It Ain’t No Lie: Pearlman Bankruptcy Nearly Over

Get ready to say ‘bye, ‘bye, ‘bye to the bankruptcy case of imprisoned boy-band manager Lou Pearlman.

Six years after the creator of ‘N Sync and the Backstreet Boys was forced into bankruptcy (and later prison), a creditor-payment plan is expected to be ready for court approval as soon as this summer.

In a recent bankruptcy-court filing, trustee Soneet Kapila said he is nearing resolutions to several big disputes that could free up more money for the creditors who’ve been waiting for payment. He said he’s also made “good progress” in negotiations with key creditors as to how they’ll be paid.

Among those disputes nearing resolution concerns “the very large” tax claim from the Internal Revenue Service, Kapila said. The trustee has struck a tentative deal with the tax agency that would see it paid with whatever money is left over after general unsecured creditors are paid. He expects to seek court approval of that settlement “in short order.”

Also coming up soon are mediation proceedings between Kapila and a dozen banks that loaned Pearlman money and received transfers from him in the four years prior to the bankruptcy case. The trustee sued the banks to recover more than $47 million for Pealrman’s creditors, while the banks filed more than $115 million in claims against Pearlman’s estate.

Through the bankruptcy case, Kapila has recovered $35 million from asset sales, royalty payments and lawsuit settlements, although only $14 million of that was available as of Jan. 31.

Kapila expects to be able to file a plan to pay creditors plan by June 7 and seek bankruptcy-court approval to put that plan into action at a July 17 hearing. (If he gets the go-ahead to pay creditors, we expect them to start singing this song.)

That happens to be one week before the five-year anniversary of the date that Pearlman reported to a federal prison to begin serving a 25-year sentence for orchestrating a Ponzi scheme that bilked investors out of more than $300 million.

Write to Jacqueline Palank at [email protected]. Follow her on Twitter at @PalankJ.