Expert: Mark J. Markus- California Bankruptcy Attorney - 8/28/2007

Question
I entered into an verbal agreement about six months ago (unfortunately not
documented) with the owner of a small business which has recently filed
Chapter 7 bankruptcy. The basics of that agreement were as such: I would
provide $2000 worth of services in the way of illustrations for a children's
book, in exchange for an equally valued computer the company wished to
part with. What I'm wondering is whether or not that agreement is still valid if
the owner of that company has since moved on, formed a new company and
is still looking to collect on those services. Additionally, if I refuse the work,
can the computer be reposessed as an asset of the bankrupt company? I
know I don't have much ground to stand on as I do not have the agreement in
writing, but I would like to understand my options from here on out. Any
advice would be helpful. Thanks.

Answer
If it is a valid contract, then the corporation can still enforce the contract.  But if they're out of business, why would it want or need your services?  As far as the computer, you might have to return it, depending on when it was received and whether the Trustee in the bankruptcy wants to try to prove the existence of an oral agreement.   If the transfer took place within 2 years prior to filing the bankruptcy case, and the Trustee can prove the corporation didn't receive anything in exchange for the computer, then you can be sued for a fraudulent transfer.