Friendship Village of Schaumburg: 363 Sale and Chapter 7

Friendship Village of Schaumburg, the largest continuing care retirement community in Illinois, filed chapter 11 in the Northern District of Illinois on June 9, 2023, after a pandemic-driven census decline left it unable to service ~$131.6 million in bond debt. The case began as a liquidation anchored by a 363 sale of the 60-acre Schaumburg campus, which closed in January 2024 for more than $35.5 million. A dispute between the debtor and its bond trustee over plan structure, lien scope, and the adequacy of a settlement with the debtor's nonprofit parent prevented confirmation and led to conversion to chapter 7 in September 2024.

The case has since entered a contested administration phase. In April 2025, chapter 7 trustee Catherine L. Steege filed a $20 million-plus adversary proceeding against the debtor's parent entity, its former CEO, and board members, alleging misappropriation of federal tax credits, improper elimination of intercompany liabilities, and fiduciary duty breaches. As of March 2026, that litigation and professional fee disputes remain pending.

Debtor	Evangelical Retirement Homes of Greater Chicago, Inc. d/b/a Friendship Village of Schaumburg
Court	U.S. Bankruptcy Court, Northern District of Illinois (Eastern Division)
Case Number	23-07541
Petition Date	June 9, 2023
Judge	Hon. Janet S. Baer
Conversion to Chapter 7	September 10, 2024

Pandemic Census Decline and Bond Default

Friendship Village of Schaumburg (FVS) was an Illinois not-for-profit corporation built in 1977 operating a campus of 537 independent living apartments, 28 garden homes, 84 assisted living units, 25 memory care apartments, and 169 nursing care beds across more than 60 acres in Schaumburg, Illinois, with the most recent addition completed in 2007. At full occupancy the campus could house approximately 1,000 seniors, making it both the largest nonprofit retirement community in Illinois and the 16th-largest CCRC in the United States. The community served approximately 600 residents at the time of filing and held three of five stars on Medicare.gov.

FVS was the sole subsidiary of Friendship Senior Options, NFP (FSO), which served as its exclusive manager under a management agreement covering personnel, financial services, IT, marketing, and contract negotiations. Michael Flynn served as president and chief executive officer, receiving approximately $406,000 in compensation in 2022.

COVID-19 and census decline. Before the pandemic, FVS typically sold 8 to 10 units per month, or roughly 100 units annually. The pandemic caused a sharp drop in new move-ins and increased staffing costs, in part because state restrictions halted tours for nearly a year, eliminating the primary sales pipeline. State-mandated admission freezes for assisted living, memory care, and nursing units compounded the census decline, creating liquidity constraints that FVS could not overcome.

On January 5, 2021, more than two years before filing, FVS informed UMB Bank, N.A. as bond trustee that it could no longer afford debt service on the Series 2017 Bonds. In February 2021 FVS failed to make scheduled payments of approximately $2.975 million in interest and $2.555 million in principal. By August 2022 the debtor made a partial interest payment of $1.455 million against a $2.9 million obligation, and by January 2022 FVS missed an additional debt service payment of approximately $708,642.

Pre-petition marketing process. In March 2022, FVS engaged Ziegler as sale advisor along with Grandbridge Real Estate Capital as financial advisor and marketing agent and conducted a sale process. At least one prospective buyer emerged but preferred to purchase outside of bankruptcy, and the process did not produce a viable transaction. FVS entered chapter 11 to complete a 363 sale under court supervision. At filing, the debtor reported assets of $10 million to $50 million against liabilities of $100 million to $500 million and between 200 and 999 creditors.

Series 2017 Bonds and Resident Refund Liabilities

The debtor's obligations at filing were dominated by the Series 2017 Bonds, issued December 1, 2017 through the Illinois Finance Authority as conduit issuer in an aggregate principal amount of $122,550,000. The issuance comprised Series 2017A, 2017B, and 2017C unrated guaranteed bonds with a final maturity in 2045. As of the filing, approximately $115.2 million in principal and $5.6 million in interest remained outstanding on the bonds, and the debtor also carried a separate direct note obligation of $13.75 million with approximately $10.27 million still owed. By the petition date, the aggregate outstanding balance had grown to approximately $131.6 million.

The bonds were trading at approximately 30 cents on the dollar. The debtor's debt service reserve fund held $7.5 million, and the bond sinking fund held approximately $103,841. UMB Bank, N.A. served as both bond trustee and master trustee, with Mintz Levin as bond trustee counsel and RBC Capital Markets also advising. Total unsecured obligations as reported in the Fourth Amended Disclosure Statement stood at approximately $96 million exclusive of the bond deficiency claim.

