Collections Law/Lender Rights


Mr Hertz,

In 2005, I lent $20K to a property development corp in GA being started up by the son of a dear friend. The contract we signed called for the loan to be repaid in full with 10% interest by the end of 2006. Unfortunately, the property being developed experienced difficulties from the start, and the corp was unable to repay me anything by the end of 2006. I understood the financial difficulties the son faced and allowed the loan to slide, expecting to be paid eventually. Unfortunately, the housing bust in 2007-2008, virtually doomed the development despite desperate measures by the son to save it.

In mid-2009, when all appeared lost, the son came to repay me with his personal check for $20K. Knowing his desperate financial plight, I offered to give him more time because I knew he had more pressing immediate needs. We agreed that he would repay me in full by Nov 2010. We confirmed this agreement in an email exchange. But, in 2010 he lost everything. And I heard nothing from him for until I contacted him this month about our agreement. He replied by email that the bank called his note in Dec 2011 and he had filed Chap 7 bankruptcy in 2011. He claimed to have been completely wiped out and had relocated to MD and taken a salaried job. Note that he never informed me of the bank's action or the bankruptcy.

Isn't the court supposed to notify all creditors in case of bankruptcy? Since I wasn't notified does the suggest my loan was not discharged in that bankruptcy action?

Because of the friendship connection here I don't want to beat up on the guy, but I can't afford to lose $20K either. He's offered to repay me on a monthly basis, if I insist. But, frankly, that offer sounded like a gesture made more to placate his dad rather than out of any a sense of legal obligation to me.

My problem is that I allowed friendship to screw up this deal from the start. I want my money, but don't want to accept repayment terms offered out kindness or guilt. Do I have any rights here that the law would recognize?  I would certainly appreciate any advise you could give me on this matter.

This is a very tough one (for you) but here goes.

I do not know if he listed you in the bankruptcy, but if he did not, that was wrong.  However, if his was a "no asset" case, then the likelihood is that your debt would be discharged anyway under the "no harm no foul" rule (i.e., you wouldn't have gotten anything out of his bankruptcy assets in any event).  There are lots of exceptions to that rule (e.g., if you were not listed due to fraud; if there really were assets; etc., etc.  If you want to pursue that line of thinking, please get yourself a competent lawyer and supply facts).

If there were assets, though, and you didn't get notice in time to file a claim, then the debt should not be discharged.

You could also accept his voluntary offer to repay and if he pays, you're okay.  But it would be hard to enforce the offer even if it's in writing.  (Possibly a good lawyer could write an agreement that rendered the discharge under the "no asset" case a "dispute" and the repayment agreement a "compromise" of that dispute.  It would be tricky, but it could be done.  The problem is that a discharged debt does not provide real consideration for the agreement, but if there's a dispute on whether it's discharged, the agreement would be a resolution of the dispute and might hold up.  Check with the lawyer and don't try to write it yourself!)

If there were assets and the "no asset" rule doesn't apply, then you could go for it.

You might see if his Dad would pay, or maybe pay $10,000, or whatever.

This is a bad situation, and since it sounds like a "no asset" case from your description, it's probably a loser, but you could try to find out the facts fully before you give up on it.  Sorry to be the bearer of bad tidings.

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Michael T. Hertz


I can answer most questions concerning bankruptcy, whether business or personal, including questions by debtors, creditors, persons interested in purchasing assets from bankruptcy estates, and the like. Also have expertise in tort law, French and Canadian law.


Practiced bankruptcy for 27 years in California and taught bankruptcy for three years in Maine. This included Chapters 7, 9, 11, 12 and 13 cases, representing debtors, creditors (secured and unsecured), bankruptcy trustees, creditors committees, and persons interested in purchasing assets from bankruptcies. Debtors included persons with virtually no money up to large corporations.

Inactive member of the Bar of the State of California. Nonpracticing member of the Bar of Massachusetts. Formerly member of the Maine Bar and conseil juridique in France. Certified by National Committee on Accreditation in Canada.

Georgetown Law Review; California Bankruptcy Journal; Maine Law Review; Dalhousie Law Journal; University of Toronto Law Journal.

Harvard Law School (J.D. 1970; cum laude) and Pomona College (B.A., 1967; cum laude)

Awards and Honors
Selected as a "Superlawyer" in 2005 and 2006 for Northern California.

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