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Bankruptcy lawyers for Crumbs Bake Shop Inc. are preparing to hold an auction on Thursday to see who else has a sweet tooth for the chain, whose 49 cupcake stores closed suddenly on July 7, the Wall Street Journal reported on Saturday. An investor group that includes Dippin’ Dots owner Fischer Enterprises and reality TV show host Marcus Lemonis plan to open the auction with a multimillion-dollar offer. The group’s approximately $6.5 million credit bid would forgive loans Fischer and Lemonis have extended to Crumbs, including a $1.1 million loan that is paying for the company’s bankruptcy.

Bank of America Corp. will hand over $26.4 million in mortgage loans to the bankruptcy liquidation trustee for defunct Taylor, Bean & Whitaker Mortgage Corp., the Daily Business Review reported on Friday. Ocala, Fla.-based Taylor Bean and ex-CEO Lee Farkas perpetrated a $2.9 billion fraud, causing the collapse of Montgomery, Ala.-based Colonial Bank in the process. Taylor Bean was the nation's largest private mortgage origination company when it filed for bankruptcy protection in 2009 after being cited for manufacturing fake loans and failing to service 528,000 others. Farkas is serving a 30-year prison sentence. A settlement plan was approved by U.S. Bankruptcy Judge Jerry A. Funk in Orlando in 2011, and liquidating trustee Neil F. Luria has been pursuing clawback lawsuits to reimburse creditors, including Freddie Mac and Ginnie Mac. The settlement with Bank of America calls for the trust to pay $10.3 million and receive the $26 million mortgage pool. The lawsuit against the bank claimed it failed to pay Taylor Bean $40 million under forward-purchasing agreements pending at the time of the bankruptcy filing.

General unsecured creditors of Lehman Brothers Inc. will receive $4.6 billion in their first distribution, perhaps as soon as next month, the Wall Street Journal reported today. In a notice to creditors filed in bankruptcy court today, trustee James W. Giddens for the first time put a number on the payback amount. These creditors had to wait for years as Giddens repaid those with "customer" status. Customers received 100 percent of their money back, while the general unsecured creditors will receive smaller percentages of recovery. Giddens said that he hopes to make the first distribution on Sept. 10.

The Roman Catholic Diocese of Gallup, N.M., has asked a federal judge for an additional eight months under bankruptcy court protection to continue negotiations with more than 100 individuals who allege they were sexually abused by clergy members, Dow Jones Daily Bankruptcy Review reported today. The church's exclusivity period, during which sexual-abuse claimants or others are barred from filing their own reorganization proposals, is set to expire Sept. 8. Citing a plan to begin mediation in the fall, the diocese asked Judge David Thuma of the U.S. Bankruptcy Court in Albuquerque, N.M., to extend that period through May 12, 2015, giving it time to reach a settlement with victims and file a plan to exit bankruptcy without interference from outsiders.

Lawyers for Bernard Madoff's two sons are asking a bankruptcy judge to reject the latest bid by Irving Picard, the court-appointed trustee handling the bankruptcy of Madoff's firm, to sue the Madoff brothers over their alleged role in their father's Ponzi scheme, Dow Jones Daily Bankruptcy Review reported today. Defense lawyers for Mark and Andrew Madoff in filings with the U.S. Bankruptcy Court in New York blasted Picard's latest attempt to hold the brothers accountable for their father's misdeeds, noting that the trustee "was dealt a resounding defeat" in a similar lawsuit he pursued in the U.K. Amanda Remus, Picard's spokeswoman, said that the U.K. litigation "was a narrow action" brought by the liquidator of Madoff's international securities business and dealt with the brothers' liability related to specific transactions set up by their father. (Subscription required.)
http://bankruptcynews.dowjones.com/Article?an=DJFDBR0120140813ea8dmlsji…

Don’t miss Irving Picard’s keynote, “Tales from the Madoff Bankruptcy,” at ABI’s 34th Annual Midwestern Bankruptcy Institute on Oct. 16-17 in Kansas City, Mo. Click here to register: http://www.abiworld.org/MW14/index.htm

