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Chapter 7 Bankruptcy a Reality for Hotel Chain in Texas and Nevada

At one point, Douglas Da Silva owned multiple hotels. Now, thanks to increased pressure from the IRS, he may be facing multiple Chapter 7 bankruptcy filings.

Da Silva was the owner of the Artisan hotel, with locations in Las Vegas, Nevada and El Paso, Texas. He has faced numerous challenges since he filed for Chapter 11 bankruptcy on both of the hotel properties in late 2008, as reported by El Paso Inc.

A Chapter 11 filing would allow him to keep ownership of the hotels while they simply reorganized. The IRS, however, which is his primary creditor, doesn’t believe that Da Silva has effectively reorganized the hotel in El Paso. They want him to file for Chapter 7 bankruptcy, so that creditors can recoup funds from the hotels’ liquidation.

Recently, a Nevada bankruptcy court granted the IRS’ wish, and put the Las Vegas Artisan Hotel in Chapter 7 bankruptcy, convinced by the IRS that Da Silva was mismanaging it, according to El Paso Inc. As a part of that filing, last month, Da Silva’s Las Vegas Artisan hotel was sold off for $1.4 million to an operator willing to renovate the building. The Las Vegas-based Siegel group purchased the hotel.

The IRS has pushed forward the Chapter 7 bankruptcy because of the allegations included in a December motion from Special Assistant U.S. Attorney Rollin Thorley. That motion said Da Silva and his business were not keeping up with the requirements of the Chapter 11 bankruptcy filing.

Said the motion: “The failure to comply with federal tax obligations and the failure to file monthly operating reports demonstrate that the debtors are mismanaging their respective estates.”

What monthly reports Da Silva did file reveal that the hotel in El Paso was losing upwards of $30,000 per month.

The IRS court filing also said neither hotel location had filed a federal employment tax return or made any employment tax deposits since they had entered Chapter 11 bankruptcy. According to the IRS, the failure to file the returns or make the necessary deposits suggested that the hotels and their management would not be capable of reorganizing in the manner that a Chapter 11 bankruptcy required.

The solution? The IRS wants a Chapter 7.

Da Silva still opposes this, however. But employees, though, claimed that they had not been paid, that their paychecks had bounced.

Da Silva bought the El Paso Artisan three years ago. In November 2008 he filed for bankruptcy protection, and opened the hotel in October 2009.