Foreclosure Evasion Using Chapter 11 of the Bankruptcy Code: A Case Study

Posted on January 3rd, 2008 by saman

On 31st of December 2007, a foreclosure sale of a ten-storied bank building in
Longview was prevented by using the bankruptcy protection legislation. The building was owned by a partnership, Two Hundred North Fredonia Ltd., led by Ronald W. Weaver Sr. The partnership acquired a 20-year loan of nearly $1.5 million for the building at the northeast corner of Tyler and Fredonia streets in 2005. The sale was scheduled for same day but was subsequently called.

On the online form that is used to file for the Chapter 11 of the Bankruptcy code, Mr. Weaver indicated liabilities of between $1 million and $100 million. He also showed that the total assets too amounted to between $1 million and $100 million. The property had an assessed value for tax purposes of $1.171 million for 2007, according to information on the county’s Internet site.

The principle assets only consisted of a former bank and office building. The partnership owes nearly $180,000 to creditors, both secured and unsecured, according to tax and court records.

According to Kilpatrick Life Insurance Co., the company pleading the case against the partnership, the Two Hundred North Fredonia Partnership owes to the Company more than $89,000 in loan payments and late fees. The court record further shows the partnership owes more than $90,000 to eight other unsecured creditors. The largest of those are Curtis-McKinley Sheet Metal; Schindler Elevator Corp.; Air Cybernetics; and American Electric Power Co. Accruals in taxes amount to a further $58,000, for 2006 and 2007, according to the Tax Assessor-Collector’s Web site. A major portion of which, approximately $37000, has to go to

Longview
Independent
School District.

The share of taxes owed to the city for both years is $14,000 while the county needs a further $7,600 to be paid in accrual. $150 is also due to The Road and Bridge fund. Records also show that no proof had been provided regarding the payment of insurance and that the entity also had to pay accrued property taxes for 2006 and 2007.

It was not the first time that Weaver used the Chapter 11 to his advantage as he battles foreclosure, according to court records. On November 5th,just a day before the
West Loop 281 shopping center was to be foreclosed, a file was also made by the Gilmer Road Loop 281 Partnership Ltd., with Weaver as manager and general partner. The outcome of that file is still pending.

According to foreclosure proceedings, the original loan amount is listed as $675,000 for this partnership. The file was made by Gregg County Clerk’s Office on Oct. 15. The method Weaver used in this filing is similar to those he earlier employed: like in the files before, he checked the box on the form indicating liabilities of between $1 million and $100 million and that the partnership assets amounted to between $1 million and $100 million.