ProgressOhio

Remember the curious case of Joy Padgett's Bankruptcy Abuse from last Fall. Or for those of you in eastern and central Ohio, the memorable Joy Padgett for Congress commercial where she is standing like Julie Andrews -- sound-of-music like -- on the family farm.

Some of you may have known that at the time she pirouetted on her TV farm, she didn't even own the family farm having transferred ownership as part of her bankruptcy case. And during the campaign that questionable transfer became embroiled in allegations that it was fraudulent by the people she owed - her creditors.

Well, sure enough, Joy is running from creditors in 'them there hills.' After the music from November's election, with visions of DC fading before her eyes, the trustee overseeing Joy Padgett's bankruptcy proceedings filed an objection to Padgett's proposed re-payment plan. The objection was based on several problems, including a need for "further documentation and explanation as to why property is not a fraudulent transfer."

PADGETT FARM TRANSFER ALLEGED TO HAVE BEEN BANKRUPTCY ABUSE

The bankruptcy trustee objection centers on Joy Padgett's decision to transfer a one-third interest in a 170-acre family farm to her two brothers at no cost. The transfer occurred less than one month before Padgett and her husband filed for bankruptcy. [Padgett Deed, Recorded in Vol. 403, pg. 376 of the Coshocton County Deed Records]

Although the transfer occurred in September 2005, it was not recorded until February 2006 and published reports indicate it may have violated Ohio's "Fraudulent Transfer" statute. The statute states that a transfer is fraudulent if it is were:

1) Transferred for less than equivalent worth (She gave to her family members - didn't sell it to them)

2) Transferred with either the intent to hide the property from creditors or transferred when the transferor is insolvent. Padgett, under penalty of perjury, misrepresented the date of this transfer in her bankruptcy filing. (Given the discrepancy over when the transfer was recorded, sounds like the 'intent to hide' applies, too.)

Other than the trustee's new objections, much of this has been made public before.

Now, for the new stuff, Padgett and hubby Don just filed a third amended chapter 13 plan. It acknowledges that:

1. Joy Padgett transferred her interest in the farm to her brothers without consideration (no money paid and no money available to creditors) - hey isn't that trying to avoid obligations to the people you owe?

2. The date of transfer was February 3, 2006 (shortly before filing bankruptcy, and not May of 2005, the date she previously claimed under oath in her prior bankruptcy filings) - hey isn't that the definition of perjury?

3. Joy owes her creditors for the value of her interest in the transferred property. Senator Padgett, like all other citizens, has to use that asset to pay those that she owes -- her creditors.

Of course, the State Senator made these admissions only after reporters called her on the omissions and after the ill-fated campaign had ended.

CAUGHT IN BANKRUPTCY COURT, NOW SHE TRIES TO LOW-BALL WHAT SHE OWES

Even after getting caught Joy still seems to be playing bankruptcy games by low balling the amount the family farm is worth.

She is trying to claim that the fair market value of the property is its Current Agricultural Use Value (CAUV), which would make at least $100,000 of fair market value disappear.

Current Agricultural Use Value (CAUV) is a differential real estate tax assessment program which affords owners of farmland the opportunity to have their parcels taxed according to their value in agriculture, rather than full market value. (Maybe she's not familiar with such technicalities. Oh wait! She sits on the Senate Agriculture Committee)

Then she proposes that that the compensation for this reduced amount should be paid five years later without any interest as if that were the same as being paid today. (Maybe she doesn't know how important property taxes are to public schools. Oh wait! She chairs the Senate Education Committee)

There are other problems with the plan. The Padgett's want the plan approved with projected payments that are based on an assumption that there will not be any shortfall on the business debts on which the Padgett's are co-signed -- even though they admit that the balance of the business debts exceeds the value of the collateral that secures them by a number in the high six figures.

The plan also appears to assume that Don Padgett will not have to pay anything as a result of the suit against him alleging that he defrauded another business by selling assets subject to JP Morgan Chase's lien while representing that the assets were free and clear.

Just prior to declaring bankruptcy, Joy and Don Padgett appear to have sold a customer list to the North Canton-based Graphic Enterprises, Inc. JP Morgan says in court documents that the customer list belongs to the bank as part of the collateral for the SBA loan. The bank sued Graphic Enterprises which bought the list for $129,250.

A BRIEF HISTORY OF THE MESS (IN CASE YOU MISSED IT THE FIRST TIME):

Padgett and her husband Donald were owners of the Main Office Supply Co. Her husband ran the business for three decades; she was the company's treasurer. The Coshocton business began experiencing financial troubles in 1999; it went from 40 employees to about eight when it closed in 2006.

In August 2004, the Small Business Administration gave the business a $737,000 loan guarantee on a loan from the JP Morgan Chase Bank. On the same day, the Padgett's renegotiated a three-year-old loan for $100,000 from the Home Loan Savings Bank in Coshocton. In October 2005, the Padgett's filed for bankruptcy for their business and defaulted on the two loans. The bankruptcy filing was subsequently tossed out by a federal judge when the Padgett's violated a court order.

On June 15, 2006, the Padgett's filed for personal bankruptcy, listing $1.16 million in debts against $202,143 in assets. Joy Padgett said most of the debt came from Main Office Supply Co. As of September 8, the Padgett's owed at least $20,000 on the local loan, and more than $720,000 on the federally guaranteed loan.

Padgett and her husband Donald filed a voluntary bankruptcy petition on June 15, 2006. The petition noted that the Padgett's failed to pay their income tax in 2006 for the year 2005. The petition noted that "all tax returns and tax reports due as of the date of the petition had not been filed." [United States Bankruptcy Court, Southern District of Ohio, Case No. 2:06-bk-52898, Donald R. and Joy A. Padgett, Chapter 13]

Padgett_third_amended_chapter_13_plan.pdf (pdf 79k)

Trustee_objection.pdf (pdf 13K)

Sign-up to receive Shadows on High Via Email