Junior creditors of Energy Future Holdings can review company financial records, a judge ruled yesterday, as the bankrupt Texas utility trudges through an increasingly complicated bankruptcy, Reuters reported yesterday. Granting a request from second-lien bondholders of Energy Future's TCEH power generation unit, bankruptcy Judge Christopher Sontchi endorsed broad discovery procedures at a hearing in his Delaware courtroom, mostly centered on transactions that occurred before Energy Future's chapter 11 filing in April. The move could herald future litigation in what is already a tangled case. Wilmington Savings Fund Society, the trustee for the second-lien group, wants to study Energy Future's collapse with an eye toward determining if certain transactions can be unwound due to fraud or other improprieties. Energy Future, the former TXU Corp, is the product of a record-breaking $45 billion buyout in 2007 by KKR & Co., TPG Capital Management and the private equity arm of Goldman Sachs. It filed for chapter 11 after years of lower-than-forecast power prices to restructure more than $40 billion in debt.

Energy Future Holdings Corp. is seeking to pay as much as $18 million or more in bonuses to 26 top executives for keeping the company on track during this year's struggle through bankruptcy, the Wall Street Journal reported today. Bonus programs already have been approved for 5,700 rank-and-file employees and managers of the Dallas energy company. However, pay enhancements for high-ranking insiders get a close look in chapter 11. The proposed bonuses are continuations of existing incentive-pay programs at Energy Future, with actual payments keyed to hitting specified business targets. Energy Future said in court papers that one major program could pay out a maximum of $15.8 million, if executives hit their top goals. A second major program provides for quarterly payments, so the company knows what targets were hit and is able to estimate the overall payout. The company said that it expects the remaining cost of that program to be about $2.5 million.

Philip Falcone’s LightSquared Inc., the bankrupt wireless company, is again the subject of competing plans over how to reorganize its business, with a potential hearing in October to confirm a final plan, Bloomberg News reported yesterday. Bankruptcy Judge Shelley Chapman said yesterday that she would consider a date around Oct. 20 to weigh arguments over how to reorganize the company, which previously narrowed three plans down to one, only to see it fail to win court approval. Judge Chapman said that she may have to “pick between or among two or three confirmable plans” after Falcone’s investment firm, Harbinger Capital Partners LLC, filed a new plan today, four days after LightSquared filed its own. Mast Capital Management LLC has said that it may put forth its own proposal, which would split up the company and separately reorganize debt at the “Inc.” and “LP” divisions, which have different lenders and own different rights to wireless spectrum.

The struggling 32-bed Monroe Hospital in Bloomington, Ind., filed for bankruptcy, blaming tough competition for why it only cares for an average of eight patients, Dow Jones Daily Bankruptcy Review reported today. Officials put Monroe Hospital LLC into protection in U.S. Bankruptcy Court in Indianapolis on Friday with a "low patient census and high expenses," said Chief Executive Joseph Roche in court papers, adding that the company owes more than $120 million to its landlord and lender.

The finger-pointing over who was responsible for the collapse of Lehman Brothers continues nearly six years after the firm filed for bankruptcy at the height of the financial crisis, the New York Times DealBook blog reported yesterday. Now, an arbitration panel has dealt with the liability of one of those parties, finding no basis for a malpractice claim against Ernst & Young, the big accounting firm that audited Lehman’s books. The panel of three former judges ruled in April that it was Lehman’s management, not Ernst & Young, that was most responsible for setting in motion and maintaining a controversial accounting maneuver that allowed the firm to temporarily move tens of billions of dollars in debt off its balance sheet at the end of every quarter. The previously unreported ruling could complicate a pending lawsuit the New York attorney general’s office filed against Ernst & Young in 2010 over the collapse of Lehman. The lawsuit accused the company of helping Lehman engineer an accounting fraud that made it look less leveraged than it truly was in the months before its collapse in September 2008.