Sept. 5 (Bloomberg) -- Celebrity photographer Annie Leibovitz has bought more time to deal with her financial woes.

A New York judge granted Leibovitz an extra month to respond to a lawsuit filed by Art Capital Group, which loaned her $24 million last year. Art Capital has accused Leibovitz of reneging on an agreement that made the lending firm the exclusive agent for selling her real-estate holdings and photographs.

Leibovitz, who turns 60 next month, now has until Oct. 1 to respond under a Sept. 2 ruling by New York State Supreme Court Justice Bernard Fried. A hearing is scheduled for Oct. 2.

The decision doesn’t affect Leibovitz’s obligation to pay back Art Capital by Sept. 8. Even if she doesn’t meet the deadline, some legal experts said the firm may not declare her in default because it could force her into bankruptcy.

“Declaring her in default may be like nuclear weapons,” said attorney Thomas Kline, a partner in the Washington office of Andrews Kurth LLP who specializes in art law and litigation. “It would make it more urgent and helpful for her to declare bankruptcy and come under a protection of the bankruptcy court.”

Art Capital may prefer to settle out of court, Kline said.

“We hope this can be resolved but are prepared to protect our rights in any scenario that unfolds,” Art Capital spokesman Montieth Illingworth said.

Photographer Sues

Leibovitz’s lawyer, Steven Brawer of Lowenstein Sandler PC in Rosedale, New Jersey, declined to say whether the sides were engaged in settlement talks.

More legal trouble erupted yesterday when Paolo Pizzetti, a photographer from Siena, Italy, sued Leibovitz in U.S. District Court in New York, alleging she misappropriated photos he took and used them in advertising campaign.

Pizzetti says Leibovitz hired him to shoot photographs of scouting locations for an ad campaign for LavAzza, the Italian coffee company, in April 2008. He said he photographed the Trevi Fountain in Rome and Plaza San Marco in Venice and images of other sites for her and sent her the images digitally.

Leibovitz later informed him she wouldn’t be traveling to Italy, he said, and Pizzetti said he doesn’t believe she ever traveled there for the ad campaign. Later, when LavAzza released its calendar of Leibovitz photos in October, he noticed two of his scouting pictures had been used with models superimposed were in it, including the calendar’s cover.

‘Same Bird’

A comparison of the plaza photo shows “the same wet weather conditions, cloud formation and the same bird in the upper left portion of the photograph,” Pizzetti said in the complaint.

“It is clear that the Leibovitz defendants copied the Plaza work authored by Pizzetti and edited it,” he said. “At no point did the Leibovitz defendants convey to Pizzetti that she planned on using his Trevi photograph and his Plaza photograph in the calendar or request his permission to do so.”

He seeks a court order requiring Leibovitz to stop using the images and $150,000 per infringement of his images as well as other unspecified damages.

“Since we have not yet seen the filing, we have no comment,” said Leibovitz spokesman, Matthew Hiltzik.

Manhattan Brownstones

If Leibovitz doesn’t repay the loan, she might lose her three brownstones in Manhattan’s West Village as well as a 228- acre property in Rhinebeck, New York, that once belonged to the Astor family. The properties might be worth as much as $40 million, according to real-estate brokers, and her photographs have been valued at more than $50 million by Art Capital.

Art Capital might try to work out a deal allowing Leibovitz to avoid foreclosure in exchange for additional fees, new collateral or higher interest rates, said Marc Abrams, head of bankruptcy and restructuring at Willkie Farr & Gallagher LLP in New York. Abrams isn’t involved in the Leibovitz case.

Art Capital could ask Leibovitz to hire “sophisticated” real-estate brokers and auction houses to sell some of her property and photographs, Abrams said. In addition, he said, Leibovitz could be asked “to live on a budget.”

The case is Art Capital Group Inc. v. Leibovitz, 602334/2009, New York State Supreme Court, New York County (Manhattan). The federal case is Paolo Pizzetti v. Annie Leibovitz, 09-CV-7696, Southern District of New York (Manhattan).

To contact the reporters on this story: Patricia Hurtado in New York State Supreme Courthouse at phurtado@bloomberg.net; Katya Kazakina in New York at kkazakina@bloomberg.net.

Last Updated: September 5, 2009 00:01 EDT