Whitehall Trust: $31.3M Mortgage and Receiver Dispute Drive Chapter 11
ElevenFlo Research
January 7, 202624 min readUpdated July 21, 2026
Nearly seven months into the Whitehall Trust chapter 11 cases, the central question is no longer how two Lehigh Valley senior living campuses will restructure $31.3 million in mortgage debt — it is whether the entities that own the real estate were ever eligible to file at all. On March 19, 2026, the U.S. Bankruptcy Court for the Eastern District of Pennsylvania dismissed Whitehall Trust and Saucon Trust as ineligible debtors, holding that the two property-owning trusts are family estate-planning vehicles rather than "business trusts" under 11 U.S.C. section 101(9)(A)(v). The court stayed that dismissal pending appeal and, on April 20, 2026, certified the eligibility question for direct appeal to the U.S. Court of Appeals for the Third Circuit.
The two operating companies — Whitehall Manor Inc. and Saucon Valley Manor Inc. — remain in chapter 11 and filed a joint plan of reorganization on May 15, 2026 funded by new value from their principal, Abraham Atiyeh. The cases trace back to a voluntary petition filed on December 26, 2025 under lead case number 25-15241, when Whitehall Trust and three related entities — Saucon Trust, Whitehall Manor Inc., and Saucon Valley Manor Inc. — sought chapter 11 protection for two personal care communities that together serve 324 residents, including 90 in memory care.
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The filing followed a December 19, 2025 order by the U.S. District Court for the Eastern District of Pennsylvania that voided amended leases and required the operating companies to turn over resident receipts and certain tenant rents to a court-appointed receiver. The chapter 11 filing invoked the automatic stay to keep the facilities operating while the debtors fought Lehigh Valley I LLC, the holder of the mortgage debt, over trust eligibility, single asset real estate status, a patient care ombudsman, lease economics, and the terms on which the Manors may keep using cash collateral.
Debtor(s)
Whitehall Trust (lead) and three related debtors: Saucon Trust, Whitehall Manor Inc., Saucon Valley Manor Inc.
Court
U.S. Bankruptcy Court, Eastern District of Pennsylvania
Case Number
25-15241 (lead)
Petition Date
December 26, 2025
Judge
Hon. Patricia M. Mayer
Claims Agent
Omni Agent Solutions
General Bar Date
March 26, 2026
Governmental Bar Date
June 26, 2026
Trust Debtors
Whitehall Trust and Saucon Trust dismissed as ineligible (March 19, 2026); dismissal stayed, eligibility certified for direct Third Circuit appeal; Manor cases continue
Plan Status
Joint plan of reorganization and disclosure statement filed May 15, 2026; not yet confirmed
Secured Debt
Approximately $31.3 million in mortgage debt on the two properties
Residents / Employees
324 residents (90 memory care); approximately 287 employees
Case Snapshot
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Trust Eligibility Dismissal and the Third Circuit Appeal
The defining ruling of these cases came on March 19, 2026, when Judge Patricia M. Mayer issued a memorandum opinion holding that Whitehall Trust and Saucon Trust do not qualify as "business trusts" under 11 U.S.C. section 101(9)(A)(v) and are therefore ineligible to be debtors under section 109. The court declined to adopt a single rigid test, treating the question as fact-specific. It examined whether the trusts were formed by investors seeking a return on capital, whether beneficial interests are transferable, whether the trusts were intended to exist in perpetuity, and whether they complied with Pennsylvania business-trust registration requirements.
The court found that the trusts' sole activity was leasing property to their affiliated Manors, that they had not collected rent or serviced their mortgages for more than five years, and that their instruments contained intra-family succession plans and spendthrift clauses typical of estate-planning vehicles. It concluded the trusts were created to preserve the Manor properties and shield the owners from liability rather than to operate a business, and noted that the filing appeared aimed at shielding the Manors from rental obligations after the district court voided the lease amendments. The court entered separate orders dismissing the trust cases the same day, and the notice of dismissal was served by BNC certificate of mailing on March 22, 2026.
