DirectBuy Home Improvement (Z Gallerie) Chapter 11: Liquidation Trust and Trustee Litigation

DirectBuy Home Improvement, Inc., the home-decor retailer doing business as Z Gallerie, filed chapter 11 in the U.S. Bankruptcy Court for the District of New Jersey on October 16, 2023, under lead case number 23-19159. The voluntary petition reported assets and liabilities each in the $50 million to $100 million range and identified the case as the brand's third bankruptcy in 14 years. The debtor entered chapter 11 with negative cash flow and no committed going-concern buyer; within nine days the court approved a liquidator to begin store-closing sales at all 21 retail locations.

The case is now a post-confirmation liquidation-trust administration. The court entered the confirmation order on April 19, 2024, the plan went effective on April 30, 2024, and Alexandre Zyngier serves as liquidation trustee. Late-stage activity is dominated by a wave of preference complaints filed in October 2025 and contested matters concerning Thomas and Elona Pope and Buy Direct, LLC, which together generate the most active docket entries through early 2026.

Debtor(s)	DirectBuy Home Improvement, Inc. (d/b/a Z Gallerie)
Court	U.S. Bankruptcy Court, District of New Jersey
Case Number	23-19159
Petition Date	October 16, 2023
Confirmation Date	April 19, 2024
Effective Date	April 30, 2024
Plan Type	Plan of liquidation; liquidation trust
Liquidation Trustee	Alexandre Zyngier
Reported Assets / Liabilities	$50 million–$100 million each
DIP Facility	~$1.1 million debtor-in-possession financing
Inventory Liquidator	B. Riley Retail Solutions
Going-Concern / E-Commerce Buyer	Karat Home (e-commerce assets, ~$7.2 million)

Z Gallerie's Third Filing and the 2023 Liquidity Failure

DirectBuy Home Improvement entered its 2023 case as the operator of the Z Gallerie home-furnishings brand, with a footprint of 21 stores in nine states, a Gardena, California distribution center, and a significant e-commerce channel attributed to the first-day declaration filed at Docket 14. Management blamed lingering COVID-19 effects on the petition, while reporting cited high mortgage rates and declining home sales alongside negative cash flow and a cooling home-decor sector that also pushed Bed Bath & Beyond and other home-furnishings retailers into bankruptcy in 2023.

The 2023 filing was the brand's third trip through bankruptcy in 14 years. Z Gallerie's prior chapter 11 in 2019 ended with a confirmed plan that nevertheless left the estate with a $6 million shortfall to priority creditors that the WSJ reported as a calculation error in the disclosure statement. The brand was acquired out of that 2019 case by CSC Generation, the same e-commerce holding company that later won the Sur La Table auction over Fortress and Marquee Brands in 2020. By the time of the 2023 filing, the operating entity had been renamed DirectBuy Home Improvement, Inc., and the Z Gallerie brand was the company's core retail identity. Initial trade-press coverage framed the case as a going-concern sale process targeting liabilities of $50 million to $100 million, but the chief executive told reporters that all stores would close if no buyer emerged.

Store Closing Sales, B. Riley, and the Karat Home E-Commerce Sale

Four days after the petition, the court approved DirectBuy's retention of a liquidator to monetize inventory across the 21-store fleet. B. Riley Retail Solutions was retained to run the store-closing sales, which began nationwide on October 25, 2023 and reached locations from South Coast Plaza in Costa Mesa to Sherman Oaks, Roseville, Columbia, Maryland, and Houston within the first week. The debtor secured approximately $1.1 million in debtor-in-possession financing — a relatively small DIP commitment that reflected the case's planned liquidation path rather than a multi-month going-concern wind-down.

The most material going-concern transaction was the sale of the brand's e-commerce assets. Karat Home was the winning bidder for Z Gallerie's e-commerce assets at approximately $7.2 million, with the sale excluding any assignment of brick-and-mortar leases as the company proceeded with the store-closing program. Karat Home subsequently relaunched the Z Gallerie brand in 2026 around an e-commerce-led model with select physical retail, confirming that the post-sale business has continued under the buyer's ownership rather than as a debtor reorganization. The auction did not produce a brick-and-mortar going-concern buyer, and California-specific coverage tracked the closure of all California locations as the store-closing program rolled forward.

Plan of Liquidation, Confirmation, and Liquidation Trust

DirectBuy filed its original plan of liquidation and disclosure statement on February 27, 2024, followed by an amended disclosure statement on March 5, 2024 and a second amended plan of liquidation on April 10, 2024. The court entered the confirmation order on April 19, 2024, and the plan became effective on April 30, 2024. The plan and confirmation order created the DirectBuy Liquidating Trust, transferred the debtor's remaining assets and causes of action into that trust on the effective date, and installed Alexandre Zyngier as liquidation trustee under the plan supplement.

Claim-objection authority shifted on the effective date. The confirmation order gave the debtor exclusive authority to object to claims through April 30, 2024 and assigned that authority to the liquidation trustee thereafter; an extension order entered on November 12, 2024 lengthened the trustee's claims-objection deadline once, and the trustee sought another extension in April 2025 because the trust and its professionals required additional time to evaluate unsecured claims against the trust's limited cash position.

Liquidation Trust Distributions and Unsecured-Claims Posture

The trust's post-confirmation report for the quarter ended September 30, 2025 shows the trust has paid down a narrow slice of the projected administrative and priority claim base while general unsecured creditors have not yet received any distribution. Cumulative cash disbursements since the April 30, 2024 effective date totaled $280,869, with no current-quarter cash disbursements. Special counsel Trif & Mogno had been approved and paid $32,350 on a cumulative basis as of the report date.

