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Can I force a closed debtor into bk?

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Latest post Thu, Jun 8 2017 9:23 AM by ca19lawyer2. 6 replies.
  • Wed, Jun 7 2017 3:19 PM

    Can I force a closed debtor into bk?

    A client of mine ceased trading in March, owing me about $10k.

    I am aware that the owners of the company (Who are also the President and CEO) are also, through a different company that they also own, the owners of the building that my client company rented.

    Their former accounting clerk (Now working for another client of mine) has told me that the owners massively hiked the rent, and awarded themselves large pay raises, as of Jan 1st, and have been paying the rent and their salaries out of my clients dwindling assets ever since.

    They have paid no vendors - other than themselves as landlords - or subcontractors since February, and have just told me that they do not expect to be able to do so.

    It seems clear to me that they are stripping the assets of their closed business.

    How can I force them into BK court, and is there any way to get them - or their building owning company - to disgorge what I feel are fraudulent payments?

    Richard

     

  • Wed, Jun 7 2017 3:40 PM In reply to

    Re: Can I force a closed debtor into bk?

    RickInNoCal:
    How can I force them into BK court

    "Forcing" a debtor into bankruptcy is not likely something you can do yourself.

     

    RickInNoCal:
    is there any way to get them - or their building owning company - to disgorge what I feel are fraudulent payments?

    You can sue the two owners and the landlord company and claim that they are liable for your client's debts on alter ego and fraudulent transfer theories.  Both theories are difficult and expensive to prove, and it's probably not worth it for a $10k debt, but speak with a local collection attorney.

  • Wed, Jun 7 2017 4:06 PM In reply to

    Re: Can I force a closed debtor into bk?

    Thanks, I'll make an appointment with a lawyer.

    I've been able to contact upwards of a dozen of their other sub-contractors, all of whom are also owed between $5k and $65k, and am still trying to track down more. Maybe between us there will be enough debt to interest a lawyer.

    Richard

  • Wed, Jun 7 2017 5:49 PM In reply to

    Re: Can I force a closed debtor into bk?

    RickInNoCal:
    Maybe between us there will be enough debt to interest a lawyer.

    No, it won't be the amount of the debt that will interest the lawyer.

    It will be the amount of money all the creditors can come up with to pay his fee.

    Did you think a lawyer would work for free?

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  • Wed, Jun 7 2017 11:02 PM In reply to

    Re: Can I force a closed debtor into bk?

    RickInNoCal:
    Maybe between us there will be enough debt to interest a lawyer.

    adjuster jack:
    No, it won't be the amount of the debt that will interest the lawyer.

    Um, yes, actually, it will be.

    Allow me to introduce you to the concept of a "contingency fee". Virtually all debt collection law firms work on a contingency basis. (Except the real 'bottom feeders' who actually *purchase* debts others have given up on for a nickel or so on the dollar)

    Under a contingency fee the debt collector receives a percentage of the recovery "contingent upon" his actually collecting. The percentage varies based on how hard the debt is likely to be to collect, and how big it is. Few such law firms will be willing to handle a $10k debt against a closed company for any affordable percentage - but a debt of, say, $250k, is a far different matter.

     

    Richard

  • Thu, Jun 8 2017 5:26 AM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on Thu, Mar 30 2000
    • PA
    • Posts 51,431

    Re: Can I force a closed debtor into bk?

    OP...you need to remember real world economics......unless the attorney is convinced that there is a viable adaquate pot to go after AND good odds of prevailing in the fact pattern at hand ...he or she is unlikely to sink his or her resources into your adventure  

     

    THere is nothing new about stripping out value before before an entity sinks .....from your vantage point it stinks. 



  • Thu, Jun 8 2017 9:23 AM In reply to

    Re: Can I force a closed debtor into bk?

    RickInNoCal:

    RickInNoCal:
    Maybe between us there will be enough debt to interest a lawyer.

    adjuster jack:
    No, it won't be the amount of the debt that will interest the lawyer.

    Um, yes, actually, it will be.

    Allow me to introduce you to the concept of a "contingency fee". Virtually all debt collection law firms work on a contingency basis.

    While you're generally right about debt collection attorneys, most debt collection attorneys won't handle an involuntary bankruptcy, and no attorney who will file an involuntary BK is going to do so on contingency.  I'm sure you can find a lawyer who will take your $10k case on contingency, but the existence of other creditors isn't going to be to your benefit in that regard.

     

    RickInNoCal:
    Few such law firms will be willing to handle a $10k debt against a closed company for any affordable percentage - but a debt of, say, $250k, is a far different matter.

    I don't disagree with the second part of this.  However, if that $250k in debt is owned by a dozen creditors, then you're looking at a dozen different lawsuits and 12x the work.  Hence my comment above that the existence of other creditors isn't a good thing for you.

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