The trust debtors moved on March 31, 2026 to stay the dismissal and appeal it. Their stay brief invoked the Third Circuit's Revel sliding-scale standard, argued a reasonable likelihood of success because no binding Third Circuit precedent defines "business trust," and contended that without a stay the lender would immediately foreclose and destroy any chance to reorganize. They proposed treating the real estate itself as security in lieu of a bond. The court granted a stay pending appeal in early April 2026, reinstating the prepetition status quo and keeping the Manor properties within the trusts' estates.
The trusts then sought certification of a direct appeal to the Third Circuit, which Lehigh opposed. On April 20, 2026, the court granted certification, finding that the proper definition of "business trust" under section 101(9)(A)(v) presents a question with no controlling Third Circuit or Supreme Court authority and conflicting lower-court decisions, and that immediate resolution would materially advance the affiliated Manor debtors' cases. The eligibility question now sits with the Third Circuit, and the plan is drafted to absorb either outcome.
Before the eligibility dismissal, Lehigh pressed two related theories. It moved to dismiss the trust debtors as ineligible under section 109 and separately argued that the trust entities are single asset real estate debtors subject to section 362(d)(3). The court granted the SARE determination on January 27, 2026, holding that both trust debtors qualify as single asset real estate under section 101(51B). The debtors responded that the trusts and operating companies form an integrated operating enterprise with going-concern value, not passive real estate holdings, and in the alternative requested an extension of any 362(d)(3) deadline with interest-only payments credited against principal.
Reorganization Plan Funded by Atiyeh's New Value
The two Manor debtors filed a joint chapter 11 plan of reorganization, a disclosure statement, and a solicitation motion on May 15, 2026, satisfying a court-ordered plan deadline. All four debtors — both Manors and both Trusts — are plan proponents. The plan is built to absorb either outcome of the pending eligibility appeal: if the dismissal is reversed, the Trusts remain debtors; if it is affirmed, the Trusts cease to be debtors but stay on as plan proponents, with the trust debtor-creditor provisions withdrawn. Getting to that filing required two rounds of exclusivity extensions — a February 3, 2026 motion and an expedited May 17, 2026 motion that Lehigh opposed — with the court most recently extending the exclusive plan period through June 30, 2026 before the June 22 consent order pushed it to July 31, 2026.
This is a reorganization rather than a sale. The plan is funded by new value contributed by the debtors' principal, Abraham Atiyeh, deposited into a distribution account, together with the debtors' ongoing net operating revenues and existing escrowed funds. Equity holders (Class 17) retain their interests in exchange for that new value. On secured-claim treatment, Lehigh's claims (Classes 7-10) vary with the appeal outcome: if the dismissal is reversed, Lehigh receives going-concern value amortized over 20 years with a 10-year balloon; if affirmed, Lehigh receives $500,000 up front plus a second secured note. In either case, Lehigh holds a "cash out" option to take $12,000,000 in full satisfaction of its claims.
General unsecured creditors (Classes 13-14, trade and service providers) are slated to receive 2% of allowed claims on the effective date from the distribution fund, and receiver and other administrative claims are treated as unclassified administrative expenses. Confirmation and the effective date are conditioned on resolution of the dismissal appeal, and the plan contemplates suspension or dismissal of the state-court foreclosure action upon the effective date so long as plan payments continue.
To support the best-interests test, the debtors filed Manor liquidation analyses on May 19, 2026. They estimate that Whitehall Manor would yield about $2,062,969 net in an orderly liquidation (about $1,855,773 forced) against roughly $14,009,279 in secured claims, and Saucon Valley Manor about $1,091,252 net orderly (about $954,337 forced) against roughly $16,317,914 in secured claims. Those figures imply liquidation deficits of roughly $17.4 million to $17.6 million at Whitehall and $21.1 million to $21.3 million at Saucon, and a chapter 7 recovery of essentially nothing for unsecured creditors.
