Chapter 11 Reorganization

Frequently Asked Questions

6/25 Town Hall

  • 2011 Sunwest loan with Oct. 2021 balloon payment due
  • Deferred and anticipated club amenity maintenance
  • Decades-long Lake Elaine lawsuit with potential daily fines of up to $700 per day and restoration of a full lake
  • Tract D (Lake Elaine) is currently owned by the Association.
  • If APPROVED and Option A is selected, then the property will be deeded to the Lake Elaine owners. We do not currently expect the LFOs to elect Option A.
    • If Option B is selected, the redesign will be the Association’s responsibility.
  • Will all country club members be allowed on the new redeveloped lake?
    • If Option A is selected from the Amended Disclosure (not expected) then the property will be deeded to the Lake Elaine Owners and become private property.
    • If Option B is selected, the redesign trails and ponds will be the responsibility of the Association and open to all members.
  • We’re voting for a smaller cost now ($2,000 to cover the $2.5M), to protect ourselves from possible larger costs later, unending litigation and the $15 million claim of the LFOs that could not be addressed any other way outside of bankruptcy, to protect our amenities and eradicate Lake Elaine issues.
  • Ballots go out June 28th, and need to be mailed or returned in-person by July 28th
    • Owners who do not return an absentee ballot will be allowed to vote in person at July 30th special meeting
    • We must reach 60% of quorum (or participation of homeowners in the vote)
    • 2/3 of those voting must vote yes on BOTH ballots for it to be approved
    • Results announced in special meeting of the members on Saturday, July 30th
  • If we don’t reach quorum on special assessment, then we can go out a second time on special assessment but must have 30% quorum (participation) that round and of that, 2/3 must vote Yes.
  • Ensure continued use of our club amenities and environment
  • Beginning 2024, we have three small increases to annual dues of $97 which resolves deferred maintenance and creates appropriate reserves/plan for maintaining building/grounds.
  • We pay a special assessment one-time fee of $2,000 and assuming success in the bankruptcy court, we are DONE with Lake Elaine issue forever!
  • Two yeses mean $2.5M goes to either Option 1 or 2 as determined by creditors.
    • Option #1 would be to deed the land to the 52 lakefront owners and pay them $2.5 million to repair and maintain the lake in perpetuity. This option would release the Association from all current, ongoing or future liability. It would become privately owned property
    • Option #2 would be to spend that $2.5 million and create the new amenity. This would include 4-5 ponds, walking trails, benches, limited parking and would be open to ALL homeowners
    • With either option, and assuming successful confirmation of our reorganization plan by the bankruptcy court, we have no ongoing legal obligation to continue any litigation from lakefront homeowners
  • We face possible conversion to Chapter 7 Bankruptcy and liquidation of all our assets – reduced or possible loss of club amenities such as tennis, pickleball, pool, golf and clubhouse.
  • However, even if we can’t use amenities, we’re still required to pay annual lot assessment fees – even when unable to use amenities.
    • Full members will pay $550 annually, Associate members will pay $365 annually
  • Likely negative impact on property values
  • $15 Million Lake Elaine dispute unresolved, unknown outcome of the Lake land
  • There are many unknowns under Chapter 7, which could include part or all of the current $15M bankruptcy claim from the lakefront owners and loss of amenities while still paying for them. If we pay the $2.5M now, we’re done forever, other than ongoing maintenance of the small ponds, according to Judge Ballinger.
  • There is a one-time special assessment of $2,000. Then starting in 2024, full members would owe an additional $97 for 2024, 2025 and 2026. By 2026, the annual dues increase will be $291. Starting in 2024, associate members would owe an additional $63 for 2024, 2025, and 2026. By 2026, the annual dues increase will be $189.
  • We’re empathetic to those on fixed incomes, and offer payment plans to ease burdens.
  • The special assessment can be paid over two years with eight (8) quarterly payments of $261 (which includes 5% interest). The first payment would be due the same day as the due date for the special assessment. Please notify the Association in writing prior to the special assessment due date if interested in the payment plan
  • The timing for implementing the reorganization plan depends on the association receiving the funds when they are due, thus the 5% interest charge
  • Deferred Maintenance: In 2020, CCC obtained an analysis of deferred maintenance and future capital needs for the Club (the “Reserve Study”) stating CCC will need approximately $8M to address deferred maintenance and capital improvement costs required over the next ten years, excluding Lake ElaineFurther analysis suggests $16M may be needed over the next 30 years
  • Sunwest Loan Balloon Payment: On Oct. 19, 2021, under the terms of the 2011 Sunwest Note, the entire balance of approximately $600,000 Sunwest Loan would become immediately due and payable in full. Under Debtor’s current revenue model, Debtor determined CCC would not be in a position to satisfy the Sunwest Note in full at maturity and anticipated that it would default on the Sunwest Note. The Sunwest Secured Claim shall be restructured on the Effective Date and paid in full, with interest, over a period of four years with an interest rate of 5%
    c. Lake Elaine Issue: Funds will be used to resolve
  • Lake Elaine Issue: Funds will be used to resolve the Lake Elaine issue once and for all, as described above
  • The availability of these amenities, whether used or not, makes CCC a desirable neighborhood and increases property values. A future owner of your home may find golf or the other amenities appealing.
  • The Ferraro Group’s contract and the previous Cindy May Marketing contract are for the same amount. The money for the signs was donated.
  • The issues we are dealing with today began 30 years ago and the current board wasn’t a part of.
  • Each year, members may elect a new board or move to a professional management association.
  • Dues increases and/or special assessment would have been necessary even if a professional management company was involved.
  • Professional management associations still report to a board of directors which makes final decisions.
  • Selling the golf course is not legally a feasible option until we emerge from Chapter 11 bankruptcy. Once that happens, and at the approval of the homeowners, selling the golf course is something that can be discussed.

