TOWNSEND -- Rolling Glen Ranch developers Steve and Susie Cavanaugh filed recently for Chapter 11 bankruptcy reorganization.

The filing means a lawsuit by Broadwater County against the Cavanaughs, seeking $258,400 for promised road improvements to Rolling Glen Ranch and Wheatland roads, now moves to bankruptcy court.

So too, does the county's property tax claim against the Cavanaughs for $3,807 in back taxes.

How the bankruptcy might affect the future of Rolling Glen Ranch Planned Unit Development, a proposed 2,599-lot subdivision in southern Broadwater County, is unknown.

That development -- with a town center, golf courses, parks and trails, and community water and sewer -- was the largest ever proposed to be built in Montana.

"We look at (the filing for bankruptcy) as one of the steps to get things back on track," said Steve Cavanaugh.

He blames Broadwater County Commission actions for his current financial hardships.

In February, the commission suspended final plat approval of other earlier Cavanaugh subdivisions -- Rolling Glen Ranch phases I and II north of Three Forks -- freezing Rolling Glen Ranch lot sales or land transfers unless they had commission approval.

The large Rolling Glen Ranch Planned Unit Development was to be built adjoining these original subdivisions.

The commission's actions followed Cavanaugh's failure to meet a Feb. 13 deadline for a two-year subdivision road agreement.

In bankruptcy documents, the Cavanaughs report assets of $9,760,327, with liabilities of $4,199,123.

Much of the assets, however, are lots, said Cavanaugh.

"Things the county has done and statements they've made have made it virtually impossible to sell lots," Cavanaugh said. "It's taken away our ability to operate as a business.

"Rolling Glen is a real estate developer. Selling real estate is the engine that runs the business. What the county has done has interfered with our ability to do it.

"We're fighting that. We've moved it into federal court. We hope to have it resolved through mediation.

"We hope to come out on top and be selling land. We think this is going to work out well in the end."

Under Chapter 11 bankruptcy, Cavanaugh will reorganize his business finances and submit a plan to the bankruptcy court for approval.

The next step, said Cavanaugh, is a mediation meeting to be set in early December.

The bankruptcy proceeding could prolong the time it takes for the county to resolve its lawsuit with Cavanaugh, said County Commission Chairman Gail Vennes.

"I'm not able to comment about what exactly is involved," he said.

He added that he regretted that Cavanaugh hadn't met with the commission to discuss the problem.

More than 30 creditors are listed in bankruptcy court documents, including businesses owed for services, banks, individual investors and investment groups.

A major local creditor is Bank of the Rockies in Helena with claims of $752,717.

A bank representative declined to comment on the bankruptcy.

"In the end, it's going to hurt," said individual investor Melodie Koberg of Polson. "You have to hire an attorney to go through this (legal) process."

She and her husband, William, are among a group of six individuals who collectively invested $75,000 in Cavanaugh's business.

"We always made very sound investments," she said. "I never played with the stock market in my life.

They were in a financial situation, she said, where "we felt we could venture a little further out."

Although the investment was riskier, the payback was higher.

"My investment is gone for the moment," she said. "If it doesn't come back. I'll feel it then."

One of the businesses owed for services is R & S Johnson, a road construction firm out of Anaconda.

Marie Johnson, a partner in the family business, is taking the proceedings with a certain amount of equanimity.

The Cavanaughs owe them $46,963, mostly in diesel costs for putting in roads for Rolling Glen.

"It was a pinch," she said. "You just suck it up and go on. You can't dwell on what they owe us. We just had to go to the bank (for credit)." she said.

Another business owner, Jason Van Vleet, of Van Vleet Masonry in Three Forks, is owed $10,200.

"It's not good," he said. "Obviously I'm dealing with it. When you're in business for yourself, you've got to deal with hardship."

Reporter Marga Lincoln: 447-4074 or marga.lincoln@helenair.com.