Local homebuilder Paul Estridge Jr. on Thursday filed Chapter 7 personal bankruptcy, agreeing to surrender his two homes—one in Westfield and one in Florida—and other possessions to satisfy a mountain of debt he accrued from his former business.
Estridge owes a list of creditors including banks, suppliers and vendors more than $50 million, he said. In a bankruptcy filing with the U.S. Bankruptcy Court Southern District of Indiana, Estridge listed assets worth between $1 million and $10 million. Estridge told IBJ on Thursday that he thought his assets had a value of $5 million or less.
The Estridge Group, a fixture in the Indianapolis-area’s homebuilding industry for more than 40 years, became part of a Houston-based company earlier this year when the company could no longer keep up with a mounting pile of debt. Estridge took over the business from his father, Paul Sr., in 1992.
Estridge said it is common practice for home builders and developers to make guarantees against loans using personal property and cash. The bankruptcy filing only allows Estridge to keep $9,000 of his assets and $350 in cash. Estridge said he will be able to keep two of his automobiles because he owes more on them than they are worth.
Estridge, now Indiana Division president for Houston-based David Weekley Homes, said he filed bankruptcy because the obligations to banks and other creditors are coming due and he has no way to pay them.
Despite the fact that many of the companies he owes will never get all of their money back, Estridge said most on the list have been very supportive.
“The support I’ve received has been overwhelming,” Estridge said. “My suppliers and vendors have been especially supportive. They saw I mortgaged my house and put every penny into this.”
A handful of companies have filed lawsuits against Estridge and his company, with five cases still pending in Hamilton County courts.
Through his association with Weekley, Estridge said he has been able to finish all the homes he started and honored all his home warranties.
“From a reputation standpoint, we’ve done well,” Estridge said.
Estridge Group had as many as 150 fulltime employees in 2004 when it was building more than 300 homes a year as one of the area's largest builders.
Founded in 1976, David Weekley Homes operates in 14 cities across the country and is the latest outside home builder to enter the Indianapolis market.
Estridge, which traces its roots to 1967, this year became the latest in a string of local homebuilders to succumb to one of the worst housing markets in decades. C.P. Morgan Communities LP and Davis Homes folded in 2009, and Hansen & Horn Group Inc. followed suit in 2010.
Nationally, new-home sales declined from 1.2 million in pre-recession 2005 to 321,000 in 2010. According to the Builders Association of Greater Indianapolis, home building permits during the same five-year period in central Indiana dropped from 13,202 to 3,720.
New-home construction could fall even more this year.
While the personal bankruptcy will be on Estridge’s personal credit report for 10 years, Estridge said it will have little impact on his homebuilding career.