ANDERSON, Ind. —
A local man’s death could signal a new chapter in a complicated bankruptcy case where church leaders took out life insurance policies on 11 of their older members.
In 2007, Anderson’s Lindberg Road Church of Christ took out the policies to back a $2.5 million line of credit from the Fort Wayne-based Star Financial Bank to expand its child care center and remodel the school.
The plan, dubbed Life Legacy, landed the church in U.S. bankruptcy court when “it didn’t work,” said the church’s attorney, David Kleiman, in an August court filing. “There was no market for the life insurance policies and the insureds continued to live,” meaning the church couldn’t pay back the loan.
Attorneys for the bank and the church finished presenting evidence in November, but Judge Frank Otte delayed making a decision.
Now, the church wants another crack at presenting evidence, following the death of Eugene Brock last week, for whom the church had taken out a $650,000 policy.
But neither the church or the bank can collect — the policy lapsed in May 2010, when the bank failed to pay the $89,000 annual premium.
The fact the bank “carelessly and unintentionally” let that happen, a new filing from the church says, implies it “had no confidence in Life Legacy, but did not care,” and lent the money anyway.
Calls to both parties’ attorneys and the church were not immediately returned.
According to the filing, the church took out the policy when Brock was 83. When it lapsed a few years later, the bank tried to reinstate it, but was denied because of Brock’s “deteriorating condition.”
If the church had been able to collect on Brock’s policy, it would have “significantly reduced” the amount the church owed.
But Brock’s policy isn’t the only one that’s lapsed, the filing says, adding the two for Forest and Barbara Higgenbotham, worth a total of $1.4 million, were also not reinstated.
This time, the filing says, the lapse appears intentional — possibly to “impair its (the church’s) collateral” and therefore its ability to repay the loan. Those expired in May 2010 and October 2011, respectively.
There are three policies still in effect: $400,000 total for Jayne Beeler and Janet Whiteman, and $700,000 for Johnny Lollar, which has a “special ‘no lapse’ provision.
Find Baylee Pulliam on Facebook and @BayleeNPulliam on Twitter, or call 648-4250.
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Facing foreclosure after a financing deal involving life insurance soured, the Lindberg Road Church of Christ has filed for bankruptcy protection. Don Knight
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