Lease Expiration, Cash Collateral, and Occupancy Payments
Lease expiration and stay relief. A parallel fight over the intercompany leases reshaped the case in mid-2026. On March 31, 2026, Lehigh and the receiver jointly moved to compel the Manor debtors to assume or reject their leases, to fix cure amounts, and, in the alternative, for relief from the automatic stay to let the receiver take possession and evict the Manors. The movants asserted the leases expired by their terms as of August 31, 2023, that the Manors had not paid rent for roughly five years or paid real estate taxes, and that prepetition cure amounts total $8,460,843.01 for Saucon Manor and $8,271,961.00 for Whitehall Manor. They argued the Manors' own 13-week projections showed administrative insolvency, leaving little chance they could pay the arrearage required to assume or propose a viable plan.
On May 15, 2026, Judge Mayer denied the motion to compel and for stay relief in its entirety, supported by an opinion served May 17, 2026. The court reasoned that the order staying the trust dismissal reinstated the status quo, so the Manor properties remain property of the Trusts' estates and protected by the automatic stay; that the leases had expired by their terms prepetition and therefore could not be assumed or rejected under section 365, which reaches only unexpired leases; that the receiver, as a superseded custodian under section 543, was obligated to refrain from administering estate property; that Lehigh as a mortgagee lacked authority under Pennsylvania law to evict a mortgagor's tenant; and that section 105(a) could not be used to grant derivative standing in a way that would override section 543. On May 20, 2026, Lehigh and the receiver appealed that order to the U.S. District Court for the Eastern District of Pennsylvania, and the record on appeal was transmitted in June 2026.
Use-and-occupancy agreements. Because the court held the leases had expired and could not be assumed or rejected, the Manors needed a new legal basis to keep occupying the trust-owned properties. On June 9, 2026, the debtors moved under section 363 for authority to enter into and perform under two use-and-occupancy agreements so the Manors can continue operating the senior living facilities while the cases and appeals are pending. The proposed monthly use-and-occupancy charges — roughly $69,578.58 and $69,844.85 — are set to match the full mortgage debt service owed to Lehigh, the same figures the cash collateral orders below require. The agreements are terminable on 30 days' notice, and the debtors framed them as separate from the cash collateral and adequate protection disputes. The motion was originally noticed for a June 30, 2026 hearing; a June 22, 2026 consent order continued that hearing, along with the other matters set for June 30, to July 22, 2026.
Cash collateral orders. The debtors' original cash collateral motion sought authority to use prepetition accounts receivable and resident receipts to fund operations, offering replacement liens and proposing budget-controlled operations with up to a 10% weekly variance. Lehigh objected that the budget provided no debt service, offered replacement liens on collateral it already controlled, included payments to insiders and non-debtor affiliates, and failed to require postpetition rent. A later objection argued that consolidated budgets across the trust and operating debtors amounted to a de facto substantive consolidation and demanded separate entity budgets plus contractual debt service of approximately $229,507.53 per month.
After interim litigation, the court's third interim cash collateral order, entered February 26, 2026, required aggregate adequate protection payments of $70,000 per month, split $35,000 from each Manor and due by the 13th of each month, and set a final hearing for March 24, 2026. After the trust dismissal, cash collateral use continued for the Manor debtors under a fourth interim order in late March 2026 that carried the same $70,000 aggregate payment, kept the 10% per-line-item weekly variance on a four-week rolling basis, and granted replacement liens subordinate only to U.S. Trustee and Clerk fees. Lehigh continued to object, filing a fifth objection on April 14, 2026 and a sixth objection on May 21, 2026.
The court entered a sixth interim cash collateral order on May 29, 2026. It continued the $35,000 monthly adequate protection payment from each Manor and added a new obligation: beginning June 1, 2026, Whitehall Manor must pay $69,844.85 per month on behalf of Whitehall Trust and Saucon Valley Manor must pay $69,578.58 per month on behalf of Saucon Trust — the debt-service figures also proposed in the use-and-occupancy agreements above. The order kept the budget controls and replacement liens in place and set a final hearing for June 30, 2026. On June 22, 2026, the debtors, Lehigh, and the receiver entered a consent order continuing cash collateral use on the same terms through July 31, 2026, extending the debtors' plan-filing exclusivity through the same date, and continuing all matters set for the June 30 hearing — including the final cash collateral hearing — to July 22, 2026, with objections due July 12, 2026.
