The school once known as Millersburg Military Institute, Kentucky's only military academy, filed for Chapter 11 bankruptcy on Wednesday.
That means the master commissioner's sale that was scheduled for Thursday in Paris is canceled, said Brian Canupp, the lawyer who filed the bankruptcy petition.
U.S. Army Cadet Corps, the owner of what is now known as Forest Hill Military Academy in Bourbon County, filed a voluntary petition for Chapter 11 in U.S. Bankruptcy Court in Lexington.
The bankruptcy filing creates an "automatic stay," and allows creditors "to have an opportunity to make their final claims," Canupp said.
The bankruptcy also "allows the Millersburg folks to maintain possession of the property," and to submit an operational plan for the future, Canupp said.
In the petition, the Cadet Corps said its estimated assets are between $1 million and $10 million. Its estimated liabilities are between $500,000 and $1 million.
The Cadet Corps was in default on loans to Farmers Deposit Bank in Carlisle, so Bourbon Circuit Judge Paul Isaacs had ordered the Millersburg property to be sold to pay the lender.
The bank filed suit against the Cadet Corps seeking $535,188 plus interest. A loan officer said in an affidavit that the school had not made payments since August 2014.
The Millersburg property — 18 acres, gym, classroom buildings, dormitory space and dining hall — was appraised at $675,000, according to court records.
Headmaster Jay Whitehead said Wednesday that he is still trying to find an investor to keep the school running.
"We've got more time to figure out what our options are," Whitehead said. "We've met with some people who had a history with MMI and who have an interest in keeping the facility going."
Last weekend about 17 people — former graduates and family members — took a tour through the grounds.
The school opened in 1893. In the 1940s and 1950s, it had an enrollment in the hundreds, but that has decreased.
The school has been in receivership for two years after the state Attorney General's Office began investigating allegations of mismanagement.
Forest Hill Military Academy closed its boarding school in December because of low enrollment. Since then It has held camps for high-school youths on the property.