One of the home building companies approved to work in Lakewood Ranch in Florida recently filed for bankruptcy. This move has left many wondering just what will happen to the roughly 30 homes the company has already sold but has yet to complete. Of those sold, construction has reportedly not even started on 18 of the homes.
The company, Paradise Homes, is based out of Sarasota, Florida. The president of Paradise Homes has control over two companies: Extreme Remodelers of Sarasota LLC and Paradise Lifestyle Center LLC. Both of these companies are included in the Chapter 7 bankruptcy filing.
Between the two companies, there are 233 creditors and as much as $10 million in liabilities. The filing lists assets between $1 million and $10 million too.
With this filing, since it is a Chapter 7, many are wondering what is going to happen to the homes that were already sold. If this were a Chapter 11 bankruptcy, which typically gives companies the chance to reorganize and restructure, this would not be as much of a concern. However, with a Chapter 7 there is normally a complete liquidation, which is why many are starting to question just what will happen.
Under a Chapter 7 bankruptcy, typically the assets a company has are liquidated -- or sold off -- in order to pay back creditors. Whatever is not paid back is discharged. In the case of Paradise Homes, the filing estimates that once the administrative costs are taken care of there will not be anything left to pay back unsecured creditors.
Of course, this is also just the most basic overview of what is likely to happen due to the fact that Paradise Homes filed for Chapter 7. However, it should be noted that business bankruptcies can be rather complicated and really benefit from the advice of a bankruptcy attorney.
Source: Bradenton Herald, "Paradise Homes files for Chapter 7 bankruptcy," Josh Salman, Oct. 26, 2012