Bankrupt, abandoned Budgetel still a home for the poor

A week after the operators of the Budgetel Inn & Suites filed for bankruptcy and abruptly closed the business, several dozen people continued to live at the McHenry Avenue motel that has had problems with vagrancy, drugs and prostitution but also has provided housing for the poor.

About two dozen of the motel’s approximately 100 rooms were occupied early Friday afternoon. The rooms were occupied when the motel operators — United Resorts LLC — filed for Chapter 7 bankruptcy Jan. 25 and then closed the next day without warning. That resulted in chaos in part because motel staff told guests that if they didn’t leave deputies would force them to leave.

It was an empty threat.

The Stanislaus County Sheriff’s Department and the Modesto Police Department said this was a civil matter and they would not get involved. A local charity and social service providers worked to provide temporary lodging at other motels for 18 families consisting of 47 people, according to county spokeswoman Amy Vickery. Providers also are helping with other services.

Several guests told The Bee on Friday afternoon that they are trying to figure out what to do next. In the meantime, they are living at the Budgetel without paying and the power and water remain on.

“I’m trying to get help,” said 56-year-old Lori Davis, who said Friday was her 53rd day at the Budgetel.

She said before that she lived with her boyfriend for about three months in a car (she said her boyfriend now is in jail) and before that she lived at the Turlock Gospel Mission for seven months. Davis said she receives unemployment benefits after getting laid off from her job doing construction cleanup.

But based on recent filings with the bankruptcy court, changes could be coming.

The Modesto-based Khatri Bros. partnership owns the Budgetel, and the partnership’s attorney has filed paperwork asking the bankruptcy court for permission for the partnership to start eviction proceedings against United Resorts so it can take possession of the motel. United Resorts leases the motel from the Khatris.

The attorney has filed a March 14 court hearing on this matter.

The filing says the Khatris want to take possession so they can “restore safe and orderly hotel operations thereon without further disruption of and damage to the business and improvements, and relocation of the occupants of the hotel.”

Neal Khatri said Friday he did not know the steps involved in removing the people at the Budgetel. “I’ve never been in this position so I can’t make any comment,” he said. “That’s why I have an attorney.”

The attorney, Vernon Gant, could not be reached for comment. But Michael Yi, the attorney representing United Resorts, said the Khatris would need to seek legal action through Stanislaus County Superior Court to evict the people once the brothers regain control of the property.

Squatters have broken into empty motel rooms and caused other damage, according to Frank Amos, the motel’s former night manager who said he has been asked to stay on as a go-between among the parties in the bankruptcy. Amos has a list of motel rooms that were occupied the day United Resorts filed for bankruptcy.

Amos said security guards run off the squatters but are staying away from the rooms on his list. He estimated as many as 70 people are living at the Budgetel. A contractor was at the motel Friday afternoon to board up the doors and windows of the empty motel rooms. Khatri said he and his brothers hired the contractor.

United Resorts filed for Chapter 7 bankruptcy, which involves having a bankruptcy trustee sell the assets that are part of the bankruptcy and use the proceeds to pay off creditors. United Resorts claims it has assets of $256,350 against liabilities of $392,360, including $61,439 it owes the Khatri Bros. partnership in lease payments.

But the attorney for the trustee has filed paperwork that essentially states the tangible assets — including the motel’s beds, furniture, office equipment and air conditioning unit — are practically worthless and seeks permission to have them removed from the bankruptcy.

The paperwork states United Resorts listed the value of these assets at what it would cost to purchase them new and not their true value as used assets. The trustee also seeks permission to end the lease agreement between United Resorts and the Khatris and any agreements that are allowing people to stay at the Budgetel.

The trustee’s attorney has filed for a Feb. 14 court date on these requests.

Several guests have said they have lived at the Budgetel for months and in some cases for more than a year. They are supposed to check out for a day after staying 21 days before checking back in. But guests said there were several ways to get around that rule.

Some guests have said they paid $350 a week to rent a room but bad credit and evictions has kept them out of traditional rental housing.

One 35-year-old man, who only wanted to be identified by his first name, Kelley, said he has been at the Budgetel for nearly a year. He said he and other family members, including his mother, are living in two motel rooms.

He said they have not been able to find rental housing. “If it’s not a scam,” he said, “then it’s not available.”

He said his mother is at Doctors Medical Center and should be discharged soon. “We’re waiting for her to get out (so we can) figure it out” when asked what the family will do next.

Kevin Valine covers local government, homelessness and general assignment for The Modesto Bee. He is a graduate of San Jose State University and grew up in San Jose.