I thought there would be one person who, when they heard this plan, could say, “Wait a minute, this is probably a bad idea.” But there wasn’t.
Members of an Anderson church who’ve been praying for relief from a complicated bankruptcy case that threatens both the church and its affiliated school will have to wait awhile longer.
After hearing hours of testimony in the case Tuesday, U.S. Bankruptcy Judge Frank Otte delayed making a decision on how to resolve the legal dispute between Lindberg Road Church of Christ, 2625 Lindberg Road, and the bank it blames for its failed finances.
In a moment of candor from the bench, Otte told church members who crowded his courtroom that he didn’t know if he had the power to prevent the Fort Wayne-based Star Financial Bank from shutting down their church through foreclosure.
“I haven’t decided,” Otte said. “But it’s a tough one.”
Here’s the crux of the problem.
That financing plan required church leaders to take out life insurance policies on some of their older church members and then use the death benefits, or the sale of the policies on a secondary market, to pay off a $2.5 million loan.
The heart of the dispute involves the bank’s “Life Legacy” financing plan that the church signed up for when it wanted to expand its child care center and remodel the affiliated Anderson Christian School.
The Life Legacy plan, created by the Carmel-based Total Financial Group, required the church to take out life insurance policies on some of its older church members.
Evidence introduced in court Tuesday showed the church took out $4.35 million in life insurance policies on 11 members, after church elders were told either the death benefits on those policies, or their sale on a secondary market, would back their line of credit.
Here’s where the problem arose:
Kleiman said the plan fell apart for Lindberg Road Church of Christ when the elderly church members covered by policies did not pass away as early as expected, and when Star Financial Bank discovered there was no secondary market to buy the insurance policies.
That’s when the church defaulted and could now wind up in foreclosure.
