AUSTIN (KXAN) — Creating artwork is hard work, so when local artist Lonnie Prachyl started seeing headlines about Trudy’s restaurants having financial trouble, he was worried.

Several of his paintings hang above the tables at Trudy’s Texas Star on 30th Street to be sold.

An online search revealed that location was actually damaged in the fall by a fire and has been closed ever since. He said no one called him to let him know.

“I can’t get a voicemail or even an email, so I wasn’t sure what else to do,” Prachyl said.

After around two months of reports that Trudy’s employees weren’t getting paid, the Austin institution filed for Chapter 11 bankruptcy earlier this week.

Attorney Stephen Sather, who filed the bankruptcy petition for Trudy’s, told KXAN the restaurant chain has about $4 million in debt. Customers reported closures at their three operating locations on Tuesday.

Several customers came to Trudy’s North Star on Burnet try to eat lunch on Friday, only to find this sign on the door (Avery Travis/KXAN)

Back open “soon”?

On Friday, Sather said they went in front of a judge for an initial hearing, to come up with a budget for the next week.

The goal?

“Freeing up” money being held by creditors.

He reported the two locations south of the river are back open and operating under the rules of the bankruptcy proceedings. He said the goal was to get the North Star location on Burnet open “soon.”

“The initial priority is paying the people who will be coming back to work as they start to get these restaurants reopened,” Sather said.

There’s no timeline right now for any “back pay,” he said, for employees who are still waiting on previous paychecks.

Sather also said the company has been working with their insurance on the Texas Star location, where Prachyl’s paintings hang, and they hope to re-open it within the month. He suggested local artists reach out to the owners with any concerns.

Art on consignment

Attorney Eric Taube said depending on Trudy’s insurance coverage at the time of the Texas Star location fire, any of Lonnie’s art that was damaged might be covered.

Sather said he had no specific knowledge about the damage.

Other artists, whose work is on consignment in the Trudy’s locations filing for bankruptcy, should be able to get their art back.

“The artist would still own their work,” Taube said. “They’re not a creditor, so they should be able to get their work back, after application to the court and by agreement with the debtor.”

The Chapter 11 filings will protect the company from creditors seizing their assets and allow them to reorganize their finances, pending a judges approval.

“In order for the debtor to move forward with certain things, like the use of money, it has to apply to the bankruptcy court for permission,” Taube said.

It’s recommended that artists or contractors get things in writing, or even work with a lawyer, to make sure the consignment is done properly.

“If I give you a painting or something and you put it up at your house, it doesn’t necessarily mean you own it. It just means you may have borrowed it or are using it,” Taube explained. “But again, consignments are unusual under Texas law and under the Uniform Commercial Code, so there are compliance issues that may affect that depending on the circumstances.”

When asked how often businesses who file Chapter 11 are able to continue “business as usual,” Taube said historically less than half of debtors actually are able to form re-organization plan. He said to keep in mind that the liquidation of all assets does constitute a plan.

“Getting confirmation for a business to continue to operate? I wouldn’t say it’s rare, but I think statistics would show it’s less than 50%,” Taube said.