A LendingTree Inc. mortgage-lending subsidiary has converted its bankruptcy case from a chapter 11 to chapter 7, a move that comes after a trust targeting Wall Street lenders for shoddy mortgage practices was pushing for the dormant company to be liquidated, WSJ Pro Bankruptcy reported. The subsidiary, Home Loan Center Inc., changed its bankruptcy status on Thursday, after first informing Judge M. Elaine Hammond in U.S. Bankruptcy Court in San Jose, Calif., of the decision. Residential Capital LLC’s liquidating trust and Lehman Brothers Holdings Inc., which hold most of the claims against HLC, had requested on Tuesday that the judge convert the bankruptcy case from a chapter 11 proceeding to a chapter 7 under the direction of an independent trustee. ResCap argued that HLC doesn’t belong in chapter 11 because the company sold its operating assets to Discover Financial Services Inc. for $55.9 million in 2012 and has no hope of reorganizing. Earlier this week, ResCap sued LendingTree in the U.S. District Court in Minnesota, in an attempt to collect from the company a $68 million judgment against its subsidiary, HLC. ResCap alleges that LendingTree is responsible for damages caused by HLC, which filed for bankruptcy to avoid the judgment. The liquidating trust, which grew out of ResCap’s 2012 bankruptcy, said that LendingTree over the years has assumed responsibility for the debt of its subsidiaries, according to the complaint. ResCap, once one of the nation’s largest subprime servicers, collapsed into bankruptcy when thousands of those mortgages defaulted.