Adequate protection dispute. The Manors had tried to head off that escalation. On May 15, 2026, they filed an expedited motion to modify the adequate protection structure, arguing that paying $35,000 per month while also escrowing the full pre-modification rent — about $139,000 for Whitehall Manor and $142,118.42 for Saucon Valley Manor — plus taxes, insurance, and maintenance was roughly double what they ever paid under their leases and rendered reorganization economically unfeasible. They proposed instead to pay Lehigh the full monthly mortgage principal and interest. The court denied that motion on May 26, 2026, leaving the higher escrow-plus-payment structure in place.
Patient Care Ombudsman's Infestation Findings
The debtors had asked the court to find that a patient care ombudsman was unnecessary, emphasizing regulatory oversight, recent inspections, and staffing above minimum requirements, and noting that the communities operate as personal care homes rather than skilled nursing facilities. The U.S. Trustee and Lehigh objected. The court denied the motion on January 28, 2026 and directed appointment of a patient care ombudsman under 11 U.S.C. section 333, and the U.S. Trustee appointed Margaret Barajas on February 2, 2026.
That appointment produced one of the most consequential filings in the case. The ombudsman's first 60-day report, filed April 8, 2026 and covering February 19 through April 2, 2026, documented serious environmental and operational problems at both facilities. At Whitehall Manor, the report described an ongoing mouse infestation with feces in the food pantry and gnawed packaging, an odor of dead mice, unmonitored refrigerator temperatures in the dementia unit, unanswered call bells, and staff not wearing visible name badges.
At Saucon Valley Manor, the ombudsman reported ceiling leaks, a heating-coil leak in the memory unit, fire extinguishers used to prop open fire doors, a "filthy" kitchen with moldy food, and residents skipping meals because food was served cold. The report stated that the Pennsylvania Department of Human Services revoked the facility's certificate of compliance and issued a first provisional license valid March 27 through September 27, 2026. The ombudsman's office said it would continue weekly site visits to both locations.
Receiver Fee Dispute and Counsel Disqualification
The receivership that triggered the filing continued to generate contested matters in bankruptcy court. The debtors moved to release $25,258.88 in escrowed Good Shepherd Rehabilitation Hospital physical therapy rent for October through December 2025, arguing that the bankruptcy court had exclusive jurisdiction over estate property, that the Manor debtors were not parties to the district-court foreclosure case that generated the turnover order, and that the receiver's authority had lapsed because no timely motion to excuse turnover was filed after the petition. The receiver transferred the funds into debtors' counsel's IOLTA account by agreement pending a ruling.
The receiver responded with a February 18, 2026 administrative expense application seeking $304,239.28 plus additional post-filing amounts, arguing that as a superseded custodian under section 503(b)(3)(E) its fees were actual and necessary because they benefited the estates by pursuing rents, unwinding the lease amendments, and attempting to secure more than $7 million. The debtors objected on March 4, 2026 that the receiver had not carried its burden. After the trust debtors were dismissed, the receiver withdrew the application as moot on March 23, 2026 — only to renew it on June 1, 2026, arguing that the order staying the trust dismissal, as clarified in the May 15, 2026 lease ruling, reinstated the prepetition status quo and revived the claim. The Trusts opposed the renewed claim on June 15, 2026, arguing it was premature while the eligibility appeal remains pending and that the receiver had not shown a concrete estate benefit; no ruling had been entered as of the most recent docket review.
Lehigh and the U.S. Trustee objected to the retention of Dilworth Paxson LLP over disclosure and conflict concerns, including potential conflicts between the trust owners and the operating companies. The court approved the retention effective as of the petition date on January 27, 2026, and Lehigh appealed on January 29, 2026. That appeal succeeded: the District Court vacated the order approving Dilworth Paxson for all four debtors and held that the Trusts and the operating Manors must obtain separate counsel. The Trusts substituted in new counsel and, on June 3, 2026, applied to employ Robinson & Cole LLP as bankruptcy counsel nunc pro tunc to May 20, 2026, at hourly rates ranging from $525 to $2,200 (lead partner Natalie Ramsey at $2,200 and Rachel Jaffe Mauceri at $1,350).
