A bankrupt Maui company that sold low-cost packaged homes left some customers in a financial lurch with no homes and no refunds. But soon those customers should see repayment.
The state Office of Consumer Protection announced Tuesday that seven former customers of Aloha Package Homes LLC will receive restitution through the bankruptcy cases of the Wailuku-based company and its owner, Virginia Parsons.
The agency said former customers will receive $171,261 in a settlement approved by a U.S. Bankruptcy Court judge. The settlement also provides $24,000 for civil fines and penalties plus $9,286 in attorneys’ fees and other costs.
The Office of Consumer Protection “is very pleased that we were able to help these Maui consumers bring closure to this matter,” Bruce Kim, the agency’s executive director, said in a statement.
Other creditors are still awaiting outcomes in the tangled bankruptcy cases that began in 2009 and 2010.
Parsons, who started Aloha Package Homes in 2001, filed for personal bankruptcy in December 2009 listing mainly consumer debts that she said she couldn’t pay because her income from the business plummeted when mortgage lenders drastically scaled back home financing.
The lost income also took a toll on the business. “We tried to hang on but it was hard,” Parsons said, adding that Aloha Package Homes had more than $1 million in orders on its books when the market tanked. “It just fell out.”
Aloha Package Homes filed Chapter 7 bankruptcy in October 2010 listing $625,294 in debts. The company said its assets totaled $65,000 in accounts receivable plus $64 in a checking account.
Some customers filed claims that included a $31,000 refund and $89,000 for two canceled home contracts.
With the company’s debts far outweighing assets, creditors were unlikely to recover much if anything. But a month after Aloha Package Homes filed bankruptcy, the personal bankruptcy case of Parsons was converted from a Chapter 11 reorganization to a Chapter 7 liquidation, and Aloha Package Homes creditors were added to the case.
Parsons listed $1.2 million in assets and $1.9 million in debts. The debts were largely in the form of underwater mortgages on a few homes, two of which were foreclosed upon by lenders. One other home is to be sold and should help pay creditors.
Parsons said much of the financial stress for Aloha Package Homes was due to a materials supplier and bonding agent, Pacific Source Inc., that “diverted” funds. Pacific Source settled the dispute for $15,000 that is going to help pay creditors.
The Office of Consumer Protection, a division of the Department of Commerce and Consumer Affairs, claims that Parsons failed to fulfill contracts for seven customers who then had difficulty obtaining refunds.
Based on an investigation, the agency said Parsons and her company engaged in unfair and deceptive acts violating several state consumer protection statutes, including improperly claiming that the company had to agree to a cancellation, requiring a written reason for a cancellation and demanding that customers pay damages for canceling their orders.
The agency also said Parsons made misleading and deceptive representations about refunds.
“This case serves as a reminder that before signing a contract and paying significant fees in advance to a business that you haven’t dealt with before, be sure to check them out first,” Kim said.
Parsons took issue with the state’s findings, saying that she tried to arbitrate the customer issues through the Better Business Bureau.
Parsons credited the independent trustees in the bankruptcy cases for doing a good job obtaining proceeds from assets for creditors.
