Sprout Mortgage is halting a $3.5 million settlement for laid off workers, citing an involuntary bankruptcy filing posted recently by the shuttered lenders' creditors who are seeking payment, National Mortgage News reported. Attorneys for Sprout filed a stay of proceedings citing court rules suggesting that no judgments could be enforced against the company because of the active bankruptcy proceeding. The lender abruptly shut down last July, prompting lawsuits from ex-employees and mortgage partners seeking to fulfill debts. Three lenders earlier this month filed for chapter 7 on behalf of Sprout in a New York federal court, seeking a combined $1.3 million allegedly owed from mortgage purchase agreements. Sprout, unlike other struggling mortgage firms, didn't file for bankruptcy.