Separately, on February 25, 2026, the court granted Lehigh's sanctions motion in part and sanctioned Abraham Atiyeh $10,170, payable to Lehigh's lead counsel, based on misrepresentations concerning Priya Kapoor-Atiyeh's alleged duties, compensation, and employment. The U.S. Trustee also moved to dismiss the Manor cases or appoint a chapter 11 trustee, but after a May 26, 2026 hearing the court denied that motion, allowing the Manor debtors to remain in possession and continue pursuing their plan.
Atiyeh Family Ownership and Mortgage Debt
Ownership structure. Whitehall Trust uses a structure common in healthcare real estate: property-owning trusts lease facilities to operating companies. Whitehall Trust and Saucon Trust, both Pennsylvania trusts, own the real estate at Whitehall Manor (1177 6th Street, Whitehall) and Saucon Valley Manor (1050 Main Street, Hellertown), and two Pennsylvania S-corporations, Whitehall Manor Inc. and Saucon Valley Manor Inc., operate the respective facilities.
The statement of corporate ownership identifies Whitehall Fiduciary LLC as trustee of Whitehall Trust and Abraham Atiyeh as beneficial owner. Saucon Management LLC serves as trustee of Saucon Trust, and Manor Trust owns both operating companies, with Anka Management LLC as trustee of Manor Trust. Abraham Atiyeh is the primary beneficiary of both property trusts and the manager or main member of the trustee LLCs, making him the ultimate beneficial owner of the four debtors. That intra-family structure — and the spendthrift and succession provisions in the trust instruments — became central to the court's conclusion that the trusts are estate-planning vehicles rather than business trusts.
Nimita Kapoor-Atiyeh, Abraham Atiyeh's wife, serves as president of the operating companies and is the licensed administrator for Saucon Valley Manor. Priya Atiyeh, his daughter, serves as vice president and is the licensed administrator for Whitehall Manor. Atiyeh leads Pennsylvania Venture Capital, whose senior-living portfolio includes Whitehall Manor and Saucon Valley Manor. The Atiyeh family also operates other regional facilities under the Manors of the Valley umbrella, including Parkland Manor and Bethlehem Manor, which a 2020 local report identified as part of the family business and which remain outside the chapter 11 cases.
In September 2023, the trusts and operating companies executed amended leases that later became the focal point of the foreclosure litigation. Lehigh contends those amendments retroactively forgave roughly $8.4 million in accumulated rent owed by the operating companies to the trusts and stripped value from collateral securing the mortgages. The district court voided those amendments in December 2025, reinstating the prior lease terms and setting the stage for the turnover order that precipitated the filing.
Whitehall Manor and Saucon Valley Manor are personal care homes regulated under Pennsylvania's personal care home rules (55 Pa. Code Section 2600), operating on a private-pay model without Medicare or Medicaid reimbursement. Together they serve 324 residents, including 90 in memory care, and the first day declaration reports about 287 employees across the two campuses with biweekly payroll of about $360,000. The operating companies also derive income from service agreements with non-debtor affiliates and from the Good Shepherd physical therapy tenant at Whitehall Manor, and the trusts collect rent from the operating companies under the intercompany leases — rent flows central to the foreclosure and cash collateral disputes.
Mortgage debt and foreclosure timeline. The debtors' capital structure is dominated by two mortgages originally issued by M&T Realty Capital Corporation in 2012 and later assigned to Lehigh Valley I LLC. The first day declaration puts the Whitehall mortgage (1177 6th Street), originated January 26, 2012 for $15,788,700, at about $13,832,351 outstanding as of June 2024 with more than $2.4 million past due, and the Saucon mortgage (1050 Main Street), originated December 1, 2012 for $19,462,800, at about $17,516,630 outstanding with more than $2.2 million past due — combining for roughly $35,251,500 in original principal, about $31,348,981 outstanding, and more than $4.6 million past due across both properties.
