First Alliance Files Plan to Reorganize

Bankrupt mortgage lender First Alliance Corp. said Wednesday it has filed a plan to reorganize debts and pay creditors as it liquidates its $60 million in remaining assets.

The Irvine firm said in a press release that assets would be transferred to two trusts for the benefit of creditors.

A disclosure document giving more details of the plan and its effect on creditors, shareholders and the company is expected to be filed this week, said Jerry Hager, First Alliance’s general counsel.

The lender sought bankruptcy protection 16 months ago amid a wave of borrower lawsuits and investigations by some states into allegations of price-gouging and preying on vulnerable borrowers.

Hager said the company would have no problem paying all $25 million to $30 million in normal business debts, but the hundreds of millions of dollars in potential damages from lawsuits and state actions made the company’s viability questionable.

“We are in ongoing settlement negotiations with all the various parties,” Hager said. He added that he has “no idea” how creditors will respond to the reorganization plan, which was filed in U.S. Bankruptcy Court in Santa Ana.

The Bankruptcy Court has temporarily halted 15 borrower lawsuits in six states against founder and 70% owner Brian Chisick, his wife and other officers of the company.