The same report itemizes plan payments by class. Administrative claims had been paid $126,701 cumulatively against $128,500 in total anticipated payments, leaving approximately $1,799 of anticipated administrative payments outstanding. Priority claims had been paid $154,358 cumulatively against a $403,000 anticipated total, leaving roughly $248,642 in anticipated priority payments still to be made from the trust. Secured claims and general unsecured claims had received no distributions through September 30, 2025. The trustee projected an anticipated final-decree application date of December 31, 2026, indicating the case is expected to remain open through 2026 while claims litigation and preference recoveries continue.

Preference Complaints and Avoidance Litigation

Beginning in October 2025, the liquidation trustee filed a wave of preference complaints against vendors and service providers that received transfers from DirectBuy in the 90 days before the petition date. The preference complaint against PDP Holdings is representative of the campaign: the trust's complaints recite the petition date, plan effective date, and trust formation, and then position the trustee as plaintiff acting on behalf of the DirectBuy Liquidating Trust as the assignee of the estate's section 547 and 550 causes of action.

The avoidance docket is the trust's primary remaining recovery channel for general unsecured creditors, given that the September 30, 2025 post-confirmation report shows no cumulative distributions to that class. The trustee's April 2025 claim-objection extension request tied the need for more time to limited trust funds and to the continued need to reconcile unsecured claims, indicating that any unsecured recovery will turn on net preference proceeds and the resolution of contested claims rather than on a fixed plan recovery percentage.

Pope Claim Litigation and District Court Appeal

The case's most active contested-matter docket concerns Thomas and Elona Pope. The Popes filed a broad set of motions seeking, among other things, appointment of an examiner, dismissal of the case, disqualification of debtor's counsel, disgorgement, correction of the petition, and referral of suspected bankruptcy offenses. The liquidation trustee opposed those motions and filed a cross-motion to expunge the Popes' proofs of claim, arguing the Popes lacked standing as creditors and that their underlying positions were barred by res judicata and collateral estoppel tied to prior Indiana litigation involving DirectBuy's predecessor and to the free-and-clear protections of a 2017 Delaware sale order.

On December 18, 2025, the court denied the Popes' motions in full and granted the trustee's cross-motion with prejudice, expunging Thomas Pope's proofs of claim 104 and 132 and Elona Pope's proofs of claim 107 and 150. The Popes filed a notice of appeal on January 5, 2026, identifying the December 18 order as the order on appeal and again tying the appeal to the same expunged proof-of-claim numbers. On March 2, 2026, the Popes moved for acceptance of a late-filed designation of record and statement of issues in the district court appeal, or for an extension of time nunc pro tunc; that request remained pending as of the filing date.

Buy Direct, LLC and the $47.4 Million Indiana Claim

A separate contested matter concerns Buy Direct, LLC, which asserted a $47.4 million claim through proof of claim 102 filed on December 21, 2023 and amended proof of claim 142 filed on December 27, 2023. The trustee moved on November 4, 2025 to expunge those claims on substantially the same theory used against the Popes: that Buy Direct's claim is barred by a prior Indiana judgment in litigation between Buy Direct and DirectBuy and by the free-and-clear provisions of the 2017 Delaware sale order through which the current debtor's predecessor acquired the relevant assets. The Northern District of Indiana had previously dismissed Buy Direct's franchising and distribution claims against DirectBuy's successor, and the underlying Buy Direct, LLC v. DirectBuy, Inc. judgment is in the public record on CaseMine. The trustee's expunge motion uses both the Indiana ruling and the Delaware sale order to argue that Buy Direct's claim is precluded as a matter of law.

The Pope and Buy Direct disputes share a common structural feature: both depend on whether prepetition Indiana litigation outcomes and the 2017 Delaware sale order foreclose claims against the post-confirmation trust. The trustee has consistently argued that they do, and the December 18, 2025 order on the Pope claims is the first ruling that applies that theory on the merits in this case.

Key Timeline

Frequently Asked Questions

Is DirectBuy Home Improvement still operating as a company?

No. DirectBuy Home Improvement liquidated under a confirmed chapter 11 plan that became effective on April 30, 2024, and its remaining assets and causes of action transferred into the DirectBuy Liquidating Trust on that date. The Z Gallerie brand and e-commerce platform were sold to Karat Home, which has since relaunched the brand under its own ownership.

What does the post-confirmation report show about creditor recoveries?

The post-confirmation report for the quarter ended September 30, 2025 shows cumulative trust disbursements of $280,869, administrative claims paid at $126,701 of $128,500 anticipated, priority claims paid at $154,358 of $403,000 anticipated, and zero payments to secured or general unsecured claims. The trustee projected an anticipated final-decree application date of December 31, 2026.

Who is the liquidation trustee for the DirectBuy Liquidating Trust?

Alexandre Zyngier serves as liquidation trustee under the confirmed plan and confirmation order, with authority to prosecute the trust's preference and avoidance actions and to object to claims that transferred into the trust on the April 30, 2024 effective date.

What happened in the Pope litigation?

On December 18, 2025, the court denied Thomas and Elona Pope's motions seeking an examiner, dismissal, disqualification of debtor's counsel, and related relief, and granted the trustee's cross-motion to expunge the Popes' proofs of claim 104, 132, 107, and 150 with prejudice. The Popes filed a notice of appeal on January 5, 2026, and a related motion concerning the appellate record was pending as of March 2, 2026.

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