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Judge says Rudy Giuliani bankruptcy case likely to be dismissed. But his debts aren't going away

NEW YORK — (AP) — A judge said Wednesday he was leaning toward throwing out Rudy Giuliani 's bankruptcy case after lawyers for the cash-strapped former New York City mayor and his biggest creditors — two ex-Georgia election workers who won a $148 million defamation judgment against him — agreed this was the best way forward.

The case has been roiled by creditors' allegations that Giuliani is flouting bankruptcy laws and potentially hiding assets. A dismissal would end his pursuit of bankruptcy protection, but it wouldn’t let him off the hook for his debts. His creditors could pursue other legal remedies to recoup at least some of the money they’re owed, such as getting a court order to seize his apartments and other assets.

U.S. Bankruptcy Judge Sean Lane said he plans to issue a decision by the end of the week. He scheduled a hearing for 1 p.m. Friday and could make his ruling at that time. Lane ruled out converting the case to a liquidation, an option Giuliani recently proposed, saying that doing so would not be in the best interest of people and entities he's indebted to.

“I’m leaning toward dismissal, frankly, because I’m concerned that the past is prologue," Lane said during a hybrid in-person and Zoom status hearing in White Plains, New York. The judge cited what he said was Giuliani's lack of transparency throughout the proceedings.

Giuliani's lawyer, Gary Fischoff, said dismissing the case would allow the ex-mayor to pursue an appeal in the defamation case, which arose from his efforts to overturn Donald Trump's 2020 election loss. Another alternative would be to have the Chapter 11 case continue while a court-appointed trustee takes control of Giuliani’s assets.

A lawyer for former election workers, Ruby Freeman and her daughter, Wandrea “Shaye” Moss, accused Giuliani of using the bankruptcy process as a “bad-faith litigation tactic” and said “he regards this court as a pause button on his woes while he continues to live his life unbothered by creditors.”

“The question here is always going to be the cat-and-mouse game of what dollar can be funneled outside of the estate,” Freeman and Moss' lawyer Rachel Strickland said. “Out in the real world, outside of bankruptcy, all dollars are fair game for everyone and Mr. Giuliani has to continue to live and do whatever it is he is able to do with his name, likeness and commentary in order to make a living.”

Lane scolded Giuliani at one point for interrupting the hearing. The ex-mayor, joining by phone, called Strickland’s comments “highly defamatory, your honor.”

Philip Dublin, a lawyer for a committee of Giuliani’s other creditors, said the committee would rather keep the bankruptcy case going with the appointment of a trustee.

Giuliani filed for Chapter 11 bankruptcy reorganization in December, days after Freeman and her daughter won their defamation case. They said Giuliani's targeting of them because of Trump's lies about the 2020 election being stolen led to death threats that made them fear for their lives.

Earlier this month, Giuliani requested that the case be converted to a Chapter 7 liquidation — which would have seen a trustee appointed to take control of his assets and sell them off to help pay creditors. Reconsidering that idea on Wednesday and pushing for a dismissal instead, Fischoff noted that administrative fees related to liquidation would “consume if not 100%, a substantial portion of the assets.”

If the bankruptcy is dismissed, Freeman and Moss could bring their effort to collect on the award back to the court in Washington, D.C., where they won their lawsuit, and avoid having to pay more legal fees for bankruptcy court. Lane said a dismissal would include a 12-month ban on Giuliani filing again for bankruptcy protection.

Freeman and Moss, meanwhile, have a pending request before the judge to declare that the $148 million judgment cannot be discharged — or dismissed — during Giuliani’s bankruptcy.

The bankruptcy is one of a host of legal woes consuming Giuliani, once heralded as “America’s Mayor” for his calm and steady leadership after the terrorist attacks on Sept. 11, 2001.

Last week, the ex-federal prosecutor and 2008 Republican presidential candidate was disbarred as an attorney in New York after a court found that he repeatedly made false statements about Trump's 2020 election loss. He is also facing the possibility of losing his law license in Washington after a board in May recommended that he be disbarred.

In Georgia and Arizona, Giuliani is facing criminal charges over his role in the effort to overturn the 2020 election. He has pleaded not guilty in both cases.

When he filed for bankruptcy, Giuliani listed nearly $153 million in existing or potential debts, including almost $1 million in state and federal tax liabilities, money he owes lawyers, and many millions of dollars in potential judgments in lawsuits against him. He estimated he had assets worth $1 million to $10 million.

In his most recent financial filings in the bankruptcy case, he said he had about $94,000 cash in hand at the end of May while his company, Giuliani Communications, had about $237,000 in the bank. A main source of income for Giuliani over the past two years has been a retirement account with a balance of just over $1 million in May, down from nearly $2.5 million in 2022 after his withdrawals, the filings say.

In May, he spent nearly $33,000 including nearly $28,000 for condo and co-op costs for his Florida and New York City homes. He also spent about $850 on food, $390 on cleaning services, $230 on medicine, $200 on laundry and $190 on vehicles.

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