Duane H. Gillman, the court-appointed trustee, declined to comment on the threats made, but said he wanted the U.S. Marshals present to ensure “a peaceable meeting.”

Kiddie Kandids went out of business on Jan. 11 after its lenders pulled their financing, resulting in its inability to meet payroll and other financial obligations. The sudden closure left 1,345 employees at the 184-store chain without employment, health insurance and owed about $1.3 million in wages and commissions.

Thousands of Kiddie Kandids’ customers were also left in a lurch when they couldn’t collect their prepaid photos or be reimbursed for packages that are either in the company’s digital photo systems, or held at locked stores.

Sorenson Capital, a Lehi private equity fund that had pumped millions into Kiddie Kandids’ nationwide expansion since 2005 from 100 studios to its current 184, said it “received no profits from Kiddie Kandids, and lost its entire multimillion-dollar investment in the company.”

“It is reasonably believed that some of the interested parties attending the Debtor’s Meeting of Creditors may attempt physical violence against the principals of the debtor, therefore, the trustee is apprehensive about conducting the Debtor’s Meeting of Creditors without a Writ of Assistance,” Gillman wrote in court documents filed Monday.

Since the bankruptcy filing, Gillman said there have been break-ins at four Kiddie Kandids stores located within malls nationwide. “There were also two false alarms at their Sandy office. There was no evidence that anyone got in,” he said.

Bankruptcy records show the company had $39.3 million in liabilities and $1.29 million in assets.

The largest creditor is a consortium of banks led by CapitalSource Finance LLC of Chevy Chase, Md. Collectively, CapitalSource, Zions First National Bank of Salt Lake City and Sargas CLO I Ltd. of Chicago are owed about $29.2 million, according to bankruptcy records.

Kiddie Kandids’ suppliers and vendors are also owed $8.38 million, while its employees and various tax authorities are owed $1.7 million.

Gillman said he has been in daily discussions with potential buyers, including national photography businesses, for the past month, but hasn’t received any offers. Pending the lenders’ approval, he is planning to sell the company’s assets in an auction conducted by court-appointed auctioneer, Erkelens & Olson Auctioneers.

“This is not a case you want to drag on. The employees are owed wages and commissions. The landlords, with whom Kiddie Kandids have leases with, are not getting paid. There are storage fees on photo paper and chemicals to be paid. There are customers who are concerned about getting the photos they’ve paid for, and also whether the privacy policy on pictures of their children, grandchildren, loved ones, will be violated,” Gillman said.

“We may require the potential buyers to address the delivery problem, and take it on as part of their responsibility of acquiring the assets,” he said.

The company had been trying to find a buyer, albeit unsuccessfully, nine months prior to its bankruptcy filing, Gillman said.

“When you have a company that was losing more than $44 million in 2007, 2008 and 2009 before they filed for bankruptcy, that could be a problem for potential buyers. Those are staggering losses,” he said.

Gillman also asked for a private ombudsman to act as an advocate for customers, whom he said “have very important privacy interests and servicing interests.”

“The ombudsman will have to reach out to customers I’ve been talking to, formulate what their needs are and get a sense of their expectations on privacy. The manner which the clients’ photographs are preserved and used is very near and dear to them. They don’t want any commercial utilization of those images,” he said.

Company CEO Dale Merrill said in an earlier statement that Kiddie Kandids’ operations have been “particularly challenged by the economic climate over the past 18 months,” and that the shutdown was a “result of abrupt and unforeseen loss of funding from its banks.”

Overexpansion and the growing availability of cheap, user-friendly digital photography are other reasons cited for the company’s collapse.

The company had 11 stores in Utah including two in Utah County — one each in University Mall in Orem and Provo Towne Centre. The company, which also has a call center in Sandy and a photo lab in Henefer, had more than 110 workers in Utah.