NORTHAMPTON - More than four years after its financial collapse, Hampshire Community Action Commission's board of directors still can't liquidate the defunct anti-poverty agency, which owes hundreds of creditors $1.5 million.

As a result, the volunteer team called upon by local officials in 2005 to wind down the nonprofit's affairs is turning to a last resort: bankruptcy.

The organization has petitioned for Chapter 7 bankruptcy in U.S. Bankruptcy Court in Worcester because it has been unable to relinquish its largest remaining asset, a building at 9 Russell Road in Huntington where tenants like the Hilltown Community Health Center have long provided services to low-income people in the area.

Seven creditors hold more than $300,000 in liens on the Huntington property and some have refused to waive those claims or strike a bargain with the agency so that it can sell or transfer the property. Only by waiving those liens can HCAC officially dissolve as a nonprofit organization under state law.

The agency's biggest creditor is the state Division of Unemployment Assistance, which HCAC owes more than $500,000. The money largely involves unpaid unemployment insurance, including interest and penalties. Six other local businesses, including area child-care providers, a fuel company, caterer, and printing business, hold liens totaling about $50,000.

"We tried to figure out a way to sell that building," said Nancy DeProsse, an HCAC board member appointed by Amherst's town administrator in 2005. "We just couldn't find a buyer."

"It had to end somehow," she added. "We're just really sorry we weren't able to make it work out."

DeProsse is one of five remaining HCAC board members who have worked valiantly to find a way to dissolve what remains of a 40-year-old publicly funded institution that once served 6,000 low-income residents in Hampshire County. A sixth board member and former president, Robert L. Condon, of Belchertown, resigned last year, citing "no end" to the situation.

"We've met, on average, once a month for all these years," DeProsse said last week.

In 2005, HCAC imploded financially after suffering $1 million in losses. In the months prior to that collapse, the agency's leaders resigned under pressure, as did 11 board members.

Local officials, including the mayors of Northampton and Easthampton, quickly appointed an emergency, interim board that initially tried to save the organization, and this team earlier considered filing bankruptcy. When that effort failed, the board successfully transferred HCAC's anti-poverty programs to other human-service agencies in the region and began the messy, time-consuming work of dissolving the agency's remaining assets.

Among those assets was HCAC's former headquarters on Route 10 in Northampton, which sold for $725,000 lock, stock and barrel in a public auction in February 2006. The property is now home to a dog kennel.

Bankruptcy petition

Chapter 7 bankruptcy is essentially a liquidation process in which the assets of a corporation, among other entities, are sold by an appointed trustee and the proceeds distributed to a prioritized list of creditors.

In the case of HCAC, the sale of the Huntington building, appraised last year at $230,000, will not satisfy the $300,000-plus in liens held by creditors on the property - or the more staggering $1.18 million owed to nearly 400 other creditors, according to a 149-page bankruptcy filing.

Those creditors represent all manner of businesses, from social service, relief and child care organizations to small businesses engaged in printing, cleaning and landscaping, to name only some of the services HCAC left unpaid. Banks, credit card and insurance companies also are owed money, as are dozens of individuals and professionals in the Valley who once worked for the nonprofit agency, including its former auditors.

The United States Trustee's Office has named Gary M. Weiner, a bankruptcy attorney in Springfield as trustee. Weiner's role will be to sell the Huntington property and distribute the proceeds to creditors. Weiner said he has not yet determined whether a future sale of the property will be public or private, but he hopes to sell the building in the next six months.

In addition to the Huntington property, HCAC also owns 40 Eric Carle lithographs valued at around $10,000.

"They have value and I will sell them to the benefit of creditors as well," Weiner said, of the lithographs by the famous children's book illustrator.

The U.S. Bankruptcy Court has scheduled a Dec. 29 meeting for creditors and HCAC board members in Springfield.

Dan Crowley can be reached at dcrowley@gazettenet.com.