In re ILS Income Fund I LP and ILS Growth Fund I LP, Case No. 25-37277 (Bankr. S.D. Tex.)
Court filings in the Chapter 7 bankruptcy of ILS Income Fund I LP and ILS Growth Fund I LP are shedding light on the scale of debt owed to the two investment funds by entities owned and controlled by Jerome Karam, a Houston-area real estate developer. According to the Trustee’s own filings, Mr. Karam personally guaranteed every note at issue, and the record reflects that other creditors have already obtained judgments against him separate from this case.
Background
ILS Income Fund I LP and ILS Growth Fund I LP filed for Chapter 7 relief on December 1, 2025. Ronald J. Sommers was appointed Chapter 7 Trustee for both jointly administered estates. According to the Trustee’s August 4, 2026, sale motion (Dkt. No. 142), the Debtors operated as investment funds that primarily invested in promissory notes secured by commercial real estate — and a significant share of those notes were made to ten special-purpose entities collectively identified in the filings as the “JMK5 Entities.”
Per the motion, “[o]n information and belief, all of the JMK5 Entities are owned by Jerome Karam,” who “personally guaranteed each of the loans in the JMK5 Loan Portfolio.”The JMK5 Entities and What They Owe
The Trustee’s filings identify ten JMK5 borrower entities, each tied to a specific commercial property, and the notes secured against that property. Based on the original principal amounts listed in the Trustee’s motion:
| JMK5 Entity | Property | Total Note Principal | Amount Owed to the ILS Funds |
| JMK5 Alvin, LLC | Alvin, TX | $4,500,000 | $4,000,050 |
| JMK5 Arena, LLC | La Marque, TX | $5,900,000 | $5,900,000 |
| JMK5 Falstaff Hotel, LLC | Galveston, TX | $20,984,810 | $20,984,810 |
| JMK5 Gemini A, LLC | Houston, TX | $16,940,000 | $14,091,707 |
| JMK5 Gemini B, LLC | Houston, TX | $10,105,000 | $9,405,000 |
| JMK5 Gemini D, LLC | Houston, TX | $12,960,000 | $11,080,000 |
| JMK5 Marina, LLC | Kemah, TX | $1,650,000 | $1,650,000 |
| JMK5 Racing, LLC | Texas City, TX | $6,500,000 | $4,999,800 |
| JMK5 Shreveport, LLC | Shreveport, LA | $2,115,000 | $2,115,000 |
| JMK5 Sand Springs, LLC | Sand Springs, OK | $51,435,000 | $51,435,000 |
| Total | $133,089,810 | $125,661,367 |
(“Amount owed to the ILS Funds” reflects each fund’s ownership percentage in the applicable notes; the balance is held by third-party co-owners such as KK Houston Properties, Inc. and several unaffiliated “ILS RE Capital” entities that are not part of the bankruptcy estates.)
Notably, the appraised value of the underlying properties — obtained by the Trustee’s retained appraiser, Integra Realty Resources — totals only about $45.4 million, roughly a third of the debt secured against them. Many of the properties carry multiple layered liens, several of which the Trustee’s own filings value at $0 in recovery because senior debt already exceeds the property’s worth.
What the Filings Say About Mr. Karam’s Financial Position
The Trustee’s motion, filed in connection with a proposed sale of the JMK5 notes, includes the Trustee’s assessment of Mr. Karam’s guarantees and overall financial condition:
“The indebtedness represented by the JMK5 Loan Portfolio represents only a portion of Mr. Karam’s liabilities, and many of his other creditors have already obtained judgments against him. Moreover, most of Mr. Karam’s non-exempt assets hold little, if any, value.”
Because of this, the Trustee concluded that pursuing Mr. Karam’s guarantees separately “would not result in any recovery for the Estates,” and is including the guarantees in the proposed sale to a third-party buyer for no additional purchase price.
The Proposed Sale
Rather than pursue collection against Mr. Karam or the JMK5 entities directly, the Trustee has moved to sell the bulk of the JMK5 note portfolio — along with Mr. Karam’s guarantees — to Impex DGW Capital, LLC for $27,866,000, subject to Bankruptcy Court approval and higher or better offers. If approved, the debt itself would not be extinguished; it would simply be reassigned to a new creditor, with the ILS estates receiving an estimated $15.3 million in sale proceeds rather than pursuing the full-face value of the debt.
The Bottom Line
Public court records in this Chapter 7 case show that entities tied to Jerome Karam are collectively obligated on more than $125 million in notes held by the ILS funds, all personally guaranteed by Mr. Karam, at a time when the Trustee’s own filings note that other creditors already hold judgments against him and that his unencumbered assets are of little value. The case remains pending before the U.S. Bankruptcy Court for the Southern District of Texas, and the sale motion is subject to further Court proceedings, objections, and possible competing bids.
This post summarizes publicly filed court records in Case No. 25-37277 (Bankr. S.D. Tex.) and is provided for informational purposes only. It does not constitute legal advice. Readers are encouraged to review the underlying filings on PACER.