Homebuyers could lose more than $15 million in Levitt & Sons bankruptcy

More than $15 million in deposits on homes that were never started or are partially built may be lost by homebuyers who had contracts with Levitt & Sons, which is now in bankruptcy. The 547 homebuyers involved have more than $17 million on deposit, but have been offered only $2,450 each as a settlement.

After writing the bankruptcy story for BloggingStocks, I was contacted by Roberta Licker, who is fighting for a return of her $41,391 deposit from Levitt & Sons. She's one of 547 people, mostly retirees and near retirees, who saw their retirement dreams destroyed when Levitt & Sons stopped construction in October 2007 and then filed for bankruptcy in November. These folks have a total of more than $17 million in deposits on unfinished or unbuilt homes, yet there is no representative on the unsecured creditors committee of 22 representing the interest of these homebuyers.

Levitt & Sons is owned 100% by Levitt Corporation, but the corporation is making the case that the corporation is not liable for the funds lost by homeowners and other unsecured creditors, primarily tradespeople, because Levitt & Sons was a separate limited liability company (LLC). That's one of the big issues. Will the LLC status protect Levitt Corporation? We probably won't know that answer for years until after several legal battles.

Roberta Licker wants the bankruptcy judge, Raymond Ray, to either place at least one of the homebuyers on the unsecured creditors committee or to allow a second committee that will represent these homebuyers. Tomorrow, Judge Ray is holding the first of at least two hearings for the people who have filed "pro se" (without attorney representation) motions with the court asking for a return of their deposits. In many cases, these deposits were supposed to be put in escrow, in other cases the homebuyers did waive their escrow rights.