Toby McKenzie bankruptcy case may be near end

Toby McKenzie bankruptcy case may be near end

January 24th, 2013 by Todd South in Local Regional News

Toby McKenzie

Toby McKenzie

Photo by Tim Barber /Times Free Press.

The years-long bankruptcy cases of former millionaire payday loan king Toby McKenzie could end with a "global settlement" on March 6.

Since an involuntary bankruptcy began in 2008, McKenzie's assets have been liquidated to pay nearly $200 million owed to 40 creditors nationwide.

McKenzie made his fortune in the payday loan business. The Cleveland, Tenn., man later sold the business and invested money in real estate and other ventures.

Shortly after the bankruptcy began, accusations flew.

In 2010 McKenzie's bankruptcy trustee Kenneth Still sued Nelson Bowers II, who was McKenzie's former business partner in developing the Cleveland Auto Mall at Interstate 75 exit 20. McKenzie claimed that Bowers took advantage of him while he suffered from a mentally debilitating illness, convincing him to sell his stake in the property for $75,000.

The entire 60-acre, undeveloped property's mortgage was $3.8 million. McKenzie was a 50 percent partner in the development.

Still claims that the purpose of the sale was to prevent the land from being seized in the ensuing bankruptcy and should be reversed.

"Bowers and his agents were aware of [McKenzie's] bankruptcy which was part of [Bowers'] motivation in obtaining [McKenzie's] interest," according to court documents.

Steve Dillard paid Bowers $505,000 to become one-third owner of the property development. Bowers then sold another one-third interest to Dewayne McCamish for $600,000 in debt forgiveness.

Bowers sued McKenzie in 2011, claiming that McKenzie's lawsuit was frivolous and likely "malicious prosecution."

Early in the bankruptcy proceedings the Chattanooga law firm of Grant, Konvalinka and Harrison told the trustee that the firm was owed attorneys' fees for legal work performed for McKenzie.

Later in the bankruptcy, the law firm updated its claim, saying that it was a "secured creditor" in McKenzie's property and interests and was owed much more money.

Still sued the law firm, writing that he doesn't believe the secured creditor claim is true.

Nearly every action in U.S. Bankruptcy Court has been appealed by one or more parties to the U.S. District Court. Some questions have even reached the U.S. Court of Appeals for the 6th Circuit.

U.S. District Judge Curtis Collier met with lawyers for all sides of the case Wednesday afternoon to schedule responses to ongoing legal questions. Attorneys for all sides told the judge that they will attempt a global settlement of claims in a March 6 mediation meeting.

The mediation meeting is private. All sides must agree on the outcome of the meeting for it to resolve the case. If not, then the legal tug-of-war will resume in all of the unanswered appeals and filings.

There is a hearing scheduled today in Bankruptcy Court for the lawsuit by McKenzie against Bowers.