Flipcause Bankruptcy May Be Converted to Chapter 7 as Funds Dwindle
The trustee overseeing Flipcause’s bankruptcy case has asked the court to convert the company’s Chapter 11 bankruptcy into a Chapter 7 liquidation, citing a lack of available funds.
“The Debtor’s estate has no operations or ability to collect revenue,” Trustee Jeffrey Testa wrote in a court filing, adding that “each dollar expended… is not being replaced.”
Chapter 11 bankruptcy is designed to allow a business to reorganize and continue operating, while Chapter 7 generally signals the end of a company’s operations. In March, Testa sold or abandoned Flipcause’s remaining assets to generate funds for creditors.
Flipcause filed for Chapter 11 protection in December, disclosing approximately $30 million in liabilities. Nearly $29 million of that amount is owed to nonprofit organizations across the country. A court-appointed trustee replaced management in January amid concerns about alleged mismanagement.
Sale of Assets Falls Short of Expectations
In March, Software4Nonprofits acquired Flipcause for $400,000—far below the $15 million valuation that co-founder Emerson Ravyn had previously suggested the company could command.
The nonprofits owed nearly $29 million are classified as unsecured creditors, meaning they will only receive payment after administrative expenses, legal fees, and certain investor claims are satisfied. Testa estimates these higher-priority claims could total between $2.5 million and $3.6 million, including at least $750,000 in court-approved attorney fees.
Investor Settlement Reached
One of Flipcause’s creditors, Grand Avenue Investments, LP, reached a settlement with the bankruptcy estate.
Although Flipcause’s bankruptcy schedules list a debt of $600,000 to Grand Avenue, the investment firm claims it is owed at least $1.2 million. Under the agreement, Grand Avenue will limit its secured claim to $825,000.
The settlement provides:
- An immediate payment of $250,000 to Grand Avenue.
- Repayment of the remaining $575,000 through a revenue-sharing arrangement tied to Software4Nonprofits subscriptions.
- Forgiveness of any unpaid balance if the amount is not fully repaid within six months.
Additionally, Grand Avenue agreed that another $375,000 claim would be treated as unsecured debt and would only be considered after nonprofit creditors are repaid.
The firm also transferred its rights to pursue personal claims against former Flipcause executive Emerson Ravyn to the bankruptcy estate. Grand Avenue had previously filed suit against Ravyn in New York Supreme Court in January.
Funding Future Investigations
As part of the agreement, the parties established a “Carve Out Reserve” to fund the administration of the bankruptcy case. The reserve includes:
- $400,000 for Chapter 11 estate professionals.
- $300,000 for a future Chapter 7 trustee.
If the case converts to Chapter 7, the trustee would be responsible for investigating potential claims and pursuing recovery actions on behalf of creditors. Testa has previously indicated that he intended to examine funds transferred before the bankruptcy filing.
Court records show that Flipcause executives paid themselves approximately $3.8 million before the company entered bankruptcy.
Settlement with Stripe
Testa also negotiated a settlement with payment processor Stripe, which froze Flipcause funds in December 2025 after company leadership indicated it would not comply with a cease-and-desist order issued by the California Attorney General’s Office.
Stripe faced penalties from Mastercard related to chargebacks after nonprofits reported that donations collected through Flipcause were not being remitted.
Although Flipcause sought a court order requiring Stripe to release the frozen funds, Stripe, Grand Avenue, and the California Attorney General opposed the request.
Under the proposed settlement, the bankruptcy estate would immediately receive approximately $550,000. Stripe also agreed that any unsecured claims it may hold would be subordinated to nonprofit repayment claims.
Nonprofits Challenge the Settlements
Several nonprofit organizations have objected to the proposed settlements.
Americana Community Center, a Kentucky-based nonprofit owed approximately $50,000, argued that the funds collected through Flipcause were charitable donations intended for its programs rather than payments for services provided to Flipcause.
In a court filing, Executive Director Richard Santiago wrote that the organization’s fundraising campaign was designed to support ongoing operations and that continued withholding of the funds harms both the nonprofit and public trust in charitable giving.
Attorneys representing dozens of charities in a proposed class-action lawsuit also filed a limited objection. They are seeking a detailed accounting of the funds held by Stripe, arguing that some of the money may belong directly to donors and designated nonprofit beneficiaries rather than the bankruptcy estate.
Upcoming Hearing
The court is scheduled to hold a hearing on April 28 to consider the proposed Chapter 7 conversion, the settlements with Grand Avenue and Stripe, and various creditor claims.