Sea Palms Council of Co-Owners Bankruptcy Case

The U.S. Trustee objected to Sea Palms’ request to waive Bankruptcy Code requirements governing the protection of estate deposits. According to the UST’s omnibus response, the debtor held $2.32 million in a reserve account and approximately $12,700 in an investment account at Ameriprise through Comerica as of May 2026, with most of the combined $2.33 million invested in a BNY Dreyfus government cash-management money market fund.

The UST argued that the fund does not constitute direct government securities satisfying section 345 and that Sea Palms had not shown cause for a waiver. It asked the court to require the money to be maintained in designated debtor-in-possession accounts at UST-approved depositories. The dispute matters because an adverse ruling could force Sea Palms to relocate substantially all of its available cash and alter its treasury arrangements during the opening weeks of this Subchapter V case. The July 14 docket entries record that hearings occurred but do not provide a supported disposition.

Sea Palms Council of Co-Owners, an unincorporated association governing a beachfront timeshare community on Edisto Beach, South Carolina, is in the opening weeks of a Subchapter V Chapter 11 caseDkt. 1 filed June 26, 2026, having completed its first-day hearing before Judge L. Jefferson Davis, IV and now working through commencement motions while it positions the 25-unit, 1,300-Unit-Week interval-ownership property for a wind-down or sale. The board authorized the filing in October 2025 and, effective December 27, 2025, suspended resort occupancy, canceled reservations, and ceased collecting 2026 maintenance fees; the debtor has retained Hilco Real Estate as broker and K&L Gates as counsel, signaling a real-estate-driven resolution rather than an operating reorganization.

The schedules depict a liquidation-ready balance sheet: roughly $2.59 million in cash and equivalents across Comerica and Truist accounts as of June 30, 2026, against only $35,915.91 in unsecured nonpriority claims and no reported secured debt, executory contracts, or leases (Schedules of Assets and LiabilitiesDkt. 40). The thin creditor body reflects the fee-collection shutdown rather than broad consensus, and estate value is concentrated in cash and the underlying real property.

The principal early dispute is the U.S. Trustee's objection to the debtor's cash-management motion, which seeks a waiver of 11 U.S.C. § 345(b) protections; the Trustee contends that holding the bulk of estate funds—over $2.3 million—in the BNY Dreyfus money market fund rather than government securities or bonded depositories fails the statutory safekeeping requirements and should be denied (Omnibus Response to PleadingsDkt. 32). The Trustee separately reported progress resolving the debtor's PII, tax, and insurance motions, with revised proposed orders expected.

With schedules and the statement of financial affairs filed under a court-granted extension (Order Extending Time to File SchedulesDkt. 41), the case turns toward the August 3, 2026 meeting of creditors and an August 19, 2026 status conference, where the sale strategy and Subchapter V plan path should take clearer shape.

Sea Palms Council of Co-Owners

Sea Palms Council of Co-Owners

Latest development

U.S. Trustee challenges protection of $2.33 million in estate cash

Key Professionals

Coverage