The proceeds from the sale of Massanutten Village, a Virginia time-share resort languishing in bankruptcy court since last winter, were distributed to creditors this week after opponents of the sale failed to post a $500,000 bond that could have blocked the transaction.

Charlottesville developer C. Dice Hammer and a partner, Florida developer James Lambert, paid $3 million for Massanutten Village on Oct. 25. as part of a bankruptcy reorganization plan filed by Union National Bank of Pittsburgh, which held $7.5 million in mortgages on the resort.

However, U.S. District Court Judge Harry Michael Jr. froze the transaction hours after the sale and imposed a 30-day stay against dispersal of the funds, to allow the owners of Massanutten more time to secure financing for their own reorganization plan.

U.S. Bankruptcy Judge H. Clyde Pearson, who agreed to Union National's plan in September, imposed a second stay against completion of the sale in November after the first stay ran out. Representatives of Massanutten's parent company, First Federal Corp., had testified that they were close to getting a commitment for $14 million and posted a $350,000 performance bond with the court.

The second stay ran out Wednesday and John Sills III, one of Union National's lawyers in the case, paid the money to the bank.

"We're very glad to see it end," said Sills. "We're sad, because we would have loved to have seen them get the $14 million, because then all the creditors could have been paid and it would have been a great deal for everybody. But the possibility of anyone putting up $14 million for an asset that has been appraised at between $4 million and $5.5 million was highly unlikely from the beginning."

Time-share development at Massanutten -- which includes a ski complex, a golf course, time-share town houses and more than 500 undeveloped lots -- slowed to a halt in February 1983 when construction companies filed $120,000 in liens in Rockingham County Court against the developer.

First Federal filed under Chapter 11 of the U.S. Bankruptcy Code in Harrisonburg last December to seek protection from Union National, which was trying to foreclose on the project, and hundreds of other creditors claiming nearly $50 million.

Creditors in the case originally supported First Federal's bailout plan, put together with the help of First Houston Capitol Resources Fund Ltd. of Texas. First Houston, one of three parties that signed the performance bond, ultimately failed to find an investor for First Federal's plan, and most of the creditors switched support to Union National's plan.

Pearson declared the bond forfeited this week after First Federal again failed to meet the court's deadline for a firm financial commitment. Joseph A. Pace, an individual with ties to First Houston, and Allied Fidelity Insurance Co. of Indiana were the other principals on the forfeited bond.

Lambert and Hammer, who have limited experience in time-share development, bought the ski resort, hotel and conference center, golf course and the undeveloped land at the project. Under an arrangement approved by the court, the new owners will spend $2 million to complete construction of 15 time-share town houses that already have been partially sold, and continue time-share development on the site.