Austin staple Trudy’s Tex-Mex files for bankruptcy

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AUSTIN (KXAN) — An Austin institution has filed for bankruptcy, and it’s scrambling to re-organize its finances, so it can pay its employees the money they’re owed.

Trudy’s Tex-Mex restaurant chain has three locations in Austin:

  • Trudy’s North Star on Burnet Road
  • Trudy’s South Start on Little Texas Lane
  • South Congress Cafe

Attorney Stephen Sather, who filed the bankruptcy petition for Trudy’s, told KXAN the restaurant chain has about $4 million in debt. The Chapter 11 bankruptcy petition was filed Wednesday in U.S. Bankruptcy Court for the Western District of Texas.

Over the last two months or so, many people sent ReportIt! emails to KXAN saying Trudy’s employees were not getting paid.

“I interviewed with Trudy’s in mid-December and took a job with them,” explained Helen MacDonald. “I liked the job. The job was fun and rewarding, but when it came time to be paid, I was told no. We would not be paid.”

She said, “It was… disbelief. What do you mean? We’re busy. We’re serving lots of food every day to happy customers who come back. What’s going on?”

MacDonald said that went on until she had to tell her managers she can’t work for free.

Sather said the restaurant chain has 275 employees, and all of them are owed something.

According to Sather, all three locations of Trudy’s were profitable, but their financial problems spiraled out of control when their Dripping Springs location shut down.

“Unfortunately, it’s something I’ve seen before that you have a successful business, which expands, and they grow one step too far,” the attorney said over the phone Wednesday evening.

Sather also added, Gary Truesdell, the owner, was experiencing health issues as well, and the chain had taken out merchant cash advance loans, which are high-interest loans for small businesses, similar to payday loans available to individuals.

According to Sather, the Internal Revenue Service placed a levy on Trudy’s credit card processor, which meant they weren’t able to collect any money from bills paid with credit cards, essentially drying up their cash flow.

Sather said the Ch. 11 filing releases the levy and also protects the company from creditors seizing their assets.

He said the goal is to open all three locations back open as early as Thursday.

The bankruptcy filing means everything Trudy’s does to reorganize its finances will need a judge’s approval. Sather said once the judge approves, the chain will work on paying its employees who haven’t been paid.

“I think when an employer engages an employee in a contract of sorts, they need to uphold their end of it, and if they don’t, they need to realize the true cost of it is people going without homes,” said MacDonald.

She said other people in the restaurant industry have been kind and helped her with her phone bill and a bus pass, but she can’t pay her rent.

“I’m going to be calling the Salvation Army at 7 a.m. every morning going down there to find out if they have a bed available,” she said.

MacDonald told us she’s staying strong, keeping her hopes high and going to make sure she gets paid. “Yes, all three! All three. I have not given up on this and I won’t.”

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