Clients Want Glen Ivy Subsidiaries Liquidated : * Legal action: If request is granted, units’ bankruptcy would be grouped into single Chapter 7 petition for all time-share operations.

Three disgruntled time-share owners hired an attorney Thursday to ask the bankruptcy court to seize control of the management and mortgage subsidiaries of the embattled Glen Ivy time-share group, whose parent company filed for bankruptcy liquidation one day earlier.

Attorney James Stang in Century City said he expects to ask U.S. Bankruptcy Judge Mitchel Goldberg to impose a Chapter 7 action against Glen Ivy Management Inc. and Glen Ivy Equity Mortgage Corp. by Monday.

He declined to identify his clients until he files the petition in bankruptcy court in San Bernardino.

William Lobell, a Santa Ana attorney representing court-appointed trustee Thomas P. Williams, said he consulted with Stang on Thursday and advised him that the involuntary bankruptcy would not be necessary, since all assets that could later be claimed by time-share owners will remain under the protection of the trustee.

“It really makes no sense,” Lobell said.

If Stang’s petition is approved, however, the management and mortgage subsidiaries’ bankruptcy would be grouped into a single Chapter 7 petition that would include Glen Ivy Holdings Inc., Glen Ivy Financial Group Inc. and Glen Ivy Resorts Inc., which filed for liquidation Wednesday.

Glen Ivy Holdings is the parent company, while Glen Ivy Financial Group is the chief subsidiary that controls the day-to-day operations of the corporation. Glen Ivy Resorts develops, promotes and markets the time-share units.

Glen Ivy Management is responsible for managing the time-share units, including renting unused time. And Glen Ivy Equity Mortgage was established for the purpose of issuing, pooling and servicing mortgages used to pay for the time-share weeks that are sold.

Citing an inability to get loans for its own operations, Glen Ivy announced Wednesday that it intends to sell off its assets or find partners to invest in joint ventures as a way to get itself out from under its financial problems.

Glen Ivy has been “flooded with offers from all kinds of companies,” including time-share operators, said Loren Gallagher, executive director and general counsel for Laguna Hills-based Vacation Resorts International Inc.

Gallagher said that the problems besetting Glen Ivy are bad news for the time-share industry and that he was disappointed to learn that his chief competitor was entering bankruptcy.

“It’s really a devastating emotional trauma for our industry,” Gallagher said. “These kinds of events make matters worse for everyone.”

Glen Ivy spokesman David McAdam, who said the company had not received any notice of a pending petition, added that Glen Ivy customers can expect business as usual with no disruptions of resort services or exchange benefits.

He also stressed that customers who owe installment payments and association dues should continue to send them to Glen Ivy. Instructions on where to send future payments will be mailed in the near future, McAdam said.

Glen Ivy, once the nation’s largest seller of time-share properties, is under criminal investigation for allegedly defrauding thousands of customers since last spring.

Although no charges have been filed against either the company or any of its officers, the Riverside County district attorney’s office has been conducting a criminal probe, sifting through as many as 3,000 documents seized since December.

Stang’s request to force liquidation of the time-share seller’s complete operation was part of a larger legal strategy “to protect the financial claims of the thousands of time-share owners” who have purchased properties at any of Glen Ivy’s 24 resorts, Stang said.

The next step, he said, would be to persuade the court and trustee Williams to convert the combined liquidation to a Chapter 11 restructuring.

“I believe the trustee will be receptive to put the enterprises into a reorganization mold,” Stang said.

Under Chapter 11 bankruptcy, a company is freed from creditors’ lawsuits until it can develop a plan to put its finances in order.

Attorneys who have filed a class-action suit against Glen Ivy welcomed the strategy, saying that it may help their case and block any possible moves by the troubled company to shelter assets.

San Diego attorney Michael Sherman said that although he was disappointed to learn that the Glen Ivy parent company and two subsidiaries had filed for bankruptcy Wednesday, he believes a move to have the entire time-share group restructured would ultimately benefit his clients.

Sherman filed a class-action suit against Glen Ivy in February, charging that as many as 60,000 clients have been defrauded by the company through double billing, falsified documents and misleading sales tactics.

“I am very concerned that no good can come out of having some of the companies in bankruptcy and some out of bankruptcy,” Sherman said. “You can’t have it both ways.”

Although saying he could not counsel customers to stop payments to Glen Ivy, he said most time-share owners he talks to have already come to the conclusion that paying Glen Ivy “is like pouring money down a rat hole. You have to ask yourself, if you are not sure you have a real title, whether it is in your best interest” to continue mortgage payments.