Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, October 17, 1995                   TAG: 9510170085
SECTION: VIRGINIA                    PAGE: C-4   EDITION: METRO 
SOURCE: CODY LOWE STAFF WRITER
DATELINE:                                 LENGTH: Medium

SALEM CHURCH GETS OK TO REPAY CREDITORS 10%

This was the second amendment to a bankruptcy plan dating back to 1988. That plan proposed to pay back all creditors 100 percent of the amount owed them.

The financial problems began after the church's founding pastor, the Rev. Rudy Holland, led a massive building and funding drive during the 1980s based on projections of dramatic growth that never materialized. Almost $4 million in debts was incurred, about half of it secured by liens on the property. The church also raised money through the sale of unsecured bearer bonds promising double-digit interest on repayment.

The church was never able to keep up payments on the debt and sought bankruptcy protection in 1988. At the time, it proposed to pay back all of its debts. The bankruptcy plan was revised first in 1990, delaying payments to unsecured creditors and requiring the collection of more than $4,000 a week just for payments on secured debts.

It was a plan that proved unrealistic and unfeasible, said the Rev. Art Hearne, pastor of the congregation, which now is called Lakeside Baptist Church.

``We reached a point where we either had to throw in the towel or come up with a plan we could pay,'' Hearne said Monday.

That meant reducing the repayment of unsecured creditors to 10 percent of the value of their holdings at the time of bankruptcy. Those whose investments totaled less than $1,000 will be paid in a lump sum after an escrow account is built up, Hearne said. Those owed more than $1,000 will be paid 10 percent over the next 20 years.

Though the plan was approved by most of those who responded to a solicitation of ballots, about 23 percent of the individuals who are owed more than $1,000 for their bonds voted against it.

Among them is James Woods, chairman of the unsecured creditors committee. Woods was particularly upset that his group was left out of the negotiations to amend the plan.

The major secured creditor, Christian Training Foundation of Charlotte, N.C., reportedly sought to have the unsecured creditors left out of the reorganization completely, according to Hearne. The foundation agreed to take a payback of $1.24 million without interest over 20 years on debts estimated to be worth almost $2 million.

Those amounted to substantial concessions, Hearne said, though not as large as the unsecured creditors were required to take.

``I am sorry we could not give [the unsecured creditors] more,'' Hearne said. ``But we had to face the issue head on. We were going further and further in the hole,'' unable to keep up even on the secured creditors' payments.

Lakeside's attorney, A. Carter Magee Jr., told the court that he had ``heartily counseled'' the church trustees to ``walk away'' from the property and allow Christian Training Foundation to foreclose. His conclusion was that the property is worth substantially less than the amount owed to the creditors with liens, and that unsecured creditors would have received nothing from such a deal.

The church ``said `no, we want to do the best we can do''' for those holding the unsecured bonds, Magee told the court. That led to the plan for partial repayment.

Judge Clyde Pearson, in accepting the reorganization plan, said he was ``very disturbed'' by the reduced payout, but could not see an alternative. Even if the property were liquidated, the sale of a church ``never brings what it should bring. If they sell, you get nothing,'' he told the unsecured creditors in the courtroom.

Cecil Black, one of those bondholders, expressed his frustration to Hearne in the hallway. ``How would you like it if somebody paid you back 10 cents on the dollar?''