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Involuntary bankruptcy rare in modern business practice

South Bend Tribune/MCT--A group of seven local contractors resorted to a rare legal move recently by trying to force Weiss Homes into bankruptcy.

The failing homebuilder and 10 of its affiliates haven't paid up on some US$560,000 worth of labor and materials, according to the petitions filed Feb. 27 in U.S. Bankruptcy Court in South Bend.

“We're hoping this process will lead to the discovery of assets that can be liquidated and paid toward the amounts that are owed,” said Edgar Shaff, president of Cabo Mechanical, an Osceola company that's out more than US$57,000, according to court filings.

Central Tech Building Products, Gushwa Heating & Air Conditioning, Imperial Home Improvement, Kaser & Maeyens, Kuert Concrete and SLR Plumbing are the other six Michiana companies that filed petitions to push the Weiss firms into a Chapter 7 liquidation.

It's an unusual occurrence.

Most companies that file for bankruptcy do so voluntarily because they can't pay their debts. In cases of forced bankruptcies, creditors believe the indebted company might be holding on to some assets that would enable it to pay a portion of what it owes.

The Tribune reported last summer that Weiss Homes was going out of business and leaving behind millions of dollars in unpaid bills from contractors and lenders.

Several contractors questioned why they hadn't been paid for their work on homes that ultimately sold and were occupied. Weiss Homes owner Dave Weiss told The Tribune in June that he had to lower prices to motivate buyers during the recession, and the sales prices didn't always cover building costs.

He and his wife, Rita, still have a house on Diamond Lake near Cassopolis, according to Cass County tax records, but they appear to be based in Naples, Florida.

Dave Weiss is a registered Realtor there, and his online profile advertises a home that's in his wife's name and listed for US$1 million. The couple also started a Naples-based company called Austen Homes in 2012, according to Florida secretary of state records.

Michael Watkins, a Barnes & Thornburg attorney representing the seven contractors, noted that forced bankruptcies are rare. He's filed a half-dozen such cases in more than 20 years as a lawyer.

“Usually, a company goes out of business and the creditors know why — they were expecting it,” Watkins said. In this instance, he said, contractors haven't received good information about what happened to the Weiss assets.

Bill Jonas, a South Bend attorney who has represented Weiss Homes in the past, said the company's situation is indicative of larger forces that have slammed the housing industry.

“You can see the same kinds of outcomes for other real estate developers and homebuilders in this post-2008 economy,” he said. “The last few years have been awful in the housing industry. It is that simple.”

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