operations in January 2025. As of the Petition Date, the Debtors neither lease premises nor own any real property, and there are no publicly held stock or other securities.

Current Assets

All of the Debtors' assets are currently held by ABCMN LLC, the assignee under the prepetition assignment for the benefit of creditors (the "Assignee"), with an address c/o Anderson Kill P.C., 7 Times Square, 15th Floor, New York, NY 10036. Upon termination of the assignment triggered by the initiation of these bankruptcy cases, such assets will be turned over to the Debtors' estates. These assets consist primarily of:

Assets transferred by Nussbaum to the Debtors, some of which may have been liquidated to cash.
Claims and causes of action against numerous parties relating to transfers made from the Debtors' escrow accounts.
Receivables from the Debtors' other lines of business.

Tangible assets are currently held by the Assignee, though the CRO is presently unaware of their specific location. Certain assets assigned by Nussbaum to the Debtors prepetition are held at Nussbaum's personal residence in Suffern, NY. The original books and records of the Debtors are located at that same address, with the Assignee in possession of copies. To the CRO's knowledge, there are no assets outside the territorial limits of the United States.

Prepetition Obligations

As of the Petition Date, there are no holders of secured claims against the Debtors.

Unsecured Claims and Pending Litigation

The Debtors' principal prepetition obligations consist of unsecured claims held by former clients and other creditors. Multiple actions and proceedings are pending or threatened against the Debtors and their property across several New York state courts, including claims alleging malpractice, voidable fraudulent transfers, fraudulent schemes, breach of duty, and negligence.

To the CRO's knowledge, no judgment has been issued against the Debtors, and a seizure of their property is not imminent in any of the pending actions.

Events Leading to Bankruptcy

Depletion of Escrow Accounts

Starting in mid to late 2022, most of the funds flowing into the Debtors' escrow accounts were being used to support a single client. This client was unable to repay the funds it received, ultimately resulting in the depletion of the escrow accounts to such an extent that the Debtors lacked sufficient funds to close pending real estate transactions where clients had previously escrowed sufficient funds for such transactions.

Upon this coming to light, the Debtors ceased all operations in January 2025.
Following the cessation of operations, many of the Debtors' former clients and other creditors filed litigation against the Debtors and Nussbaum individually, arising from the Debtors' practices with respect to funds placed in their escrow accounts.

Assignment for the Benefit of Creditors

In 2025, the Debtors considered various options to wind down their affairs, including filing for bankruptcy. After consulting with certain constituent parties, the Debtors decided to proceed with an assignment for the benefit of creditors pursuant to Article 2 of the New York Debtor and Creditor Law.

In June 2025, the Debtors executed an assignment agreement to ABCMN LLC, a special purpose entity of which Sheldon Eisenberger of Anderson Kill P.C. (the "Assignee") was the sole member. The Assignee filed a petition commencing the assignment for the benefit of creditors (the "ABC Proceeding," Case No. 157933/2025) in the Supreme Court of the State of New York, New York County (the "State Court").
In connection with the appointment of the Assignee, Nussbaum agreed to contribute certain personal assets to the Debtors that the Assignee could then liquidate for the benefit of creditors.

Stalled ABC Proceeding and Conversion to Chapter 11

Since the commencement of the ABC Proceeding, minimal progress has been made in effecting recoveries or making distributions to creditors. While a few lawsuits were filed, little to no progress was made in advancing them.

In February 2026, the Assignee wrote to the State Court requesting that matters related to the ABC Proceeding be reassigned to a different part of the Court, as certain actions—some pending since June 2025—had not been resolved. The State Court has yet to respond to this request or otherwise resolve any of the open matters.
Meanwhile, the multitude of litigation against the Debtors continued unabated, as there is no automatic stay arising from the filing of an ABC proceeding. These litigations are proceeding in multiple separate actions before multiple courts, creating a risk of conflicting decisions that could render the ABC Proceeding ineffective.
- The stalled ABC Proceeding also runs the risk of protracted delays in recovering assets, primarily through avoidance action litigation, and making distributions to creditors.

In light of these circumstances, the Debtors, in consultation with the CRO, determined that a Chapter 11 filing was necessary to most efficiently wind down their affairs. The Debtors filed for Chapter 11 protection on April 16, 2026, in the U.S. Bankruptcy Court for the Southern District of New York.

The filing is intended to consolidate and centralize all pending litigation in a single forum capable of providing a speedier resolution, with the objective of returning funds to creditors as promptly as possible.
The CRO intends to pursue settlement negotiations to the greatest extent practicable, noting that the extensive jurisprudence developed in the bankruptcy courts for adjudicating issues related to the type of conduct at issue would be advantageous in resolving matters arising from the Debtors' prepetition activities.
The Debtors' stated core objectives in filing the Chapter 11 Cases are (i) establishing a transparent, comprehensive, and equitable process for resolution; (ii) asset recovery, including pursuing prepetition assets and litigation claims; and (iii) maximizing value for all stakeholders through a liquidation plan.