Columbia, South Carolina is hot during the summer, such that the City adopted the motto “Famously Hot” a few years ago. Temperatures frequently exceed 100 degrees in the summer. On June 12, 1987, the PTL Club filed chapter 11 cases in Columbia, adding heat to the already hot City.

The Praise the Lord, or “PTL,” Club was a tele-evangelist organization created and, for a period, controlled by Jim and Tammy Bakker. The Bakkers met in college in North Carolina and worked as evangelists for a variety of ministries until they launched the PTL Club in 1974.

The PTL Club’s broadcast facilities were located in Charlotte, North Carolina, and the production facilities, along with a planned hotel and resort called Heritage USA were located just across the border in Fort Mill, South Carolina. At the heart of the facility was pyramid-shaped Crystal Palace.

Prelude to Bankruptcy

As the popularity of the PTL Club grew, so did the organization’s plans of expansion in the Fort Mill area. The PTL Club developed a family theme park/resort, which was to be anchored by a 500-room hotel, the Heritage Grand Hotel. In return for $1,000 paid by each of the approximately 160,000 “PTL Lifetime Partners,” the Club promised these partners three nights’ stays per year at the Hotel. Problematically, these promises could not be met with the existing facilities.

Following problems with the FCC and the IRS, Jim Bakker was alleged to be involved with fraud in the handling of PTL funds, but no actions were filed until after the bankruptcy case was commenced.  The events at PTL were widely covered by the press, and the new nickname of “Pass the loot” competed with “Praise the Lord”. As a result of these controversies, donations began to taper off.

On March 19, 1987, following disclosure of a payoff to a church secretary, Jessica Hahn, Jim Bakker resigned from PTL and was replaced by Southern Baptist Reverend Jerry Falwell. Ms. Hahn alleged that Bakker had drugged and raped her in 1980.  Bakker alleged the sex was consensual, but it was clear that PTL funds had been used to pay off Hahn.

As the payoff to Hahn and the FCC and IRS problems came to light, Rev. Falwell authorized the filing of a chapter 11 petition.

Much like the founders of the PTL Club, the Club’s bankruptcies were anything but ordinary.  For example, the following unique issues arose in the PTL Club bankruptcies that may have never arise again:

• Ministers were appointed as the majority of the chapter 11 trustees;

• 11 USC § 342 notice of the case was given through first class mail, national newspapers and on live TV during the PTL TV shows;

• A local theater was rented and used for the meeting of creditors;

• One of the adversary actions was “filed” by the plaintiff in a national newspaper one week prior to the complaint actually being filed with the bankruptcy court. The defendant was frustrated by reading excerpts in the press without access to the complete document;

• The Court created a special committee for those claiming Lifetime Partner status, while leaving open the issue of whether they had creditor status or not;

• The examiner donated to the club on live TV;

• There was a controversy over the version of the bible used to swear in witnesses;

• The debtor estate funded an extra deputy clerk just to work on these cases. A Special Deputy Clerk oath was prepared, making it clear that while the salary was paid by the debtor estate, the deputy clerk reported to the Clerk of Court. 

• 24-hour security was assigned to the presiding judge after multiple death threats were received against him.  The Clerk of Court’s office received about two duffel bags of mail on the PTL case daily, all of which was x-rayed for bombs after the death threats were made against the presiding judge.

At the time the cases were filed in 1987, the United States Bankruptcy Court for the District of South Carolina only had one permanent judge and a depleted clerk’s office staff that had been decreased by three due to efficiencies in closing cases. The Judge, J. Bratton Davis had at one time the highest caseload in the nation.  In those days, chapter 11 cases were given the same weight as chapter 7 or 13 cases, and no accommodation was made for the size of the case. Due to a conflict with Judge Davis, Judge Rufus Reynolds from North Carolina was assigned to the case.  South Carolina was not a US Trustee district until 1987, but the US Trustee cooperated with the Court and assisted whenever possible.

The PTL Club cases ultimately became liquidating chapter 11 cases as a result of Jim Bakker’s departure from the PTL Club television program.  His departure severely impacted revenue, ending the hope for any successful reorganization. The case closed in December of 1992.

The PTL Club cases, involving clerical infidelity, deep-seeded religious beliefs, and national media attention, evidence just how unique bankruptcy cases can be.  These cases are a showcase for how bankruptcy courts can address myriad legal and non-legal issues with creativity in dealing with unanticipated issues.  There may never be another case like the PTL Club cases, but that doesn’t mean we cannot still glean valuable insights into the flexible approach the court took to resolve these numerous, difficult situations.