David Andrew “Andy” Fetyko, a hard-money borrower, bankrupt

In an increasingly familiar story, another local builder who borrowed $70 million from a hard-money lender has filed for bankruptcy protection.

David Andrew “Andy” Fetyko, one of the single-largest borrowers of the bankrupt lender Estate Financial Inc., has filed for personal Chapter 7 bankruptcy protection.

Under Chapter 7 bankruptcy, debts are wiped clean and most of a debtor’s assets are liquidated to pay creditors. A filing for bankruptcy protection also halts collection activity on all debts.

Fetyko, 42, says his experience with troubled lender Estate Financial of Paso Robles has ruined him, but otherwise he could not comment based on the advice of his San Luis Obispo attorney, Paul Ready.

Fetyko is seeking to discharge $76.5 million of debts — more than $70 million of which is owed to Estate Financial and about 3,000 investors, according to his bankruptcy filings.

Set apart from bank lending, hard-money lending involves pooling money from investors, which is then lent typically to real estate developers and builders in high-interest loans. It is considered risky because it’s often a last resort for borrowers who cannot obtain financing through traditional means.

But such a bankruptcy is leaving more than Estate Financial investors in its wake. Fetyko’s filing shows a number of debts to San Luis Obispo County residents, banks, businesses and government agencies.

It will be up to the bankruptcy court to determine which creditors would be paid first or what percentage of Fetyko’s assets should be paid out to whom. If his assets are, as he has stated in his initial filing, valued about $15.5 million, and he owes $76.5 million, it is unlikely all of his creditors will be repaid in full.

Among Fetyko’s creditors are San Luis Trust Bank, which is owed more than $813,000 — nearly $250,000 of which is not secured by any collateral — and the San Luis Obispo County Treasurer-Tax Collector’s Office, which is owed more than $623,000 in property taxes.

Fetyko also owes money to many local businesses in the construction industry, such as Paso Robles’ Weyrick Lumber and Hayward Lumber, collectively owed more than $140,000; Michael Fredericks Paving, owed more than $78,000; and Tim Twisselman Enterprises, owed nearly $69,000. Other subcontractors in the county left unpaid include plumbers, drywallers, fra-mers, tilers and plasterers.

Still other creditors include educators, dentists, doctors, tire stores, accountants, retailers, public utilities and state and county agencies, such as the Franchise Tax Board, the San Luis Obispo County Public Works Department, the state Water Resources Control Board and the Templeton Community Services District.

Also, many of Fetyko’s Estate Financial-funded developments — still needing millions of dollars to be completed — have stood for more than a year as half-built, deteriorating eyesores in the county.

Estate Financial bankruptcy trustees have foreclosed on the properties and are putting them up for sale. But given the magnitude of having to deal with more than 544 real estate projects under Estate Financial’s control, the process, which one trustee described as trying to sort out a “mess of scrambled eggs,” has been slow.

For instance, Fetyko owes $5.7 million on an incomplete condominium project on Rockview Place in San Luis Obispo. In February 2008, when The Tribune broke the story of Estate Financial’s real estate troubles, Fetyko’s project, which he had begun in 2005, had stalled.

Only six of the nine condominiums slated for construction had been framed. Fetyko had projected its market value in 2005 at $6 million. Estate Financial President Karen Guth had told The Tribune she needed $1.5 million to complete the project and had hoped to resume building within three months. Instead, she filed for bankruptcy that summer.

Estate Financial bankruptcy trustees have had the buildings wrapped with plastic to keep them from deteriorating any further and have put the buildings up for sale for $2.5 million.

Guth — who was sentenced to 12 years in prison this month for defrauding her investors — asked for personal guarantees from Fetyko for the money that he was borrowing. Now that he has filed for bankruptcy protection, he more than likely will not be obliged to pay those guarantees, and the Estate Financial investors are left with unfinished real estate projects that are being sold for much less than what was borrowed on them.

In their November status report on the proceedings, trustees Tom Jeremiassen and Brad Sharp said Estate Financial had about $314 million in outstanding loans when it filed for bankruptcy protection.

If Fetyko’s calculations are right, his $70 million debt to Estate Financial represents a little more than a fifth of that firm’s holdings. It is unlikely investors would be made whole if those properties are sold, Jeremiassen said.

For instance, in his bankruptcy filings, Fetyko says he owes Estate Financial $5.7 million for what was loaned to him to build the San Luis Obispo condos. However, none of those condos were completed, and the listed price would cover just more than half of the debt.

If anything, Fetyko’s bankruptcy might save the Estate Financial trustees time by their not having to ask him to prove that he can’t meet his debts, Jeremiassen said. In other words, the trustees won’t have to go through the process of suing him for money he does not have the ability to pay.

“He’s stated he owes us (because he put personal guarantees on the loans) and he doesn’t have the assets (to pay the debt), so that puts a finality to it,” said Matt Sorensen, a financial consultant to the Estate Financial trustees.