Chapter 13 bankruptcy is protecting one man from city debt collectors, while municipal officials speak out against a recent court decision.
In High Point, North Carolina, the city council may be hard-pressed to ever recover money owed to them by City Councilman Foster Douglas. Benjamin Kahn, a judge in the U.S. Bankruptcy court, ruled the city may not be eligible for repayment of an earlier judgment.
Douglas filed a Chapter 13 bankruptcy protection plan in December, which keeps the city from being named as a secured creditor, eligible for immediate repayment. The city continues as an unsecured creditor in the proceedings.
In 2002, Foster and his brother Jerry Douglas, filed a civil rights lawsuit against the city of High Point. This case was dismissed for lack of evidence, and the pair were responsible for the debt to the city of 106,000 residents.
The local lawmaker owes $32,216 to the city, according to the bankruptcy court handling the case. He has agreed to pay $1,125 a month for five years in restitution. That totals $67,500, which will be paid to Bank of America, the Internal Revenue Service, and the North Carolina Department of Revenue.
The amount Douglas will pay is not expected to cover any unsecured creditors in the case, which could leave the city holding the debt. If Douglas completes this court order successfully, his debt to the city would be discharged.
City officials did little with the judgment, until August 2013, when they re-executed the court order.
In the latest ruling, Kahn ruled the defendant’s debt to his mortgage company, totaling $78,800 and $30,900 in back taxes take precedent over debt owed to the city. Municipal officials in High Point argued their debt should be paid first, since the ruling ordering payment occurred before mortgage on the house became overdue.
Bankruptcy cases can become complicated, and this example in North Carolina shows just how complex these proceedings can become at times.