Pursuant to a June 27, 2012 tribal resolution, on July 2, 2012, the Santa Ysabel Resort and Casino filed a voluntary chapter 11 bankruptcy petition. The casino is an unincorporated enterprise for economic development owned by the Iipay Nation of Santa Ysabel, a federally recognized Indian tribe. After numerous construction problems during the peak of construction pricing, the casino opened in 2007, just before the drop in the economy. According to papers filed in the Bankruptcy Court, the casino is financially distressed and unable to service the debt associated with its construction and operation.
This chapter 11 filing may become a case of first impression as to a tribe’s eligibility for relief to file bankruptcy. Because of the uncertainty as to whether an Indian tribe can be a “debtor” under the bankruptcy code, other tribes facing financial distress have elected not to file bankruptcy, but rather, to continue workouts outside of bankruptcy court. An eligibility decision in this case involving the Santa Ysabel Resort and Casino could have major ramifications for both tribes and lenders to tribes.
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