LuxUrban Hotels converted to chapter 7 on October 21, 2025, after management conceded that financing and consensual cash collateral use had not been secured and did not appear achievable on reasonable terms. The conversion order ended a chapter 11 effort that began on September 14—37 elapsed calendar days, calculated from the petition date recorded in the U.S. Trustee’s motion to the order date. The debtors consented to liquidation while disputing allegations of gross mismanagement.
The financing problem involved access to cash as well as its availability. In their October 17 response, the debtors reported holding approximately $400,000 that they had not deployed because they lacked consensual cash collateral access. They argued that even resumed hotel operations were unlikely to be sustainable without financing or that consent.
U.S. Bankruptcy Court for the Southern District of New York
Case Number
25-12000, lead case
Petition Date
September 14, 2025
Judge
David S. Jones
Conversion Date
October 21, 2025
Case Snapshot
The U.S. Trustee’s motion identifies both debtors and the September 16 joint-administration order. Judge Jones signed the conversion order. This account examines the conversion record through October 21, 2025; the separately identified investor-settlement update reflects reporting published March 27, 2026.
A Hotel Operator Without a Funded Restart
LuxUrban built its business by leasing entire hotels on a long-term basis and renting rooms to guests. By the bankruptcy filing, its remaining portfolio consisted of the Herald, Tuscany, Hotel 27, and Hotel 46 in Manhattan. The U.S. Trustee’s motion described Hotel 46 as a single-room-occupancy property rather than a hotel serving transient guests. It said the properties appeared to have stopped providing normal staffing, maintenance, and room services before the petitions, while reservations remained available online. U.S. Trustee’s motion
That condition differed from the operating continuity promised at the outset. In a September 15 announcement, restructuring counsel Jacobs P.C. said LuxUrban intended to reduce debt and emerge as a private company, and that its hotels would remain open during reorganization. The debtors subsequently acknowledged that unpaid employees had walked off the job and that hotels closed just before the cases began. Counsel’s announcement; debtors’ response
The U.S. Trustee emphasized the absence of first-day motions and requested a conference over wage and consumer-protection concerns. The debtors later said management had pursued financing and consensual cash collateral use without success. Together, those filings explain the immediate obstacle to reorganization: management had no agreed source of usable funding for a restart. U.S. Trustee’s motion; debtors’ response
Legacy Debt and a Disputed $118.6 Million Tax Claim
The U.S. Trustee’s motion, citing the petition and CFO Michael James’s declaration, described approximately $14.9 million of outstanding senior debt at filing. The underlying notes bore 18% interest, were secured by substantially all of LuxUrban’s assets, and had matured before bankruptcy. The same motion recited the debtors’ estimates of no more than $5.2 million owed to merchant cash advance lenders and at least approximately $7.8 million owed to vendors. These were reported obligations, not adjudicated claim allowances. U.S. Trustee’s motion
The debtors attributed their liquidity problems to accumulated obligations from previously operated properties, merchant cash advances, union payments, and taxes. They said those burdens required payments exceeding $10 million between the fourth quarter of 2024 and the first quarter of 2025. Their response also alleged that a confession of judgment affecting the Tuscany cut off online travel agency receivables and access to its credit card processor, impairing payroll funding. Those explanations were management’s account of the collapse. Debtors’ response
The largest asserted liability was New York State’s tax claim. The U.S. Trustee reported a claim totaling $118,568,565.23, including approximately $91.2 million classified as priority and $1.48 million as secured, for sales taxes covering periods from February 2020 through February 2025. The motion said the claim was filed September 18 and amended October 8, 2025. U.S. Trustee’s motion
LuxUrban disputed both the scale and basis of the assessment. It said its approximately $158 million in net rental revenue from 2020 through 2025 covered operations across eleven states and that online travel agencies handled substantial tax collection and remittance. The debtors reported an appeal and predicted a reduction to $5 million–$10 million. That range was their estimate, not a ruling or an agreed liability. The conversion order did not resolve the tax dispute. Debtors’ response; conversion order
Unpaid Workers and Reservations at Closed Properties
The U.S. Trustee sought an independent chapter 11 trustee based on alleged gross mismanagement and the interests of creditors. Its motion cited the union’s report that employees at the Tuscany and Hotel 46 had gone five weeks without pay, benefit contributions had not been remitted for several months, and approximately $57,000 in employee 401(k) contributions remained unremitted. These were allegations advanced in support of the requested appointment. U.S. Trustee’s motion
The debtors acknowledged that numerous employees had not been paid for five weeks. They blamed depleted operating capital and legacy obligations, and said some prepetition wages had been paid from union cash bonds. They nevertheless opposed a finding that current management had grossly mismanaged the business. Debtors’ response
Responsibility for continued reservations was also contested. LuxUrban said third-party online travel agencies processed guest payments and bore responsibility for reservation changes and refunds. It also asserted that management had communicated regularly with Cloudbeds about the booking system. Debtors’ response
Cloudbeds answered that it was a software provider, not an online travel agency, and that management had never directed it to disable the booking engine. It said it learned of the closures through news coverage and customer reviews, and avoided unilateral action because of potential automatic-stay and contractual issues. According to its October 20 statement, Cloudbeds suspended the booking engine on September 30 under the court’s oral modification of the stay. Cloudbeds’ statement
Consent Resolved the Choice of Bankruptcy Chapter
The conversion order records a broader procedural sequence than a single creditor demand. St. Giles, Wyndham-related entities, and the Hotel & Gaming Trades Council joined the U.S. Trustee’s appointment motion. Aareal Capital filed a limited joinder and cross-motion seeking conversion or dismissal as alternatives. The debtors consented to chapter 7, and the U.S. Trustee modified its request to support conversion and appointment of a chapter 7 trustee. Conversion order
LuxUrban argued that appointing a chapter 11 trustee would consume resources before reaching the same conclusion: liquidation was appropriate because financing and consensual cash collateral use remained unavailable. It requested conversion without a hearing on the disputed management allegations. Debtors’ response
The court recorded that no party had expressed opposition by its deadline and that appointment of a trustee in a converted chapter 7 case was in creditors’ best interests. It cancelled the scheduled hearing and ordered conversion on October 21. The order established the liquidation posture; it did not adjudicate each allegation about management, guest payments, or the tax assessment. Conversion order
Investor Settlement Was Still Subject to Approval
A later development concerned separate securities litigation. Bloomberg Law reported on March 27, 2026, that former LuxUrban executives had agreed to a $3 million investor settlement funded by directors and officers liability insurance. Investors were seeking preliminary approval in the U.S. District Court for the Southern District of New York. The report described a proposed resolution subject to approval, rather than a completed payment or a distribution to bankruptcy creditors. Bloomberg Law
At conversion, the immediate funding question had been resolved against continuing chapter 11. The remaining recovery questions—including the amount ultimately allowed on the disputed tax claim—were left for subsequent proceedings. Debtors’ response; conversion order
Sources
conversion order /documents/3fc7d865-62f9-47b8-8e59-d70e9fd3c0f4/
U.S. Trustee’s motion /documents/9f2b0574-f7a6-4959-9551-667aeb647c15/
October 17 response /documents/fdb355f6-7a28-4c15-a6f8-766efbec5e97/
Bloomberg Law https://news.bloomberglaw.com/securities-law/luxurban-settles-investors-hotel-lease-lawsuit-for-3-million
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.