Provident Financial Inc., a Kalispell-based investment and lending company announced Sept. 3 that it plans to liquidate its assets. The company filed for Chapter 11 bankruptcy protection on Sept. 2.

Arlene Hulford, who had invested with Provident for 17 years, said she felt there was no warning of the impending failure, even though she asked Provident in March how it was faring in the rough economy.

"I'm shocked," Hulford said. "I can't believe they didn't give us any warning. We don't have any other investments, any other savings, nothing."

Hulford and her husband stand to lose $60,000, though it is likely most or all of that money will be returned to them.

Brad Walterskirchen, president and chief executive officer of Provident, has sought to assuage fears through his letter to the company's 500 investors and by fielding an onslaught of calls from worried clients.

"We are going forward with an orderly liquidation," Walterskirchen said. "We hope we'll have enough to pay back our investors. We can't predict what the economy is going to do. If it gets worse, it's going to put pressure on those assets. We might absorb a loss. If the market improves, we might be able to sell assets at a profit."

In the letter to investors, Walterskirchen recalled a January 2009 letter in which he told clients about efforts to reduce costs to keep pace with the deteriorating economy. He noted that Provident reduced salaries and payroll expenses, laid off personnel and wrote down repossessed assets and building capital.

Provident primarily made short-term real estate loans.

The firm also has an insurance premium finance division that helps finance people who cannot afford their insurance premiums. Walterskirchen said the insurance division continues to make money for the company.

The Hulfords knew that Provident was not insured by any government agency, but saw good returns on their investments over the years.

"We have nothing to fall back on now," Hulford said. "How am I going to pay my taxes? It might be six months before we can get any of it back."

Provident investors are invited to attend a meeting of creditors at 1:30 p.m. on Oct. 9 in Missoula, though it is not mandatory.

Provident's lawyer, Harold Dye of Dye and Moe in Missoula, explained that Provident will propose a liquidation plan for creditors to vote on in the coming months.

Creditors will receive a disclosure statement from the Montana District of the U.S. Bankruptcy Court with the plan.

"It's like a prospectus," Dye said. "It gives creditors an informed basis to decide whether to accept the plan or not. The plan is in legalese, the disclosure's in plain English."

Investors will also receive ballots so they can vote on the plan.

For the plan to be approved, a super majority of half the claimants representing two-thirds of the total asset amount must vote in favor.

Dye expects the plan Provident is drawing up will win approval. If it does not, the case could be dismissed from bankruptcy court or converted to Chapter 7 bankruptcy, but Dye said that is unlikely.

"Chapter 7 is not conducive to getting the best value," Dye said, explaining that in Chapter 7 cases, assets are liquidated as quickly as possible. "The idea is not to fire-sale the assets."

Walterskirchen said he invites questions from investors and Dye also is available to explain the bankruptcy process, which could take as little as five months.

"We encourage people to talk to us," Walterskirchen said.

Reporter K.J. Hascall may be reached at 758-4439 or by e-mail at [email protected]