Resident refund liabilities. As a CCRC, FVS collected large entrance fees from residents that were partially or fully refundable. Individual entrance fees varied widely: one resident paid approximately $124,000 plus roughly $2,400 per month with a contractual promise of a 90% refund, while others paid over $300,000 or more than $250,000 in entrance fees.

The debtor carried approximately $5.2 million in triggered, non-contingent refund liabilities to former residents, ~$14.8 million in untriggered contingent liabilities to former residents, and ~$77.7 million in untriggered contingent liabilities to current residents — totaling roughly $97.7 million in resident-related unsecured claims. The size and layered contingency structure of these liabilities made consensual restructuring outside a sale process extremely difficult. One family reported waiting four years for a refund after a relative's passing, and another family was offered only $7,000 on an expected $225,000 refund representing 90% of the original deposit.

Other obligations. Trade creditors held approximately $3.9 million in unsecured claims. FSO held an intercompany claim of approximately $232,000. LEAF Capital Funding, LLC held a secured claim arising from equipment financing; as of early 2026, determination of the amount of LEAF's secured and priority claim remained pending before the court, with a hearing scheduled for March 17, 2026. Morrison Management Specialists also asserted a disputed secured claim of up to ~$1.84 million, though confirmed other secured claims totaled only approximately $40,000.

Cash Collateral and FSO DIP Financing

No third-party DIP lending was obtained. FVS filed a motion to use cash collateral on the petition date, and the court entered a progression of orders authorizing continued use: a first interim order on June 23, 2023, a second interim order on July 12, 2023, and a final cash collateral order on August 11, 2023. All cash collateral use was consented by UMB Bank, N.A. as bond trustee.

FSO as DIP lender. On July 24, 2023, the debtor filed an emergency motion for post-petition financing from its own parent entity, FSO. The court entered the DIP financing order on August 11, 2023, authorizing borrowings of up to $3 million on an unsecured administrative priority basis, with the bond trustee's consent to the subordinated financing. As of the disclosure statement date, FVS had drawn the full $3 million. The decision to use the debtor's own nonprofit parent as DIP lender — rather than a third-party financial institution — created inherent conflicts of interest that the chapter 7 trustee would later pursue in adversary litigation.

FSO settlement contribution. Under a subsequent settlement and contribution agreement, FSO agreed to contribute $1 million to the estate through partial forgiveness of its DIP obligations to fund ongoing bankruptcy administration, and $1.5 million into a Former Residents Trust for the benefit of former residents owed entrance fee refunds. These contributions were central to the debtor's proposed plan but became a focal point of the bond trustee's objections.

363 Sale to IL CCRC, LLC

FVS pursued a sale of substantially all assets — the CCRC campus and operations — under Section 363 of the Bankruptcy Code.

Bid procedures and stalking horse. The debtor filed a bid procedures motion on June 14, 2023. IL CCRC, LLC was identified as the stalking horse bidder under an asset purchase agreement filed September 15, 2023, with a cash purchase price of approximately $33 million plus additional future financial commitments.

Auction and sale approval. An auction was conducted October 20~25, 2023. Encore Healthcare Services of New York submitted the winning bid of approximately $114.8 million — roughly $141,000 per unit — against the stalking horse's opening bid of $83.1 million. IL CCRC, LLC (the acquisition vehicle for Encore) was announced as the winning bidder.

Beyond the cash purchase price, Encore pledged $15 million in capital improvements, $750,000 annually in benevolence care for legacy residents, $50,000 per year in charitable contributions, and $25,000 per year in employee education assistance. Current residents were to receive entrance fee repayments of 25% within three years, 35% within four years, and incremental increases through full reimbursement after 16 years. The bankruptcy court conducted the sale hearing on November 8, 2023, and entered the sale order on November 22, 2023.

Closing. The sale closed on January 3, 2024. Continuum Advisors, led by Dave Kliewer and Jay Jordan, arranged the transaction. Total cash consideration exceeded $35.6 million, excluding a $2 million set-aside for former residents and approximately $626,000 for accrued paid time off obligations transferred to IL CCRC, LLC.

The sale proceeds represented approximately 27% of the ~$131.6 million in outstanding bond obligations, ensuring that bondholders would face a substantial shortfall even before administrative expenses. FVS's status as a Medicare-certified CCRC added regulatory complexity to the transaction, requiring coordination with the Illinois Department of Public Health and state CCRC regulators prior to the transfer of operations. The buyer committed to transitioning the campus from a majority entrance-fee model to a rental community. Separately, a parcel known as the Huntley Property sold for approximately $450,000, closing January 31, 2024.

