Germantown Settlement, a venerable social-service agency largely funded by public dollars for decades, is facing significant opposition from creditors to its plan to resolve its bankruptcy.
The plan, which would cost taxpayers at least $1.8 million, is being challenged by several key creditors, including the city's Redevelopment Authority (RDA), which argues the proposal fails to meet the most rudimentary legal standards.
In filing objections to the plans, two creditors - the RDA and Nova Bank - said they intend to foreclose on property used as collateral for debts owed by Germantown Settlement, or one of its subsidiaries.
The RDA said it would foreclose "promptly" on the Germantown YWCA property at 5820-24 Germantown Ave. The RDA lent Germantown Settlement $1.3 million to purchase the YWCA in 2006. The property, which remains vacant, suffered damage last week from a fire, which has been ruled arson.
Nova Bank said it intends to foreclose on the Germantown Community Center at 48 E. Penn St. It holds a $250,000 mortgage on the property.
Likely more significant for the Germantown nonprofit is a filing by Parke Bank, which contends Germantown Settlement has failed to live up to the terms of an agreement that stopped a foreclosure sale of the Burgess Center, a commercial real estate property at Chelten and Wayne Avenues.
The center, under a $7.2 million mortgage held by Parke, is Germantown Settlement's most viable commercial property.
Parke, in its court filings, said it is now free to sell the property to recoup its money. It stopped short of saying when it would place the property up for sale.
John E. Kaskey, a lawyer who represents Parke, did not respond to a request for comment.
Germantown Settlement, which was founded by Quakers in 1884 to aid newly arrived German immigrants, filed for Chapter 11 bankruptcy in April. A key subsidiary, the Greater Germantown Housing Development Corp. (GGHDC), filed for bankruptcy at around the same time.
The two organizations listed about $16 million in debt between them.
Last month, Germantown Settlement and GGHDC filed reorganization plans that called for paying the RDA, Parke Bank and Nova Bank in full.
The plans provided no more than $200,000, however, to cover unsecured debts, including more than $2 million owed in city, state and federal taxes. The amount of tax owed is in dispute. Pennsylvania has filed objections to the plans, arguing it is owed $280,000 in taxes not even acknowledged by Germantown Settlement.
To cover the debts, Germantown Settlement said it intended to refinance its properties and obtain "private grants" to further stabilize its finances.
The plan did not specify who would refinance the debts or where the "private grants" would come from.
The RDA, Nova Bank and Parke Bank contended that without even basic information, the plan fell short of its legal requirements for disclosure.
The RDA concluded that Germantown Settlement "does not have any financing lined up and has no means of funding the plan."
Emanuel V. Freeman, president of Germantown Settlement, did not returns calls for comment.
A hearing on the plan objections is set for Thursday in federal bankruptcy court before Chief Bankruptcy Judge Stephen Raslavich.