Carmel-based Oak Street Mortgage, which not long ago was a high-flier poised to go public, filed for Chapter 11 bankruptcy this morning in federal court.

Oak Street in December sold most of its assets to Kansas City, Mo.-based Novastar Financial Inc. amid a meltdown of the sub-prime mortgage market. Subprime lenders like Oak Street make loans to customers with shaky credit.

The Carmel company still has a financial interest in loans it made prior to the sale. Under the supervision of bankruptcy court, Oak Street will repay creditors based on how they perform.

Founded in 1999 by former Bank One executive Steve Alonso and others, Oak Street rode a red-hot housing market to become central Indiana's fastest-growing private company in 2003, according to IBJ research. The next year, it registered for a $150 million initial public offering, a plan it later tabled.

A slumping housing markets, tough competition and other factors led Oak Street to sell its assets.

"You learn that you can't overcome a market when it is devaluing so quickly," Alonso said. "We got to a point where we were negotiating with creditors."

At its peak, Oak Street employed 700 people, 500 of whom remained at the time of the sale. Alonso said the sale enabled employees to keep their jobs with the new owner.

Detailed information on Oak Street's assets and liabilities was not immediately available.

Many of the nation's subprime lenders have filed for bankruptcy protection in recent months.

Today's bankruptcy filing does not involve Carmel-based Oak Street Funding, which is under separate ownership and continues to operate. Oak Street Funding makes loans to insurance agencies secured by commissions.