Post-sale operations. The campus now operates as Encore Village. By early 2025, the community had 693 residents in 860 units with what the new operator described as record growth. CEO Avi Satt stated that Encore had invested $15 million in upgrades and maintenance and that "the community is in a healthy place financially today."

Morrison Management Specialists dispute. Morrison Management Specialists objected to cure amounts and to the sale itself. After the court overruled its sale objection on December 15, 2023, Morrison filed a notice of appeal to the district court.

Plan Disputes and Conversion to Chapter 7

The chapter 11 case was marked by conflict between the debtor and UMB Bank as bond trustee over plan structure, the FSO settlement, and the scope of the bond trustee's lien on estate assets.

The debtor's liquidating plan. FVS filed its original disclosure statement and chapter 11 liquidating plan in October 2023 and subsequently amended both documents four times through February 2024 — filing the Second Amended Disclosure Statement in January, the Third Amended version in February, and the Fourth Amended Disclosure Statement at the end of February. The court approved the Fourth Amended Disclosure Statement on March 12, 2024.

Under the debtor's plan, bondholders would recover approximately 23.3% on estimated allowed claims of ~$131.6 million. Former residents who opted into the plan's release provisions (Class 5A) would receive 10–17.5% recovery, funded by two sources: $2 million held in trust from IL CCRC, LLC's purchase and $1.5 million from the FSO Settlement and Contribution Agreement. Class 5A claimants could also receive distributions from the Unsecured Creditor Trust. Non-resident general unsecured creditors (Class 6, ~$3.96 million) faced uncertain recoveries dependent on trust proceeds after higher-priority claims.

Class	Description	Est. Allowed Claims	Est. Recovery
1	Priority Claims	$481,000	100%
2	Bond Claims (UMB as Bond Trustee)	~$131.6 million	~23.3%
3	Other Secured Claims	~$40,000	100%
4	Bond Trustee Deficiency Claim	TBD	Unknown
5A	Former Resident Claims (opt-in)	~$20 million	10–17.5%
5B	Opt-Out Former Resident Claims	$0	0%
6	Non-Resident General Unsecured	~$3.96 million	Unknown
7	Intercompany Claims (FSO)	$232,000	0%
8	Equity Interests	N/A	0%

Bond trustee objections. UMB Bank objected to the debtor's plan on multiple grounds, arguing that the FSO settlement improperly benefited residents at the expense of bondholders, that the bond trustee's lien extended to certain assets the debtor treated as unencumbered, and that the plan was not confirmable. The bond trustee also contested the debtor's treatment of Employee Retention Tax Credits (ERTC), asserting through a demand letter that the ERTC funds received by FVS were property of the bond trustee's collateral estate.

The debtor and FSO disputed this position, and the ERTC allocation became one of the central unresolved issues that prevented confirmation. The debtor and the bond trustee submitted competing confirmation briefs in April 2024, and a contested confirmation hearing was held, but the court did not enter a confirmation order.

U.S. Trustee objections. The U.S. Trustee filed multiple objections during the chapter 11 case, including objections to the Wyse Advisors retention application and to plan confirmation, adding an additional layer of regulatory scrutiny to the already contested proceedings.

Competing plan and withdrawal. On July 18, 2024, UMB Bank filed its own competing disclosure statement and plan. The debtor withdrew its plan the following day. The debtor then filed an objection to the bond trustee's competing plan, challenging its feasibility and asserting that the bond trustee's plan did not adequately protect interests of all creditor classes.

Conversion motion. On August 9, 2024, the debtor filed a motion to convert to chapter 7. The motion cited several factors: the debtor's inability to afford another contested confirmation process given depleted estate resources, concerns about the bond trustee plan's feasibility and its treatment of unsecured creditors, and the need for an independent trustee who could evaluate and pursue estate claims — including potential causes of action against FSO and its officers — for the benefit of all creditors rather than primarily bondholders. The court entered the conversion order on September 10, 2024, and Catherine L. Steege was appointed chapter 7 trustee the same day.

Adversary Proceeding Against FSO and Former Officers

On April 11, 2025, Trustee Steege filed a complaint against FSO, former CEO and CFO Michael Flynn, former controller and CFO Jeffrey Nyberg, and members of both the FVS and FSO boards (Adversary No. 25-00130). The complaint alleges:

• Misappropriation of approximately $7.7 million in federal Employee Retention Tax Credits belonging to the debtor
• Improper elimination of $8.5 million in post-petition intercompany liabilities and $400,000 in pre-petition intercompany liabilities owed by FSO to FVS
• Excessive payments under the management agreement and unauthorized payments on the DIP loan
• Breach of fiduciary duty by directors and improper domination by FSO

The claims include breach of contract, conversion, unjust enrichment, aiding and abetting fiduciary breach, and alter ego liability. The complaint demands $20 million or more in damages and seeks to disallow FSO's claims and impose an asset freeze.

