A bank is disputing assertions by a bankrupt Henderson church that certain funds donated by church members are not part of the church's bankruptcy estate.
The Church at South Las Vegas filed for bankruptcy protection and reorganization July 8 to avoid foreclosure of its property after the church strategically defaulted on its mortgage.
Officers of the church, which has a ministry helping exploited sex workers in Las Vegas, said it’s deeply underwater on its mortgage for its building at 3051 Horizon Ridge Parkway.
They said it doesn’t make sense to continue making mortgage payments and that it needs to preserve cash to build a larger church. The church says it has offered to pay the mortgage if the bank will write down the principal amount of the mortgage – but so far the terms offered have been unacceptable to the bank.
The building is worth just $2.375 million vs. the $7.653 million owed to the bank, church attorneys say.
In one of the church’s early bankruptcy filings, its attorneys with the Las Vegas law firm Gordon Silver are seeking a court declaration that $646,700 in "designated cash" held by the church is not the property of its bankruptcy estate and therefore not subject to creditor claims or control by the court.
This money, the attorneys said, has been donated by church members for specific purposes such as expanding the church – and they are arguing creditors shouldn’t be able to require that the cash be used to pay the mortgage and for operational expenses.
Attorneys for First Bank of St. Louis, which holds the mortgage note, argued Wednesday that these claims plainly contradict the loan agreement signed by church officers.
"It is unfortunate that rather than honoring its commitments, the debtor seeks to retain cash for future expansion at the expense of paying creditor claims," the bank attorneys said in a court filing.
"The parties contemplated, the (church) board authorized and the loan documents expressly provide for all income, including without limitation, tithings, pledges, gifts, commitments and givings, and the accounts into which those funds are deposited, to constitute the collateral of the bank," said the filing for the bank by attorneys with the Las Vegas law firm Santoro, Driggs, Walch, Kearney, Holley & Thompson.
U.S. Bankruptcy Judge Linda Riegle hasn’t indicated when she’ll rule on the dispute over the cash held by the church.