Creditors and Bankruptcy/Lender Rights
In 2005, I lent $20K to a property development corp 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 and taken a salaried job. Note that he never informed me of the bank's action or the bankruptcy. Is the court supposed to notify all creditors in case of bankruptcy?
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 it was made as a gesture of to placate his dad rather than 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.
Hello Joseph: I feel bad for your being in such a spot that appears to be as much of a personal dilemma as it is a legal one. As for the bankruptcy, your instincts on this are correct. If he did not notify you of the bankruptcy, then his right to a discharge of his obligation to you would have been negated by his failure to notify you. It is hard to say more about that without actually seeing the bankruptcy papers involved. If you call me I can look up your case and give you a better idea of what your rights are in this situation. There is also another issue - your rights to enforce the agreement may have been affected by the statute of limitations, but given the other details you provided, that may not be a problem.
If I were in your position, I would think that if you were more informed of your present rights and ability to enforce this obligation you would be better prepared to approach your friend's son with a constructive solution. In other words, you could then negotiate with him from a position of strength - and that always makes it easier to be more tactful and gracious, which would also appear to be a concern given your relationship with the father.
What it boils down to is this - You don't have the facts to know how to approach this until you know your legal rights, and no one can tell you that without knowing more specifics about what is happening or what has happened in the bankruptcy. You are welcome to call me if you wish. I will not charge you just to talk on the phone and we can look up your case to see what is going on and then discuss your present options.
I look forward to hearing from you if you decide to call.
Jack Hall J.D.