McNally Smith files for bankruptcy
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Updated: 8:50 p.m. | Posted: 1:43 p.m.
McNally Smith College of Music filed for bankruptcy in federal court Thursday and is seeking to liquidate.
The St. Paul-based music school closed abruptly in December, giving faculty, staff and students just days notice, saying financial pressures led to the closing.
The filing seems to indicate the 32-year-old school has more assets than liabilities.
McNally's liabilities range between $1 million and $10 million, according to the 112-page Chapter 7 filing in U.S. Bankruptcy Court in St. Paul. Assets total between $10 million and $50 million.
The assets include the school's building at 19 East Exchange Street, assessed by Ramsey county in 2017 at nearly $14 million. Public records indicate the school owes around $3 million on a mortgage.
• Previously: McNally Smith came within 'hair's breadth' of reopening
The number of creditors that are owed money are between 200 and 999, according to the filing. The filing also lists the names of creditors, including former faculty and staff who were not paid for their last weeks of work, as well as some students.
Among the creditors is Ronald Pfuhl's daughter, Nichole. Last October, McNally Smith told Pfuhl he would get a discount on tuition if he paid before the second semester started.
"We had the money that we'd been saving since before she was born, so we took that opportunity to save a little bit on tuition and paid $12,000," Pfuhl said.
"We don't have any information about [refunds] since nobody answers the phones, emails aren't usually returned," he added.
Phil Kunkel, a bankruptcy attorney with Gray Plant Mooty who is not involved in the case, said a trustee will be appointed to take control of all the assets of the school, gather them together, and then liquidate them for the benefit of creditors.
"The other priority that can't be overlooked is the expenses of liquidating the assets and administering the case will get paid ahead of the employees and other creditors as well," Kunkel said.
McNally Smith closed after a two-year effort to convert from a for-profit into a nonprofit. That would have allowed students and the institution access to more federal assistance and permitted the school to seek charitable contributions.
Enrollment had fallen by 30 percent between 2012 and