McKenzies frustrated with bankruptcy

McKenzies frustrated with bankruptcy

April 30th, 2010 by Monica Mercer in News

The wife of self-made millionaire Toby McKenzie, a Cleveland, Tenn., native who went from riches to rags after being forced into bankruptcy almost two years ago, expressed her frustration with the process and said it has made them learn who their real friends are.

"When my husband was handing out money right and left, everyone was there, weren't they?" Rebecca McKenzie said through tears Thursday after a Bankruptcy Court hearing as Mr. McKenzie sat by her side.

She explained how the bankruptcy filed in 2008 has "paralyzed" their life, despite her husband's history of philanthropy. Mr. McKenzie, a pioneer of the national payday loan business, donated millions of dollars to local schools and charities over the years.

"This man has literally donated millions to this community, but when he had such bad medical problems (after declaring bankruptcy), we couldn't even get the trustee to help us pay his medical bills," Mrs. McKenzie said.

In early 2009, just after Mr. McKenzie was forced into bankruptcy, a health scare put him in a coma for days, causing the court to put total control of his daily business operations in the hands of a bankruptcy trustee and independent accountant.

Mr. McKenzie seemed hopeful Thursday after the hearing, calling the handling of his bankruptcy case "sloppy" over the past year and a half and expressing confidence that the judge would allow him to carry out his plan to pay back his creditors.

After creditors nationwide filed documents showing Mr. McKenzie owed about $151 million, he initially wanted to reorganize his many businesses under the Chapter 11 bankruptcy code and try to repay as much debt as he could, documents indicate.

The sale of collateral drastically has reduced Mr. McKenzie's debt since the initial bankruptcy filing, but the exact amount is not yet known, officials said. Mr. McKenzie's plan calls for $1 million to settle all claims.

The court hearing Thursday marked the beginning of the struggle for Mr. McKenzie to regain control of his financial life, and some of U.S. District Bankruptcy Judge Shelley Rucker's rulings seemed to go his way.

Judge Rucker ruled that Mr. McKenzie now must be allowed access to his accounting software in order to reacquaint himself with his financial records.

Mr. McKenzie's lawyer, Richard Banks, complained in court that despite the businessman keeping that same post office box for 30 years, the trustee had neglected to send him his mail. The judge ruled that bankruptcy trustee also must start forwarding Mr. McKenzie's mail on a weekly basis.

"It's never been timely remitted," Mr. Banks told the judge. "There ought to be a better way."

A hearing scheduled for May 25 will address Mr. Banks' most serious allegations in the case: That officials in the bankruptcy have neglected to pay some of Mr. McKenzie's former employees what they rightfully are owed and that a piece of land off exit 20 in Cleveland wrongfully was sold by the

trustee for just $2,500.

That commercial land, Mr. Banks argues in court documents, is worth up to $2 million.

He and Mr. McKenzie will argue May 25 for Judge Rucker to void the sale so Mr. McKenzie can sell it at market value and use the proceeds to help pay off debt.