Lon Morris College Former Employees to Receive Prior Wages

Date Posted: 8/27/2013

This week former employees of Lon Morris College will receive payments generally equivalent to their prior unpaid wages as the result of charitable distributions being made by Heartspring Methodist Foundation and Texas Methodist Foundation, totaling $500,000.


The 158-year-old Methodist college, Texas’ oldest junior college, filed for bankruptcy protection last summer amidst a liquidity crisis so severe the employees had missed 3 payrolls. The employees continued to work without pay so that students could complete their spring semester, in furtherance of the school’s mission.


The assets of the school were sold as part of the bankruptcy plan, confirmed by Judge Bill Parker of the U.S. Bankruptcy Court for the Eastern District of Texas in February. Unfortunately sale proceeds were insufficient to satisfy the school’s secured lenders, leaving the employees with no likelihood of receiving payment from the bankruptcy estate anytime in the near term. The school’s financial crisis and inability to pay faculty and staff for so long created a significant hardship for many employees.


Lon Morris had investments and endowed funds at multiple foundations, and was in litigation and settlement discussions with certain of the foundations in an effort to access those funds. In compromise of those disputes, the foundations and the Chief Restructuring Officer, Dawn Ragan of Bridgepoint Consulting, agreed to the charitable distributions from the foundations to the employees.


Prior distributions were also made during the bankruptcy case. The Texas Annual Conference of the United Methodist Church organized a humanitarian appeal that generated enough funds to cover one of the missed payrolls. A Tennessee foundation also made a distribution towards the unpaid wages during the prior Christmas season. This final distribution from the two foundations was delayed due to matters pending with the office of the Texas Attorney General.


Ms. Ragan said “I am delighted we were finally able to make this happen. Heartspring and Texas Methodist worked diligently with us to get to this point. These charitable distributions are meant to recognize and repay these employees for the contributions they made to facilitate students completing their education and the Methodist mission. We could not have accomplished this without the support of many people working together.”

Lon Morris will continue to liquidate claims, sell assets and collect on insurance policies that should produce several million dollars to make payments to other unsecured creditors over time.