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In one of the most complex bankruptcy cases in West Virginia history, attorneys for some of the debtors in the Blackjewel coal company bankruptcy filed a motion to convert the Chapter 11 reorganization to Chapter 7 liquidation.

On Nov. 25, a motion was filed with the U.S. Bankruptcy Court for the Southern District of West Virginia asking for Blackjewel’s estate and its affiliated debtors, including Blackjewel LLC’s former CEO Jeffery Hoops, be handled by a court-appointed liquidator because they do not have the money to continue the Chapter 11 process with no hope of rehabilitation.

“Cause clearly exists under Section 1112(b)(1) to convert this matter to Chapter 7,” the filing said. “Given the Debtor’s ongoing, and given its lack of operating assets permanent, negative net cash flow, and continuing financial losses, there is no reason to continue this proceeding as a Chapter 11 and incur the substantial and unnecessary administrative expenses attendant to doing so.”

If the motion is granted by the federal court, it means that instead of exiting Chapter 11 bankruptcy as a new company with less debt, Blackjewel LLC would effectively cease to exist. This could mean the company and its affiliated debtors potentially would not have to pay millions in back taxes, reclamation fees, employee health care and unfunded pension obligations and other expenses.

Scott Stapleton, of Stapleton Law Offices in Huntington, an experienced bankruptcy attorney, said it is very common for companies to shift from a Chapter 11 to a Chapter 7 when they are struggling financially, like Blackjewel.

“This happens the majority of time,” he said. “It appears they were really hurt by the declining coal market.”

Stapleton said this particular bankruptcy case is so complex because of its size.

“It’s just so huge,” he said. “This was a huge entity with many subsidiary companies.”

Stapleton said he believes the most recent filings indicate Blackjewel is not able to reorganize under Chapter 11 and different factions are arguing the methodology to use to best distribute the remaining assets according to federal bankruptcy law.

“It’s just the two alternative ways to liquidate the remaining assets,” he said. “The majority of the assets have already been sold off and given to creditors.”

In the filing, the debtors admit that “virtually all of the debtors’ assets and operations have been sold.”

“The only remaining assets appear to be unrestricted cash of $146,243 and existing claims against Clearwater Investment Holdings, LLC, United Bank, Lexington Coal Company and Mr. Hoops,” the filing said. “According to the debtors, there also exist inchoate and/or undetermined possible future claims against Mr. Hoops, his wife, their children and their families, and several businesses.”

The debtors reported assets having a total book value of more than $357 million on the petition date.

“The debtors, however, realized a total of less than $44 million from the sale of nearly all reported assets through October 31, 2020,” the filing said.

On Wednesday, Dec. 2, an objection motion was filed in the case to the Chapter 7 liquidation plan by the same attorneys that filed the motion to have the bankruptcy converted from a Chapter 11 bankruptcy case.

A timeline of the convoluted bankruptcy case that has lasted nearly a year and a half shows that on July 1, 2019, Blackjewel, LLC and four affiliated debtors each filed a voluntary petition for relief under Chapter 11. The move left hundreds of coal miners out of work and unpaid.

On July 24, 2019, six additional debtors each filed a voluntary petition for relief under Chapter 11.

On Sept. 14, 2020, the bankruptcy court entered an order continuing the stay temporarily prohibiting medical service providers from direct billing and commencing or continuing any judicial, administrative, or other proceeding against individuals covered under the debtors’ health plan through and including Dec. 27, 2020.

On Sept. 25, 2020, the debtors filed their “Joint Plan of Reorganization and the Disclosure Statement.”

On Nov. 25, the debtors filed motion to convert the Chapter 11 bankruptcy to a Chapter 7 liquidation.

On Dec. 2, a preliminary objection was filed to the debtors’ first amended disclosure statement and joint Chapter 11 plan of liquidation.

The cases are pending before Judge Frank W. Volk and are jointly administered under Case No. 19-30289. The hearing to consider confirmation of the plan and approval of the disclosure statement will be held at 9:30 a.m. on Thursday, Dec. 17, and will take place using telephonic and videoconferencing technology.

Reporter Courtney Hessler contributed to this article.

Follow reporter Fred Pace at FredPaceHD and via Twitter @FredPaceHD or email him at

Follow reporter Fred Pace at and via Twitter @FredPaceHD or email him at