Chapter 11 Reorganization

A filing for Bankruptcy can take many forms, including a Chapter 11 Reorganization. A Chapter 11 Reorganization allows us to create a plan of reorganization (a new business plan) and show the court how CCC plans to effectuate the plan. This option allows us to maintain the day-to-day operations of our Club without interruption so that members and others can continue to enjoy our amenities.

Continental Country Club filed a Chapter 11 Petition for Bankruptcy Protection on Tuesday, February 9th, 2021 in the U.S. Bankruptcy Court in the District of Arizona.

The Board’s decision to take this step relied on a three-pronged financial problem that was accelerated after the October 30th preliminary ruling of finding CCC in contempt for having not maintained Lake Elaine consistent with a 1990 Consent Decree, discussed below. The Board had to consider “how” it could meet the obligations and fill the lake to a level that, according to experts, has never been sustainable. The Court also imposed on CCC a $700/day fine until water began flowing into the lake at which point the fine would be reduced to $500/day until the lake was filled. Fixing the lake to accommodate the mandated water level would require extensive work including repairs to the dam, repairs to the liner between the 6,835 and 6,845 levels or the possible replacement of the entire liner, and sinkhole repairs. The required work would require Engineers, Contractors, and time. The work and fines until the lake was filled amounted to a lot of money that our Association does not have.

While the pending contempt order and associated fines were the catalyst for this action, there were also underlying considerations including an October 21 obligation to pay a $600,000 balloon payment incurred when funds were borrowed to install a new golf course irrigation system in October 2011.

We also have aging facilities that require upkeep with an insignificant amount of reserves. Our clubhouse is over 50 years old and the other amenities require maintenance and repair. A draft reserve study has been received and is under review that shows that millions of dollars are needed over the next 10 years and through 2050.

