Eagle Broadband entered Chapter 11 bankruptcy yesterday as its former chairman submitted an asset seizure order to its primary bank.

H. Dean Cubley sued Eagle in 2006 seeking payment on a $1.9-million loan he extended to the company in 2003, when he was its chairman, in lieu of shares for options he held at the time.

Eagle argued that Cubley’s loan “was induced by misrepresentations.” But the court sided with Cubley in June of this year, awarding him the full $1.9 million principal plus interest and legal fees for a total of $2.8 million.

Yesterday Cubley served Eagle’s primary bank, Amegy Bank of Texas, with a writ of garnishment, and the company entered Chapter 11 bankruptcy the same day, continuing operations as a “debtor in possession” business.

According to the Associated Press, Eagle's bankruptcy filing values its assets at $2.7 million and liabilities at $8.7 million.

As of May, Eagle claimed $9.7 million in total assets and $15.5 million in total liabilities, with $45,000 in cash and equivalents and $442,000 in long-term debt.

With a $7.3-million net loss in the May quarter, Eagle reported $808,000 in revenue, 15% of which came from broadband services and 76% of which came from the company’s IT services business, which offers satellite and network support to business customers.

Earlier this year the company spent about $1 million building a video superheadend in Miami for the delivery of IPTV service. But in May, it blamed a 16% year-over-year decline in broadband service revenue to “management’s decision to contract with a third party to operate a majority of the company’s bundled services business.”

This year the company has been shedding parts of its business, selling its Texas fiber network and its set-top box business.