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Federal Judge Dismisses Motion to Remove Case from Bankruptcy

March 23, 1988

DALLAS (AP) _ A judge on Tuesday gave Bishop College two months to come up with $200,000, but rejected a motion to take the struggling school out of protection of Bankruptcy Court.

U.S. Bankruptcy Court Trustee George McElreath had sought to dismiss the school’s Chapter 11 reorganization petition. That would have left Bishop vulnerable to lawsuits from its 400 creditors, who are owed more than $12.5 million.

U.S. Bankruptcy Court Judge Robert McGuire, in denying McElreath’s motion, ordered the school to raise $50,000 every two weeks beginning April 5. If the school cannot prove it has the cash on hand within three days of each deadline, he will reconsider the motion to dismiss the Chapter 11 petition.

″It’s a good deal,″ said Bishop attorney T. Glover Roberts. ″It’s incentive for the school, especially the students, to do something.″

Roberts said the school, which has failed to meet its payroll for two months, has operating expenses of $200,000 a month and would not have survived if the trustee’s motion had been granted.

″Bishop is in a deeper and deeper financial hole,″ Roberts said.

Observers in the packed courtroom, mostly Bishop students and faculty, applauded McGuire’s ruling. Afterward, many joined in singing the school’s alma mater in the courthouse lobby.

Judith Swift, attorney for Bishop’s largest creditor, its faculty-staff committee, praised the judge’s ruling.

″Clearly the debtor is in violation on matters of legal concern, but law is about equity, too,″ Swift said. ″The equity here is the human concerns of the students and faculty.″

Swift told the judge that 28 of the school’s approximately 50 faculty and staff members had agreed to work without pay for the rest of the term if Bishop was allowed to stay open.

Only two creditors joined McElreath’s motion to dismiss the Chapter 11 protection.

Though he rejected the motion, the judge said McElreath was right to carry out his duty as court-appointed trustee to point out Bishop’s violations of the bankruptcy filing. The most notable, the judge said, was the accrual of nearly $700,000 in new debt since the school filed for protection last May.

School officials are hoping for aid from the U.S. Department of Education, which is expected to decide next week whether to renew $400,000 in funding for the school. That funding was lost last year when the Southern Association of Colleges and Schools failed to renew Bishop’s academic accreditation because of its financial problems.

Bishop’s board ospring semester in late May unless the school’s dire financial situation changes.

Under Chapter 7, Bishop would close and its assets would be sold to pay creditors.

School officials are also working to get back $150,000 from two churches that recently withdrew donations. The churches backed out after Dallas businessman Clifford Sugerman reneged on a $300,000 pledge.

Sugerman had promised to match donations up to that amount.

Sugerman, whose Chapter 13 bankruptcy petition filed in 1985 is still an open case, gave no reason for dropping the pledge and his Sugarman Foundation is now under investigation by the state attorney general’s office.

Bishop College, affiliated with the National Baptist Churches, was founded as a college for blacks in 1861. It currently has about 300 students.

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