Professional Retentions and Fee Administration

FVS retained multiple professionals during the chapter 11 phase. Dopkelaw LLC, led by Bruce C. Dopke, served as general bankruptcy counsel. Polsinelli PC served as co-counsel from its Chicago office. Wyse Advisors LLC and Newpoint Advisors Corporation served as financial advisors, and Grandbridge Real Estate Capital handled the sale process as investment banker and real estate advisor.

The official committee of unsecured creditors was represented by Crane, Simon, Clar & Goodman. Stretto, Inc. served as claims and noticing agent. Professional retentions were approved in early July 2023, with Grandbridge, Wyse Advisors, and Dopkelaw all receiving court approval on July 7, 2023.

Fee administration. The case generated significant professional fees relative to estate size. Final fee orders have been entered for Stretto ($51,266), Wyse Advisors ($328,394), and Newpoint Advisors ($67,527).

Interim fee applications disclosed substantial additional amounts: Polsinelli PC's third interim application totaled $554,807, with a fourth interim application also filed; Dopkelaw LLC's fourth interim application sought $84,946; and the unsecured creditors' committee counsel Crane, Simon, Clar & Goodman filed a fourth interim application exceeding $377,000. As of March 2026, the chapter 7 trustee's deadline to object to the final fee application of Dopkelaw LLC was extended to April 3, 2026, and additional fee matters remain pending. The court had previously entered findings of fact and conclusions of law in April 2024 regarding prior interim fee applications.

Key Timeline

Date	Event
January 5, 2021	FVS informs bond trustee it can no longer service the Series 2017 Bonds
January 2022	FVS misses ~$708,642 debt service payment
June 9, 2023	Chapter 11 petition filed; cash collateral motion filed
June 14, 2023	Bid procedures motion filed
June 23, 2023	First interim cash collateral order entered; unsecured creditors' committee appointed
August 11, 2023	DIP financing order and final cash collateral order entered
September 15, 2023	Stalking horse APA (IL CCRC, LLC) filed
October 20--25, 2023	Auction conducted; IL CCRC, LLC announced as winning bidder
November 22, 2023	Sale order entered
January 3, 2024	Sale closing — substantially all assets transferred to IL CCRC, LLC
January 31, 2024	Huntley Property sale closes (~$450,000)
February 29, 2024	Fourth Amended Disclosure Statement and plan filed
March 12, 2024	Order approving Fourth Amended Disclosure Statement
July 18, 2024	Bond trustee files competing plan
August 9, 2024	Debtor files motion to convert to chapter 7
September 10, 2024	Conversion order entered; Catherine L. Steege appointed chapter 7 trustee
April 11, 2025	Chapter 7 trustee files $20M+ adversary proceeding against FSO and former officers
December 2025	Final fee orders entered for Stretto and Wyse Advisors

Frequently Asked Questions

What happened to Friendship Village of Schaumburg?

Friendship Village of Schaumburg filed chapter 11 on June 9, 2023, in the Northern District of Illinois. The 60-acre CCRC campus was sold to IL CCRC, LLC (an Encore Healthcare Services acquisition vehicle) for more than $35.5 million in a 363 sale that closed January 3, 2024. After disputes between the debtor and its bond trustee prevented plan confirmation, the case was converted to chapter 7 on September 10, 2024.

The campus now operates as Encore Village, with 693 residents and $15 million invested in upgrades. Fewer than 1% of U.S. life plan communities have filed for bankruptcy according to LeadingAge data. In 2024, Illinois enacted legislation requiring presale disclosure of entrance fee refund status and timelines for CCRC residents.

Why did Friendship Village of Schaumburg file for bankruptcy?

The COVID-19 pandemic caused a census decline across the community's assisted living, memory care, and nursing units, eliminating the operating surpluses needed to service ~$131.6 million in Series 2017 Bonds. Before the pandemic, FVS typically sold 8 to 10 units per month; state restrictions halted tours for nearly a year, and occupancy never fully recovered. FVS stopped paying debt service in January 2021 and exhausted its liquidity runway before filing more than two years later.

What are bondholders expected to recover?

Under the debtor's Fourth Amended Disclosure Statement, bondholders holding approximately $131.6 million in claims were projected to recover approximately 23.3%. The plan was never confirmed, and actual recoveries under the chapter 7 administration will depend on the outcome of the Trustee's adversary proceeding and remaining estate assets.

Who is the claims agent for Friendship Village of Schaumburg?

Stretto, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more bankruptcy case coverage, visit the ElevenFlo bankruptcy blog.