Kelly Gearhart bankruptcy debts now put at $65 million

Atascadero builder Kelly Gearhart’s debt has grown by $20 million, to nearly $65 million, according to his latest bankruptcy filing.

In the initial filing of his Chapter 7 bankruptcy case, Gearhart claimed he had about $6.5 million in assets and about $45 million in debt. In a revised schedule, Gearhart listed his assets at $13.5 million and his debts at almost $65 million.

The balance sheet will continue to change if people file claims against Gearhart, according to Ken Gibson, an attorney for the Ohio trustee handling the bankruptcy. Gibson believes more claims will be filed.

Creditors should make an official filing with the court in order to be repaid, Gibson said.

“If people do not file a claim, they will not receive a distribution from the bankruptcy estate,” he said Tuesday, adding that they could still be paid through a sale of the property upon which they have a valid deed of trust.

In recent years, Gearhart borrowed millions of dollars from county residents — including those who invested in Jay Hurst Miller’s Hurst Financial in Atascadero — for several commercial and housing developments, particularly in the North County. However, in 2008, Gearhart started coming up short in repaying interest and principal of his debts, which helped trigger the collapse of the now-bankrupt company. Gearhart moved to Ohio a year ago, and he then filed for bankruptcy in that state in February.

During the past year, state regulators have accused Gearhart of fraud in his dealings with Miller. More than 400 investors are also suing Miller, Gearhart and the escrow company that handled many of their deals, saying they conspired to take investors’ money without building the projects as promised, according to court documents.

Even while the bankruptcy trustee continues to sort out Gearhart’s money trail, the San Luis Obispo County District Attorney’s Office and the FBI say Gearhart and Miller both are under investigation for criminal activity. No arrests have been made.

Gearhart and Miller no longer have phone numbers where they can be reached by The Tribune, and their attorneys have not returned repeated phone calls.

Gearhart’s amended filing was made in May. Attorneys for the bankruptcy trustee say they will continue to search for Gearhart’s assets on behalf of his creditors. To that end, Gibson’s partner, Michael Moran, has filed papers with the court asking Gearhart to appear for a deposition Oct. 23. According to Moran’s request, entered in court on Monday, he wants more information about Gearhart’s business dealings regarding:

a project on 5680 El Camino Real in Atascadero;

Gearhart’s original application for reimbursement from the city of Atascadero for the Barrenda sewer system, which Gearhart put in place as part of a construction project;

Gearhart’s insurance policies on his vehicles or other personal property; and

all records of transfers of his vehicles, including motorcycles, motor scooters, cars or any personal property, to his relatives or those of his wife, Tamara Lowe, as well as to their employees or relatives of their employees.