Tax payouts dip for Commercial Mortgage creditors

By Sean F. Driscoll

BusinessRockford.com

Commercial Mortgage & Finance’s 1,400 creditors can’t access their investments because of the company’s bankruptcy filing, but they will get a break on their taxes.

The Internal Revenue Service generally taxes interest earned through bank or investment accounts and companies managing those accounts issue their customers a yearly statement of their earnings.

This year, Commercial Mortgage officials are issuing tax statements based only on interest earned on promissory notes due before the company’s Oct. 8 bankruptcy filing. Any notes due after that date were frozen by the bankruptcy filing.

“I don’t think it would be appropriate to send out a statement for accrued interest when it wasn’t paid out,” said Gregory Jordan, Commercial Mortgage’s bankruptcy attorney. “It’s not going to be the situation where they’re going to get the double whammy of not getting paid and having the joy of paying taxes.”

The promissory notes were offered on six- or nine-month terms at interest rates typically higher than a traditional certificate of deposit, although they were not insured by the Federal Deposit Insurance Corp. Many investors held multiple notes and rolled them over, using them as a savings and investment tool.

Since the Chapter 11 filing, however, the funds have been frozen, and investors have been left without access to their money.

In court filings, Jordan has indicated that the company may be ready to exit bankruptcy by Aug. 15. He’s also asked to have until May 6 to submit a plan to reorganize or liquidate the company.

Commercial Mortgage & Finance Co. does not own CMF Insurance Agency of Rockford.

Reach staff writer Sean F. Driscoll at 815-987-1346 or sdriscoll@rrstar.com.