Bankrupt USA Capital, the private lender with $962 million in assets under control, is privately discussing a reorganization plan with four committees that represent investors and creditors.

Thomas Allison, chief restructuring officer of USA Capital, said he hopes to keep the private lender running as an ongoing business, rather than liquidate its assets. But participants fear that any one of the committees could effectively veto a Chapter 11 reorganization and force a liquidation under Chapter 7 of the bankruptcy code.

Bankruptcy Judge Linda Riegle gave the debtor and creditors more time to continue private negotiations and extended the time for USA Capital to file a plan.

USA Capital was a licensed mortgage broker that used money from individual investors to make loans to developers who provided collateral. Investors either purchased fractional interests in specific mortgage loans or so-called trust deeds, or they bought shares in two funds that pooled investor funds to make numerous loans.

Many of the loans, including some to insiders at USA Capital, stopped paying interest, but investors received regular payments that they thought came from borrowers. On April 13, USA Capital became insolvent and filed for bankruptcy court protection.

In the hearing Thursday, USA Capital attorney Annette Jarvis reported that the interim managers are hiring attorneys to start foreclosure against loans in default in several state. Allison declined to estimate the number of loans that will be foreclosed or the total amount of those loans.

Interim managers, having already mailed checks totaling $64 million, plan to mail a second round of distributions to investors on Sept. 15. USA Capital First Trust Deed Fund was sent a check earlier, and checks to investors in that fund were being mailed Thursday, said Candace Carlyon, an attorney for the fund's committee. The total distribution is expected to be less than $10 million.

Investors in a second fund called USA Capital Diversified Trust Deed Fund did not get distributions in the first round and will not receive money in the second round.

USA Capital has set aside payments owed to Diversified but the fund committee opposes that action.

Separately, Riegle set Nov. 13 as the deadline for investors and creditors to file claims against the USA Capital. The company will be mailing claim forms that can be used for that purpose, but many investors will not need to file a claim.

Investors and creditors already listed on a bankruptcy court document need not file a claim unless they disagree with the amount the debtor says they are owed.