Kluge, Moses file for Chapter 7 bankruptcy

After seeing banks foreclose on their winery, manor home and a luxury housing development, Patricia Kluge and her husband, William Moses, have filed for personal bankruptcy.

Last Thursday’s filing in U.S. District Court will place the couple’s assets under Chapter 7 bankruptcy protection and under the control of a court-appointed trustee. The filing indicates the couple’s debts are “primarily business debts.”

According to U.S. District Court officials, filing a Chapter 7 bankruptcy petition prevents creditors from continuing lawsuits, garnishing debtors’ assets or even calling the debtors to demand payment.

Moses and Kluge declined to comment on the filing or legal issues involved in the bankruptcy.

“We just want to put this behind us and move on to the next phase,” Moses said. “It’s been a long, painful process.”

Attorneys for the couple and for the several banks that have foreclosed on the couple’s properties could not be reached for comment Monday.

The filings indicate that the couple has between 50 and 100 creditors and that they owe between $10 million and $50 million in liabilities. The filing indicates the couple has between $1 million and $10 million in assets.

According to court officials, debtors must provide the court with schedules of debts, assets and other financial data and attend a meeting of creditors usually held a month or more after the petition is filed. At the conclusion of the court procedure, the debts are “discharged” and the debtors no longer liable for the debt, although the laws regarding that discharge are “complex,” according to the court.

There are at least three banks involved in Kluge/Moses proceedings. They include Sonabank, which foreclosed upon the couple’s Vineyard Estate development; Bank of America, which foreclosed on Kluge’s Albemarle House manor home; and Farm Credit Bank, which foreclosed on — and sold in pieces at auction — the couple’s Kluge Estate vineyard and winery.

The couple and the banks have been in a variety of negotiations before, during and after the foreclosures.

Vineyard Estates was a joint effort with First Colony Resorts of North Carolina but First Colony went bankrupt in September 2009 due to the economic collapse and decimation of the real estate market.

The home sites were projected to include pools, outdoor kitchens, formal gardens, wine cellars, tennis courts and spaces for vineyards.

Bank of America foreclosed on Kluge’s 23,500-square-foot Albemarle House mansion property for default on loans valued at nearly $23 million. Those loans helped finance the winery and vineyard operations. Much of the furnishings in Albemarle House, including some draperies, were dedicated in a loan agreement to Farm Credit Bank after the winery’s sales failed to meet those set out in the loan agreement.

Kluge and Moses defaulted on the winery loans in September 2010 after their effort to take their wines to national and international markets fell in the midst of the Great Recession.

Farm Credit Bank sold the properties in a complex auction, with reality television star and real estate mogul Donald Trump buying most of the property for more than $6 million.

Kluge and Moses recently sued Farm Credit Bank in federal court for “flawed and wrongful conduct” that they claimed damaged the business. The suit claimed that Farm Credit “ended any hope for [Kluge and Moses] to save the business” when it took over operations and “shut down key aspects” of the winery.

That suit was withdrawn earlier this month.

Kluge and Moses will be required to provide the court with creditors and debts later this month, documents show.