According to the first day declaration, the operating companies stopped paying rent to the trusts in February 2021 to prioritize resident care and payroll, and the trusts made their last direct mortgage payment on February 5, 2021. The Manors paid property taxes — roughly $371,000 at Whitehall and $412,000 at Saucon, about $783,000 combined — on behalf of the trusts as an offset against unpaid rent. M&T assigned the non-performing mortgages to HUD in November 2022; HUD auctioned the loans in 2023, Windstream Capital LLC purchased them, and Lehigh Valley I LLC acquired the mortgages in June 2024.
The debtors say the December 19 order would have stripped operating cash flow and forced the facilities to close. The chapter 11 filing halted enforcement and moved the dispute into bankruptcy court.
Industry data show the long-term care sector expected about $94 billion in pandemic-era losses across 2020 and 2021. In Pennsylvania, a LeadingAge PA survey reported that 1 in 4 certified nursing home beds in the state are offline due to staffing and funding constraints, and a separate survey projected a shortage of 2,600 care providers. A Spotlight PA investigation found that Pennsylvania lost 26 nursing facilities between 2019 and August 2024, with the statewide count declining from 695 to 669, driven by inadequate Medicaid reimbursement and shifting ownership patterns. The state has also seen large chapter 11 filings in the sector, including SpiriTrust Lutheran, which operated six facilities and reported substantial liabilities in its 2025 filing.
Frequently Asked Questions
Why were Whitehall Trust and Saucon Trust dismissed from bankruptcy?
On March 19, 2026, the bankruptcy court held that the two property-owning trusts are family estate-planning vehicles rather than "business trusts" eligible to file under 11 U.S.C. section 109. The court dismissed both trust debtors, stayed the dismissal pending appeal, and on April 20, 2026 certified the eligibility question for direct appeal to the Third Circuit.
Are the senior living facilities still operating?
Yes. The two operating companies, Whitehall Manor Inc. and Saucon Valley Manor Inc., remain in chapter 11 and continue running both campuses. After the court held the leases had expired, the debtors moved on June 9, 2026 for authority to enter use-and-occupancy agreements to keep operating the trust-owned properties.
What does the plan of reorganization propose?
The joint plan filed May 15, 2026 is funded by new value from principal Abraham Atiyeh plus operating revenue and escrowed funds. Lehigh's secured claims carry a $12,000,000 cash-out option, and general unsecured creditors are slated to receive 2% of allowed claims. Confirmation is conditioned on the outcome of the trust-eligibility appeal.
What is the secured debt at the center of the case?
Lehigh Valley I LLC holds roughly $31.3 million in mortgage debt secured by the two properties. The loans originated with M&T Realty Capital Corporation, were assigned to HUD in 2022, sold in a 2023 auction to Windstream Capital LLC, and assigned to Lehigh in June 2024.
What did the patient care ombudsman find?
The ombudsman's first 60-day report, filed April 8, 2026, documented a mouse infestation and food-safety problems at Whitehall Manor and ceiling and heating leaks, fire-safety issues, and unsafe food handling at Saucon Valley Manor, where the Pennsylvania Department of Human Services revoked the certificate of compliance and issued a provisional license through September 27, 2026.
What are the Manors paying to use cash collateral?
Under the sixth interim cash collateral order entered May 29, 2026, each Manor pays $35,000 per month in adequate protection plus, beginning June 1, 2026, the full monthly mortgage debt service on behalf of its affiliated trust — about $69,844.85 for Whitehall and $69,578.58 for Saucon. A June 22, 2026 consent order continued those terms through July 31, 2026 and moved the final hearing from June 30 to July 22, 2026.
Who is the claims agent for Whitehall Trust?
Omni Agent Solutions serves as the claims and noticing agent and maintains the official claims register. The general bar date was March 26, 2026 and the governmental bar date was June 26, 2026.
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