Finally, CCC’s boards have struggled to make ends meet for years, while trying to honor their pledge made in 2013 not to raise dues again for eight years. With huge increases in minimum wage, increasing expenses related to repairing, replacing and maintaining facilities, and rising water costs, along with the contempt action, sanctions, and order, and after exploring all other options, there was no other possible decision. We view this as an action being led by forces out of our control and hope it can be an opportunity to strengthen our Association’s financial position for years to come.

After the October 30th preliminary ruling, the board studied and reviewed all possibilities, along with speaking with several professionals and our attorneys. Unfortunately, this was the only possible conclusion, and once decided, needed to be acted upon quickly. The January newsletter provided to homeowners did reference that bankruptcy was an option that was being considered.

For the most part, most of our Members should not be affected by this petition. We will keep our facilities open and our employees will be working to ensure “business as usual”.


At the beginning of the Chapter 11 process, we explained that “values may be negatively affected. As with any kind of public HOA restructuring, the CCC bankruptcy could create some market uncertainty on the impacted houses, however this kind of impact should be short-lived and was inevitable given CCC’s financial condition and potential Lake Elaine liabilities that must be addressed under the court’s recent preliminary ruling.” As we now know, market conditions have been favorable for most of the real estate market, including our CCC properties. We do think that if we are unsuccessful in approving the fees necessary to support the reorganization plan, there will likely be a negative effect on property values with the reduced or possible loss of amenities currently enjoyed by HOA members including golf course or driving range, tennis or pickleball courts, swimming pool, clubhouse and Bear Paw Recreation Center.

The reorganization plan imposes an increase to our annual assessment that will be phased in over three years beginning in 2024. Our members will be voting to approve this fee which will be necessary for the reorganization plan to move forward.

The reorganization plan imposes a one-time special assessment of $2,000. Our members will be voting to approve this fee which will be necessary for the reorganization plan to move forward.

The primary next steps are as follows:

  • Round Table Discussions will be held on every Thursday at noon.  Dates:  6/9, 6/16, 6/23, 6/30, 7/7, 7/14, 7/21 and 7/28
  • We will also be having Town Hall Meetings for everyone who is interested in attending. These dates are on the listed Saturdays at 9:00 AM. Dates:  6/25, 7/9 and 7/23. 
  • 6/28: ballots on the two fees required to support the reorganization plan will be mailed to members
  • 7/28: ballots due by 5:00 p.m.
  • 7/30: Special Meeting of the members to vote and certify the count
  • 8/4: Initial Confirmation Hearing in the Bankruptcy Court

Not currently but we hope that our members will approve the two fees required to support the reorganization plan that will provide our HOA with a healthier and stronger future. Beyond the potential Lake Elaine obligations, we have a 50-year-old building, and numerous amenities. There are constant ongoing repairs and improvements required for these assets that must be addressed. CCC also had a balloon payment due in October, for $600,000. The intent in filing Chapter 11 Reorganization was to give CCC the opportunity to develop a reorganization plan and develop a solid financial footing for the future. We have developed such a plan and are confident that if our members approve the two fees to support it, we will take a big step towards a better future for our Association

The amount of a one-time special assessment and annual dues increases has been discussed earlier in this section as well as in several ‘Things to Know’ messages. The timing will depend on whether or not our members approve the two fees necessary to support the reorganization plan and the legal processes that will ultimately approve our reorganization plan. The special assessment will go into effect immediately and the annual dues increase, phased over three years, is estimated to begin in 2024.

As the CC&Rs are currently written, townhome and condos have the right to vote on special assessments and on annual assessment increases of over 20%. As stated at the 2/12/21 meeting, the Board is taking ALL homeowners concerns regarding voting equality seriously and plans to include the townhomes and condos in all future votes, if legally possible

Yes, on November 16, 2021 the board unanimously passed a one-time resolution allowing townhome/condominium members a vote on the two fees that are required to support the reorganization plan.

Board Resolution

The filing for Chapter 11 reorganization stays those fines. An automatic stay is a provision in the bankruptcy law that temporarily prevents creditors, collections agencies, government entities, and individuals from pursuing Continental for amounts owed.

