Lindsey Bankruptcy Results in Small Change

Turns out Tim Tarvin got it just about right.

Tarvin is an associate professor of law at the University of Arkansas and a former bankruptcy trustee. You may remember he raised a few eyebrows back in 2010 when he said some creditors in John David Lindsey’s $169.6 million bankruptcy case could expect to collect about a nickel on the dollar for the debt they were owed.

Tarver later clarified, explaining that creditors who had been “careful and cautious” might get 100 percent of what they were owed. It was the undersecured and unsecured creditors, Tarvin believed, who would get pennies on the dollar.

Well, someone slipped us a copy of trustee John T. Lee’s final report on Lindsey’s bankruptcy, and Tarvin is looking pretty smart right about now. The final report was filed and entered March 5 at the U.S. Bankruptcy Court in Fayetteville.

The bottom line shows those with unsecured claims will receive a total of $183,941.26. Pennies on the dollar, indeed.

More Math

There’s a lot between the opening lines of Lee’s notice of final report and the bottom line, of course, and we were lucky enough to find a bankruptcy attorney to help us sift through the numbers.

Best we can tell, the unsecured non-priority claims back in 2010 ended up totaling about $159.1 million. Only creditors who file proofs of claim, however, are entitled to try to get a piece of the settlement.

That meant “a lot of little guys don’t even try,” our attorney friend said.

According to court documents, about $72.35 million in proofs of claim were filed. According to Lee’s report, claims “of general [unsecured] creditors totaling $31,252,462.06 have been allowed and will be paid pro rata” at a rate of about 0.6 percent, plus interest where applicable.

Unfortunately for the creditors, the pool of money available totaled barely more than $205,000. Take out the trustee’s fees and expenses, and taxes, and that pool shrank to $183,941.26.

Disturbing Disbursements

The relatively shallow disbursement pool means, for example, that Chambers Bank, which had allowable claims totaling about $4.96 million, was left with a proposed payment of a little more than $21,000.

Or, more to the point, a company called Moore’s Retread & Tire, which had a claim of $18,527.12, was left with a proposed payment of $109.04.

It’s also worth noting that James E. Lindsey, Lindsey Investments and JE Lindsey Limited Family Partnership, which had a total of about $21 million in claims, was left with a proposed payment of about $124,000, or 67.4 percent of the disbursements.