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The judge overseeing Rudy Giuliani's bankruptcy granted him a rare legal win.
In a court order Friday, the judge dismissed the Chapter 11 case and allowed him to appeal the $148 million defamation judgment he owes.
But there's a catch: Giuliani isn't allowed to file for bankruptcy again over the next 12 months. And his creditors are ready to pounce.
Throughout the bankruptcy process, Giuliani has failed to sufficiently provide crucial information about his own assets and his businesses.
"The lack of financial transparency is particularly troubling given concerns that Mr. Giuliani has engaged in self-dealing and that he has potential conflicts of interest that would hamper the administration of his bankruptcy case," the judge, Sean H. Lane, wrote in a memorandum Friday.
Giuliani filed for bankruptcy in December, claiming he couldn't pay his $152 million in debt.
The bankruptcy froze all the other civil litigation against Giuliani, including defamation cases from election technology companies and a lawsuit from Noelle Dunphy, who accused him of sexual abuse.
Nearly all of Giuliani's debt was the $148 million judgment a Washington, DC, jury awarded to Ruby Freeman and Wandrea Moss, two election workers he defamed by falsely claiming they manipulated votes in Georgia.
Giuliani's assets were worth about $10 million — depending on what he could get if he sold his Manhattan and Florida apartments — not nearly enough to satisfy all the debt.
The creditors also want the judge to put Giuliani on the hook for $350,000 in fees already incurred in the case by a legal discovery vendor. Lane would also place control of Giuliani's Upper East Side condo, which is up for sale, in the hands of a lawyer representing his creditors. If Lane approves their request, a chunk of the potential proceeds from the sale would go toward legal fees, and the rest would be held in escrow.
Over the past few months, Giuliani has filed inconsistent financial disclosures and appeared to squirrel away streams of income, his creditors have complained. Giuliani said he had trouble finding an accountant — a claim his creditors found hard to believe. Lane expressed frustration with "the difficulties we've had in terms of transparency in this case" in a hearing earlier this week.
"When confronted with complaints about a failure to satisfy the Bankruptcy Code's obligations as to financial transparency, most debtors will respond by curing at least some — if not all — of the defects," Lane wrote Friday. "By contrast, Mr. Giuliani has done nothing."
At the same time that Giuliani was filing odd financial statements, he also made it clear in court filings that he wanted breathing room to appeal his $148 million judgment.
After months of wrangling — including a last-ditch effort to convert the bankruptcy to a Chapter 7, which would have further slowed the process — Giuliani and lawyers representing Freeman and Moss struck a deal.
On Wednesday, they both told the judge that dismissing the bankruptcy altogether was the best move.
The draft order provided by Giuliani's legal team included a line that would forbid the 80-year-old from filing for bankruptcy again for one year.
In the Southern District of New York, where the case is playing out, bankruptcy judges customarily forbid debtors from re-filing for some period of time if they believe the debtor sought the protection in bad faith, according to Eric J. Snyder, the chair of the bankruptcy practice at Wilk Auslander LLP.
"Twelve months is a long time. Normally, it's six months," Snyder said. "But in this type of case, because of Giuliani's behavior, I think 12 months is probably consistent."
Dismissing the bankruptcy would unfreeze all of Giuliani's other civil cases, allowing him time to appeal the massive defamation judgment against him.
It also means all the other litigants suing Giuliani can continue to pursue their cases against him in other courts, which are mostly taking place in New York, where he was once the mayor and top federal prosecutor.
But the legal team representing the so-called "unsecured creditors" — including Dominion Voting Systems and Dunphy — objected to dismissing the bankruptcy case.
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In a rowdy hearing Wednesday, they asked Lane to allow the cases to play out in the bankruptcy process.
Lane said at the hearing that he was inclined to dismiss the case. He said appointing a Chapter 11 trustee to take over Giuliani's assets would eat up administrative fees, and that Giuliani's lack of financial transparency posed a persistent problem.
"That's not going to magically change if you continue the case in 11 with the trustee," he said.
"Our client Noelle Dunphy remains as strong and steadfast as ever in her commitment to pursuing justice," Dunphy's lawyer Justin Kelton told Business Insider in an email earlier this week. "If Mr. Giuliani's bankruptcy is dismissed, she will continue pursuing her claims in court, and we look forward to the day when we can present this case to a jury."
Giuliani also has plenty of other legal woes stemming from his false claims that the 2020 election was rigged against Donald Trump.
The ex-president's former attorney was disbarred in New York and may soon lose his law license in Washington, DC.
He is also the subject of two criminal cases, in Arizona and Georgia, over his efforts to overturn the election results.
