Bridger Steel Chapter 11: Conversion to Chapter 7 and LCF Lawsuit

Bridger Steel, Inc., a Montana metal roofing and siding fabricator, filed for Chapter 11 bankruptcy on February 24, 2023, in the U.S. Bankruptcy Court for the District of Montana, then converted the case to a Chapter 7 liquidation on June 13, 2023, less than four months later.¹ The company had roughly 57 employees and ran out of cash to pay them. Around 250 creditor claims were filed against the estate, and a Chapter 7 trustee is now selling what is left and pursuing a separate lawsuit against the merchant cash advance lender whose daily withdrawals helped drain the company’s accounts.

What Caused the Filing

Sixty-seven days before the bankruptcy petition, on December 19, 2022, Bridger Steel signed a merchant cash advance agreement with The LCF Group, Inc. Under that agreement, roughly $4,967 was swept automatically from the company’s checking account every day.¹

A merchant cash advance is not structured as a conventional loan. The lender buys a slice of the business’s future revenue in exchange for cash upfront and then collects through daily debits. For a company already short on working capital, those debits can pull money out faster than sales replace it. That is what the record describes here: the daily drain left Bridger Steel unable to cover payroll for its 57 employees or fund operations, and the Chapter 11 petition followed.

Why Chapter 11 Failed and Chapter 7 Took Over

When Bridger Steel filed, existing management stayed in place as a debtor-in-possession, with the same powers as a bankruptcy trustee and a duty to run the business in creditors’ interests, not just ownership’s.² The company asked the court for permission to spend cash collateral on essentials like inventory, utilities, and payroll while it tried to reorganize.

Reorganization did not work. On June 13, 2023, the case converted to Chapter 7, which the Bankruptcy Code allows when a debtor faces continuing losses with no reasonable likelihood of rehabilitation.³ Richard J. Samson was appointed Chapter 7 trustee, taking control away from management. His job is to gather assets, review every proof of claim, and distribute what the estate produces.¹

The claims deadlines were August 22, 2023, for general creditors and August 23, 2023, for governmental units. Anyone who missed those bar dates lost the right to collect from the estate.

What It Means for Customers

Customers who paid for products they never received became pre-petition creditors on February 24, 2023. To have any claim on the estate, they needed to file a proof of claim (Official Form B 410) with supporting documentation before the August bar date.⁴

Consumer deposits get some protection. Customers who prepaid for products they never received can claim priority status up to $3,800 per person under the amount that took effect April 1, 2025.⁵ Anything above that cap drops to general unsecured status, which sits near the bottom of the payout order.

Unfilled orders were executory contracts that the debtor or trustee could either perform or reject.⁶ Once the case converted to Chapter 7 and operations ceased, rejection was effectively the outcome, and the customer’s remedy was a claim for the lost deposit.

Warranties are a harder problem. Product warranties on items Bridger Steel delivered before the filing are pre-petition obligations, and with no operating business left to honor them, customers can file unsecured claims but should not expect meaningful recovery. Customers who bought products after the filing but before the June conversion have stronger footing, because those transactions are administrative expenses of the estate.

What It Means for Employees

Wages earned before the February 24 filing but not yet paid qualify for priority up to a per-employee cap. When Bridger Steel filed in 2023, the cap was $15,150 for wages earned within 180 days before the petition; the figure adjusts periodically for inflation and is $17,150 for cases filed on or after April 1, 2025.⁵ Unpaid contributions to benefit plans within the same 180-day window get similar treatment, subject to their own per-employee cap.⁷

Wages earned after the filing date are treated as administrative expenses, which sit at the top of the payout order. That distinction mattered while Bridger Steel was still operating during Chapter 11. Once the case converted to Chapter 7, operations stopped, and any remaining wage claims fold into the liquidation distribution.

Where Other Creditors Stand in Line

Chapter 7 pays claims in a strict order, and each tier must be paid in full before the next tier sees a dollar:

Secured creditors are paid first from the sale of their specific collateral. If the collateral sells short, the shortfall drops into the unsecured pool.
Administrative expenses come next: trustee fees, attorney and accountant fees, and the cost of running the case, including the adversary proceeding against The LCF Group.⁸
Then priority claims in a set sequence: employee wages within the cap, then benefit plan contributions, then consumer deposits up to the $3,800 cap.
General unsecured creditors, including trade vendors and material suppliers, come last, splitting whatever remains pro rata.

With around 250 claims filed against an estate whose main assets were manufacturing equipment, inventory, and accounts receivable, the math is unforgiving for lower-priority creditors. Administrative and priority claims typically consume most of what a liquidation produces, and general unsecured claims often recover pennies on the dollar, if anything.

The Trustee’s Lawsuit Against The LCF Group

After reviewing the claims register, Trustee Samson filed an adversary proceeding against The LCF Group. The suit asks the bankruptcy court to disallow LCF’s claim against the estate, avoid its lien, recover payments as preferential transfers, and declare that the merchant cash advance was in substance a loan carrying a usurious interest rate under Montana law.¹ Any money the trustee recovers goes back into the estate and increases what other creditors can be paid.

The LCF Group moved to send the dispute to private arbitration under a clause in its pre-bankruptcy contract. The bankruptcy court denied the motion, reasoning that the trustee’s claims come from independent powers under the Bankruptcy Code, not from Bridger Steel’s contract rights, and that splitting the issues between an arbitrator and the bankruptcy court would create duplication and waste that “fundamentally conflicts” with the Code’s collective claims process.¹

The ruling matters beyond this case. Merchant cash advances have become common among small businesses in distress, and when they contribute to a bankruptcy filing, trustees can and do challenge them. The Bridger Steel decision confirms that an MCA lender cannot use its arbitration clause to pull core bankruptcy issues, such as preference actions and claim objections, out of the bankruptcy court.

What to Do Now

If you are owed money, paid a deposit, or hold a warranty on a Bridger Steel product, check whether you filed a proof of claim before the August 2023 bar date. If you did, your recovery depends on where your claim sits in the priority order and how much the trustee ultimately collects, including anything won from The LCF Group. If you did not file in time, your claim against the estate is generally lost. Case updates, including the trustee’s reports and any distribution, are filed on the bankruptcy court docket for the District of Montana.

1
GovInfo. Memorandum of Decision in Re Bridger Steel, Inc.
2
Office of the Law Revision Counsel. 11 U.S. Code 1107 – Rights, Powers, and Duties of Debtor in Possession
3
Office of the Law Revision Counsel. 11 USC 1112 – Conversion or Dismissal
4
United States Courts. Proof of Claim
5
Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases
6
Office of the Law Revision Counsel. 11 USC 365 – Executory Contracts and Unexpired Leases
7
Office of the Law Revision Counsel. 11 U.S. Code 507 – Priorities
8
Office of the Law Revision Counsel. 11 USC 503 – Allowance of Administrative Expenses