A bankruptcy judge refused Wednesday to protect the Kapok Tree restaurant from its creditors any longer. Earlier this year, Judge Thomas Baynes dismissed the case from bankruptcy court after three plans to reorganize and pay back the creditors had failed. The judge's action left some creditors worried that they will never get their money back.
On Wednesday, they asked the judge to take the Clearwater restaurant back under the court's protection until it could be marketed and sold for its full value.
Attorney Norman Davidson, who represents unsecured creditors owed at least $1.2-million by the restaurant company, told the judge he fears his clients would not get their money if the court did not keep the restaurant corporation under its protection and that only large creditors would be repaid.
One big creditor, Kentucky Central Life Insurance Co., which is owed more than $1.8-million on a mortgage against the Kapok Tree, is asking a circuit judge to foreclose on the property so that it will be sold and the insurance company can get its money.
If that happens, Davidson said, the restaurant will sell for far less than the $3.2-million at which it has been appraised, and "my clients are going to get wiped out, and Kentucky Central is going to end up with everything."
Despite the protests, Baynes refused to take the case back.
"I will tell you right now it's going to stay dismissed," he said.
That leaves the door open for Kentucky Central to finish foreclosure on the seven-acre parcel on McMullen-Booth Road. If the foreclosure is successful, the property will be auctioned off at the courthouse.
If there is any money left after Kentucky Central is paid its share, the remaining money will go toward paying unsecured creditors. Any money remaining after that would be distributed among the 1,700 shareholders in the company, said former company president Aaron Fodiman.