Commonwealth of Pennsylvania Limited Objection and Proposed Order for Abandonment in Kaja Holdings LLC Bankruptcy

Overview of the Commonwealth of Pennsylvania’s Limited Objection

The Commonwealth of Pennsylvania, through the Office of Attorney General, filed a Limited Objection regarding the motion by $DLP\text{ Lending Fund, LLC}$ to compel the abandonment of real estate collateral. The Debtors in this case are $Kaja\text{ Holdings LLC}$, $Kaja\text{ Holdings 2, LLC}$, and $Alan\text{ Investments III, LLC}$. The Commonwealth’s primary concern involves the consumers living in these properties under "Collateral-Related Consumer Contracts." These individuals have often invested thousands of dollars and significant labor into making these homes habitable. While the Commonwealth does not object to $DLP$ being restored to its pre-bankruptcy position, it insists that consumers must also be restored to theirs. Consequently, the Commonwealth requests that the Court order the abandonment of these consumer contracts alongside the collateral. The Trustee has indicated no objection to this request. The Commonwealth cites 11\text{ U.S.C. & 105} as the source of the Court’s broad equitable authority to resolve the motion in this manner.

Background of Litigation and Consumer Protection Efforts

For the past six years, the Commonwealth has worked to protect consumers allegedly treated unfairly by $Vision\text{ Property Management}$ and its affiliates, including the Debtors. In $October\,2019$, the Commonwealth filed a lawsuit in the $Common\text{ Pleas Court of Allegheny County, Pennsylvania}$ ($Commonwealth\text{ of Pennsylvania v. Vision Property Management et. al.}$, case number $GD-19-014368$). This litigation has already resulted in the deeding of over $250$ Vision homes to Pennsylvania consumers and a distribution of approximately $\$1.8\,\text{million}$ to others. Similar actions have been filed elsewhere, such as by the Attorney General of New York in the $Southern\text{ District of New York}$ in $August\,2019$.

In related litigation in $Northampton\text{ County, Pennsylvania}$ ($DLP\text{ Lending Fund v. Michael Beys et. al.}$, case number $CV-2021-09442$), the Commonwealth intervened in the summer of $2023$. This case established a receivership managed by $Trigild\,IV, LLC$. The Commonwealth’s intervention was prompted by the Receiver wrongfully sending "Notice to Quit" letters to $63$ consumers. Originally, $DLP$ had sought to stay all related litigation, including the $Allegheny\text{ County}$ case, but this request was denied and the receivership was temporarily dissolved before being reinstated.

Nature of the Deceptive "Rent to Own" Transactions

The Commonwealth alleges that the Defendants violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, 73\text{ P.S. & 201-1}, et seq. These violations involved deceptive "rent to own" or "for sale by owner" transactions. $Vision\text{ Property Management}$ operated through dozens of subsidiaries, now controlled by $FTE\text{ Network, LLC}$. Consumers, often unrepresented and from low-income families, were allegedly not informed of physical defects in the homes and were misled about the nature of the contracts. Some consumers even believed they held title immediately after signing paperwork.

These contracts placed the entire burden of making the properties habitable on the consumer, which the Commonwealth asserts violates state law. The homes were typically sold at prices $2\times$ to $4\times$ what Vision had paid for them in the same condition. While the contracts included an option to purchase for a fixed price, usually less than $10\%$ of monthly payments were credited toward that purchase price. This structure resulted in a large balloon payment consisting of nearly the entire inflated price. Despite these terms, most consumers invested thousands of dollars and manual toil to repair the run-down structures because they believed the marketing pitch of homeownership.

Status and Management of the DLP Receivership

The order establishing the Receivership (Exhibit L) requires the Receiver to act in good faith regarding existing Lease with Option to Purchase ($LOP$) or other consumer contracts. In $January\,2024$, the parties, including $DLP$ and the Commonwealth, entered into a Consent Order that created a roadmap for managing these contracts. Before the bankruptcy petitions were filed, the Receiver was methodically sending "Account Status Reports" to consumers.

The Commonwealth and the Receiver held weekly meetings and engaged in near-daily email communication to review consumer contracts individually. This process led to agreements on credits for habitability repairs. The presiding judge in the Receivership also held periodic status conferences to monitor this progress. The Commonwealth notes that while the Debtors listed some of these contracts as executory contracts in their schedules, the schedules are incomplete and the characterization is disputed.

Legal Analysis for the Abandonment of Consumer Contracts

The Commonwealth argues that the Collateral-Related Consumer Contracts must be abandoned coincident with the collateral itself under 11\text{ U.S.C. & 554(b)}. This section allows a Trustee to abandon property of the estate that is burdensome or of inconsequential value and benefit. The term "any property" is interpreted broadly to include leases and contracts. Supporting case law includes $In\,re\,Estiatorio\,Ent.\,Ltd., 669\,B.R.\,676, 688\,(S.D.N.Y.\,2025)$ and $In\,re\,Palace\,Quality\,Services\,Industries,\,Inc., 283\,B.R.\,868\,(E.D.\,Mich.\,2002)$.

Retaining these contracts would offer no revenue to the Debtors and would likely trigger significant litigation. It would place the Trustee in the untenable position of managing contracts for properties the estate no longer controls. Abandoning the contracts is described as the only fair course of action to resolve consumer claims and avoid further reducing the value of the estate or delaying its resolution. The Commonwealth agrees with $DLP$’s conclusion that the collateral is burdensome, but adds that the associated consumer contracts are equally without value to the estate.

Provisions of the Proposed Court Order

The proposed order, under case number $25-11551-DSJ$, seeks to compel the abandonment of real estate collateral and grant relief from the automatic stay under 11\text{ U.S.C. & 362(d) and 11\text{ U.S.C. & 543(d)(1). The Court found by a preponderance of the evidence that the properties listed in Schedules 1 ($Kaja$), 2 ($Kaja\,2$), and 3 ($Alan$) are burdensome and of inconsequential value. Abandonment is effective immediately pursuant to $Bankruptcy\,Rule\,6007(b)(3)$.

The collateral is deemed revested with the Receiver ($Trigild\,IV, LLC$) as the entity with a prepetition possessory interest, subject to the $Northampton\,Court$ order dated $December\,12, 2022$. The Court also found "cause" for stay relief as the Debtors have no equity in the collateral and no intent to reorganize. Critically, Paragraph #8 of the order specifies that the abandoned property includes all consumer leases with option to purchase, agreements for deed, installment land contracts, and similar consumer contracts, whether or not they were expressly included on the Debtors’ schedules. The Debtors are further ordered to amend their schedules within $21$ days to remove improperly scheduled properties and correct the record.