Owensboro’s Davis Auto Group has filed for Chapter 11 bankruptcy amid an ongoing legal dispute with the dealership’s minority owners, Matthew Hayden and the Estate of Jack T. Wells. Majority owner Jerry Ray Davis, who faces allegations of self-dealing, has been approved to personally guarantee a $400,000 emergency loan to keep the dealership afloat as it fights to reorganize.
Davis Auto Group LLC, doing business as Jerry Ray Davis Chrysler Dodge Jeep Ram, filed for Chapter 11 bankruptcy on Dec. 6, 2024, following months of financial strain.
Court records show that creditors True BDC, Inc., Green Beehn Lawncare, LLC, and Relic Investment Properties, LLC initiated the bankruptcy by filing an involuntary petition in the U.S. Bankruptcy Court for the Western District of Kentucky. Judge Charles R. Merrill is overseeing the case.
The dealership’s financial struggles became public late last year when Hayden and the Estate filed a lawsuit accusing majority owner Jerald “Jerry” Ray Davis of financial mismanagement and self-dealing. While Davis’s attorneys argue the allegations are baseless, the legal battle set the stage for the company’s bankruptcy proceedings.
Financial woes and allegations
In court filings, Hayden and the Wells estate allege that Davis failed to address substantial tax obligations and misused company funds for personal expenses, including luxury travel, concert tickets, and private living arrangements. The complaint also claims that Davis significantly increased his own salary without approval and engaged in undisclosed dealings benefiting companies he owns.
Davis disputes these accusations, stating that some transactions characterized as “self-dealing” directly benefited his business partners.
“The lawsuit is full of unfounded allegations with no apparent purpose other than to destroy my character,” Davis said in a statement.
He maintains that the dealership’s financial troubles were compounded by declining vehicle sales and economic headwinds that impacted Chrysler dealerships nationwide in 2024.
The bankruptcy process
The Chapter 11 filing allows Davis Auto Group to continue operating while reorganizing its finances. The dealership’s attorney James Irving revealed in United States Bankruptcy Court that the dealership struggled to meet payroll and vendor payments, with sales plummeting to fewer than 40 vehicles in December — a decline from its typical monthly average of 80 to 120. He cited bad weather and negative publicity as a reason for the decline in sales.
“Not wanting to leave any creditor unpaid, and certainly not wanting to miss a paycheck to any of my valued employees, I turned to my partners for help,” Davis said in a statement to Owensboro Times. “Rather than step up to the plate… my partners filed a baseless lawsuit against me.”
Irving acknowledged in court that the dealership’s ultimate intent is to sell, and Davis will not be involved as a potential buyer.
Emergency hearings held in January highlighted the dealership’s immediate need for liquidity. On Jan. 24, Merrill approved $400,000 in interim debtor-in-possession (DIP) financing, personally guaranteed by Davis. The funds will be used to address urgent expenses, including $190,000 owed to German American Bank, payroll obligations, and vendor payments.
The court, at the request of the minority owners’ counsel and U.S. Trustee’s office, set strict conditions, requiring Davis to forego his salary and adhere to regular financial reporting. The court also stipulated that none of Davis’s family members or associated entities may receive any form of payment during this period. Additional financing of $300,000 is also being considered.
Creditor and trustee concerns
The U.S. Trustee’s office and minority owners have raised concerns about the dealership’s financial transparency and Davis’s oversight. In a court hearing, Jamie Lynn Harris, representing the U.S. Trustee, questioned the “emergency” nature of the DIP financing request and highlighted more than $600,000 in unpaid taxes. Harris also criticized Davis’s use of company credit cards and called for stringent financial monitoring.
Lea Goff, representing the minority owners, argued that budget inconsistencies and unexplained expense spikes require additional oversight. Court filings show that company credit card usage doubled between December 2024 and January 2025, which Goff said raises further questions about financial accountability.
Davis’s financial advisor, Andrew Simon of Oxford Restructuring, said that while credit card usage had increased, it was partly due to addressing vendor obligations that were delayed to preserve cash flow.
A path forward?
Despite the legal and financial challenges, Davis expressed optimism about the dealership’s future.
“This proceeding is designed such that companies like mine can reorganize and come out stronger than before,” he told Owensboro Times.
The next scheduled hearing on Feb. 13 will evaluate whether the dealership will receive approval for the additional financing, and identify a potential path forward.
Hayden could not be reached for comment.
