John Michial Shumate and his wife, Jennifer, who own the Shumate Harley-Davidson dealership here, and three of their companies have filed for Chapter 11 reorganization in U.S. Bankruptcy Court here, listing total debts and assets of more than $10 million.

The companies filing separate bankruptcy petitions were Shumate Spokane LLC, Shumate Inc., and Shumate Tri-City Inc., all of which listed a Kennewick, Wash., address.

In the filings, separate lists of creditors holding the 20 largest unsecured claims against Shumate Inc. and the Shumates personally show factory credit provider Harley-Davidson Credit Corp. to be the largest such creditor, owed about $5.3 million. That company is followed—lumping together the largest creditors from both lists—by GE Capital Franchise Finance Corp., at $4.1 million; GE Commercial Distribution, $762,000; Key Bank National Association, in Kennewick, $751,000; and Columbia River Bank, in Richland, Wash., $700,000.

Separately, based on the bankruptcy filing, the Spokane attorney representing the Shumates and their companies has filed a notice of stay in Spokane County Superior Court to suspend proceedings in a lawsuit filed against them there by Harley-Davidson Credit Corp.

That company had obtained a temporary restraining order in August that allows Shumate-owned Harley-Davidson dealerships here and in the Tri-Cities to remain open, but prohibits them from selling motorcycles, parts, accessories, and clothing that constitute collateral to which Harley-Davidson Credit Corp. claims it's entitled.

That company, which finances dealers' purchases of goods from Harley-Davidson Motor Co. and affiliate Buell Distribution Corp., alleges in its suit filed two months ago that the Shumates and their business entities have failed to repay it as required under the terms of their credit agreements.

Furthermore, it claims they've been continuing to sell motorcycles and other merchandise "out of trust," meaning without first paying it the principal it's owed on that inventory. It asserts, also, that Shumate Tri-City LLC wrongfully provided inventory to Shumate Spokane LLC after Harley-Davidson Credit Corp. notified Shumate Spokane it would limit that company's credit for acquiring inventory until it paid in full the past due amount it owed.

Apparently because of the limitations placed on it by the temporary restraining order, the Spokane Harley-Davidson dealership largely has been shut down in recent weeks. However, Spokane attorney Barry Davidson, representing all of the defendants, said last month he is confident that it and two affiliated stores, in Lewiston and Kennewick, will resume full operations soon. He said the Shumates believe that Harley-Davidson Credit Corp. and Harley-Davidson as a manufacturer have not acted in the best interests of the dealerships or their customers. Also, he said he expects the financial dispute to be resolved in the Shumates' favor.

A spokeswoman in Chicago for Harley-David-son Financial Serv-ices Inc., of which Harley-Davidson Credit Corp. is a part, declined to comment on the matter, saying the company's policy is not to discuss dealer relations. Harley-Davidson Financial Services is one of several entities doing business under the umbrella of parent company Harley-Davidson Inc. Other operating entities include Harley-Davidson Motor Co., Buell Motorcycle Co., and MV Augusta, all of which produce motorcycles of various types.

John Michial Shumate already owned the Tri-Cities dealership five years ago when he bought the Spokane Valley dealership at 6815 E. Trent and the Lewiston satellite store from George Latus. Latus had operated the dealership here for 20 years and moved it in 2001 to the 27,000-square-foot building on Trent where it has been located most recently. He opened a Portland dealership in 1991 and sold the dealership here to Shumate so he could focus his attention on that operation.

Latus still owns the building and property on Trent, and says his ex-wife owns the Lewiston satellite store property. He says he's saddened by the Shumates' financial difficulties, but would consider reassuming ownership of the Spokane dealership under the right circumstances, if the Shumates are unable to reorganize successfully.

"The thing I don't want is that building (on Trent) to sit vacant," he says.

One of the debts listed by Shumate Spokane LLC and Shumate Inc. is $25,000 owed to Vandervert Developments LLC, of Spokane, for unpaid rent, late fees, interest, and attorney's fees and costs. Developer Dick Vandervert says that debt stems from the Shumates' lease of an 11,000-square-foot building his company owns at the northwest corner of U.S. 2 and Hawthorne Road.

The Shumates leased the building about a year ago, buying out the lease of a business that was located there, he says, with plans of opening a motorcycle store there. Those plans never materialized, though, and the Shumates now are marketing the space through a commercial real estate agency in an effort to sublease it, Vandervert says. He adds that he'd like to regain control of the building so he can find a new tenant for it.

Despite a recession-caused slump in motorcycle sales, another Harley-Davidson dealership, Lone Wolf Harley-Davidson, owned by Greg and Beth Ernst, opened in Coeur d'Alene last year. It's the only other Harley-Davidson dealer in the Spokane-Coeur d'Alene area.