Owners of Bibelot chain avoid asset liquidation

Judge allows couple to reorganize under Chapter 11 protection

January 18, 2002|By William Patalon III | William Patalon III,SUN STAFF

A U.S. bankruptcy judge has approved a petition by the owners of the defunct Bibelot Bookstore chain to file for voluntary bankruptcy protection after creditors tried to force the Baltimore couple into involuntary liquidation.

Judge James F. Schneider ordered that the Chapter 7 involuntary bankruptcy case involving Brian D. and Elizabeth G. Weese be converted into a Chapter 11 bankruptcy, where debtors and creditors cooperate to resolve outstanding debts.

The order Wednesday was issued after a Bankruptcy Court hearing and with the approval of creditors.

The Weeses indicated assets of over $1 million and liabilities of more than $10 million, according to court records.

Creditors Bank of America, Allfirst Bank, MART Ltd. Partnership and Community Banks NA in August filed a petition to force the Weeses into liquidation, to settle debts incurred when the couple was running the Bibelot chain.

Bankruptcy Court is the most recent venue in the long-running battle between the Weeses and the creditors.

Earlier in August, a Baltimore County judge barred the couple from using or transferring millions of dollars in assets that allegedly had been transferred to the Cook Islands in the South Pacific to defraud creditors. Approximately $25 million had been shifted offshore, creditors alleged.

The first Bibelot opened in April 1995 in Pikesville, and the chain had five stores at its height. But Bibelot was unable to weather strong competition from national chains and, by 1999, appeared to be stumbling.

Even so, Bank of America that year agreed to lend the company $17 million, based on the personal guarantee of Elizabeth Weese - who at that time had a net worth of about $41 million.

But, in mid-2000, the Weeses defaulted on the business loan. That July, while the bank was working through legal channels to recover its money, the Weeses formed the Cook Islands trust, and the next month began transferring money and other assets into it, lawsuits against them alleged.

By December 2000, the Weeses' debt load had eclipsed $24 million, and the couple had transferred most of their assets offshore. The trust in the Cook Islands held the furnishings to their home, partnership interests, stocks and bonds, and $16 million, as well as other assets, court papers alleged.

On Aug. 23, 2001, Bank of America and the other creditors filed the involuntary bankruptcy filing against the Weeses.

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