The property cannot be abandoned.  So long as CCC owns the property, at a minimum, it will remain liable for public safety/nuisance issues and dam maintenance obligations with the State of Arizona.  If it is to be divested, it must be accepted by a third party.  The plan gives the LFOs the option of taking ownership and responsibility for the property going forward and relieving CCC of all future liabilities in exchange for a onetime payment by CCC to the homeowners of $2.5 million. 

Continental received $1500 in donations for marketing materials for the campaign. This included signage, team captain materials and t-shirts.

Chapter 7 Information

There are many unknowns associated with a conversion to Chapter 7.

Yes, there is nothing inherent in Chapter 7 that dissolves the HOA. However, a Chapter 7 panel trustee would be appointed and all decisions regarding the operations of the HOA will be made by the Trustee. The Trustee is charged with maximizing distributions to creditors.

The trustee is appointed to liquidate and pay, not operate. It is difficult to predict how the trustee will act, but generally speaking trustees wind up operations quickly after appointment and liquidate assets as fast as possible.

Not necessarily. That would be within the discretion of the trustee.  The obligation to pay dues at least at their current level runs with the land. A member may cease paying in protest, but the trustee will ultimately have the same rights CCC currently has to enforce and compel payment ultimately filing a lien on the property and foreclosing.

Without an additional court order, the Trustee steps into the Debtor’s shoes and inherits any and all land restrictions, encumbrances, etc.

The Lake Elaine lawsuit was based on a 1990 Amended Judgement and Settlement that was rejected by the bankruptcy court earlier this year. (link to message). If we convert to Chapter 7, the HOA cannot be sued by Lake Elaine property owners or any other entity.

Continental Country Club

Continental Country Club has 2,395 owners. Membership in Continental is a result of home ownership. All Single-Family homes governed by the CC&Rs are obligated to pay an annual lot assessment. The CC&Rs govern 1,210 single family homes. This includes CC&Rs enforcement on the property, common area maintenance, amenities access and social activities. The remaining properties consist of Townhomes, Condos and timeshares. These properties have individual property management companies who handles their CC&R enforcement and day-to-day operation. The owners of these properties are also obligated to pay annual assessments to CCC based on their respective CC&Rs. Continental is responsible for those owners’ access to amenities and common area maintenance.

The original clubhouse was built in 1960. There were several additions made in the 1970’s. There is no definite date as to when the clubhouse pool was built; however, there is a 1979 photograph showing the pool and the two adjacent tennis courts.

This anomaly resulted in 1994. Back then, the increase had to be approved in each single-family subdivision. It was approved in some subdivisions, but not in others, as some subdivisions expressed strong discontent with increasing the assessment because they did not see value in the use of amenities. That resulted in two levels. We have compensated by charging usage fees and not giving golf discounts to those who do not pay the full amount. These homeowners are known as Associate members. In 2006 Continental Country Club succeeded in unifying (11) different sets of CC&Rs for individual single-family subdivisions. However, the CC&Rs needed to be combined with the assessments at the amounts approved by each individual subdivision at that time. The Board approved a two-tier membership now known as Associate and Full Membership to account for the difference in assessment levels. These membership tiers are subdivision specific. Associate Members have the option to upgrade on an annual basis to full members, although full members do not have the option to become associate members.

The Wyndham Timeshares (125 units) are Full Members of Continental just like all other owners. They pay the full membership dues and receive the same benefits. Wyndham also contributes 50% of the cost of running the Fitness Center and pays for all Capital Improvements at Bear Paw + 60% of the operational day-to-day costs.

Homeowners have a duty to pay their annual dues and this holds true even while in a Chapter 11 reorganization.

All owners of lots subject to the declaration are required to be members of Continental Country Club, Inc., per the recorded declaration.  The restrictions contained in a declaration are covenants that run with the land and cannot be terminated by the owner.