By Stephen Dick
The Herald Bulletin
ANDERSON, Ind. —
The bankruptcy of Lindberg Road Church of Christ’s bankruptcy suffered a below recently when a court denied the church’s amended plan of reorganization.
The church obtained a loan from STAR Financial Bank for $2.5 million in 2007, but was having trouble paying it back. To have money coming in, the church took out life insurance policies on some of its members. When they died, the church would collect the money and pay off its debt.
Years went by and no one died, which led the church into bankruptcy. When parishioner Eugene Brock died there was a policy for $650,000 on him. But neither the church nor STAR could collect as the policy had lapsed. The church blamed the lapsed payments on the bank, but Judge Frank Otte of the United States Bankruptcy Court in Indianapolis disagreed.
As Otte pointed out, the court gave the two sides time to work out the agreements. The church came up with a plan, which dictated what the bank would be paid and how the bank could act toward the church’s assets.
“The Court, after reviewing the pleadings ... finds the Debtor’s Plan is not confirmable as proposed on a number of grounds,” wrote Otte.
One of those grounds is a violation of state law. The church claims an oral agreement from 2006 that would limit the bank’s claim.
“The Court agrees with the Bank’s agreement that the Bank’s secured claim cannot be limited by the Plan based upon an alleged oral ‘understanding’ ... that is found nowhere in the Loan Documents.”
Otte called the church’s terms toward the bank as “not fair and equitable.”
The judge scolded the church for “placing the economic fallout on the shoulders of the bank instead of accepting “the consequences of its financial decisions and not look for blame as an escape from dealing with negative fallout of those decisions.”
Otte urged the church to present a new bankruptcy plan consistent with his ruling and the two sides “can now focus on working together to restructure this Debt.”
Messages left for the Lindberg Road Church of Christ’s pastor Ryan Smith and the church’s attorney, David Kleiman, went unreturned.