The Nebraska Economic Development Corp., which lent $1.48 million to Ted and Kathryn Baer for a business that later closed, is contesting the couple's bankruptcy filing as an attempt to escape their debts.
Monthly expenditures of $2,000 for food, $1,500 for home maintenance, $4,000 for car payments, $850 for recreation and $800 for clothes are excessive, the nonprofit corporation said in its motion to dismiss the Baers' Chapter 7 bankruptcy filing.
The corporation said the Baers should be forced to file for Chapter 13 bankruptcy reorganization, which would require them to repay creditors over five years. Chapter 7 calls for liquidation of all but certain exempt assets, and creditors receive a share of the proceeds.
Baer invested the loan money in Thunder Alley, an Elkhorn bowling and entertainment center that later went bankrupt, although it has since reopened under different ownership.
The loan was guaranteed by the U.S. Small Business Administration. The Nebraska Economic Development Corp., which was established in 1987, awards and administers SBA loans.
The economic development group also disputes the nearly $15 million in debt claimed by the Baers.
Much of that amount stems from business loans the Baers helped guarantee but may never have to repay, according to the court filing. The Elkhorn business, for example, reorganized under bankruptcy protection, reopened as Sempeck Bowling & Entertainment and is trying to repay its creditors.
The Baers reported $14.7 million in debts and $1.97 million in assets after filing for bankruptcy April 29. All but $1 million of the debt was in business loans. About $10 million of the debt was attributed to Thunder Alley.
The same filing also showed that the couple's annual income is about $240,780 before taxes.
An heir to the former J.L. Brandeis & Sons department store fortune through his late father, Alan Baer, Ted Baer is president of a business investment group. His wife is secretary of the Alan and Marcia Baer Foundation.
The Economic Development Corp.'s motion also says the Baers' annual income should be included in the bankruptcy proceedings and alleges that the Baers are abusing bankruptcy laws because they have the ability to repay their debts.
The Baers have declined to talk outside court about their bankruptcy or their businesses. Their attorney, Robert Craig, said their business liabilities extend beyond the bowling alley.
The Baers couldn't file under Chapter 13 even if they wanted to, Craig said, because Chapter 13 applies to a maximum debt level of $1.4 million.
Todd Mulliner, the attorney representing the Nebraska Economic Development Corp., said his client didn't want to talk publicly about the lawsuit. Scott Sailors, the organization's director, was on vacation and couldn't be reached.
Craig also said the money that the Baers spend every month to live wouldn't make a dent in their debt.
“Even though the Baers have millions of dollars in debt, these people are saying, ‘You are spending too much money on groceries, you're spending too much money on clothes.' When you have millions of dollars of debts, that kind of spending is of no consequence,” Craig said.
The Baers have a $305,000 mortgage on their $622,000 home in Regency and are making payments on a 2010 Volvo and a leased Buick Enclave. They want to keep their home and those cars, but they told the court earlier that they would surrender their 2006 Maserati luxury sports car. They still owe $35,000 on that vehicle.
The Baers also reported about $11,580 in credit card debt, including accounts with Younkers, Von Maur and Talbots. Other creditors include the Nebraska Furniture Mart, Bloomingdales and Borsheims.
Craig said group outings to restaurants or other functions might explain some of the spending. “We're talking about a couple of people who are active in the community,” he said.
The Baers defended their spending at a hearing with creditors in June.
“It's a 30-plus-year-old house,” Ted Baer said about the $1,500 in monthly maintenance expenses. “When something happens, it needs to be fixed.”
Craig said the Baers are overwhelmed by debt they can't repay. Under Chapter 7, the court sells certain assets but protects others, such as a car, home and a certain level of future earnings, he said.
“This gives people a fresh start,” Craig said. “There used to be things called debtor prisons.”
The Baers have been involved in myriad businesses, including sports teams, catering companies and keno operations. Along with the loan from the Nebraska Economic Development Corp., their investment in Thunder Alley included a $1.75 million loan from the Alan Baer trust and a $500,000 loan from the estate of Ted Baer's late mother, Marcia Baer.
The Nebraska Economic Development Corp. specializes in the SBA program designed for “bricks and mortar” financing of land, buildings and equipment.
The group, with offices in Omaha, Lincoln and Gothenburg, has a $150 million small-business portfolio of projects that include companies in manufacturing, medical, legal and accounting services, retail stores, motels and agricultural processing.
Contact the writer:
444-1117, joe.ruff@owh.com
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