Is raping creditors OK?

[pacreditor]

What is the name of your state (only U.S. law)? Pennsylvania

I have an (ex)customer that is “going to claim” bankruptcy on a sole proprietorship. As of today he has not officially done it, but on December 30 he closed up and stopped conducting business in the normal way.

Since then the phone calls have been directed to another person that is following up on all the incoming leads for new business and directing all other calls from creditors and warranty complaints to another phone number that will never be answered. The incoming leads are being turned into sales for the other person, who in turn buys the material from the owner. Materials that the suppliers will never be paid for.

In the meantime all incoming payments for previous jobs are being deposited and transferred to the owner’s personal bank account. The business and personal assets are being sold, hidden or transferred to others. A few people are still employed using up materials that have not been paid for in order for him to pocket as much money as possible, with no intention of passing it on to the suppliers.

I’ve been told by the owner himself that he can not pay me because he “will be” claiming bankruptcy soon.

There will be no money or assets to distribute to creditors.

Can this be for real? Is this the way it works?

I’ve been told by a lawyer that “Yes, that’s the way it goes”.

What recourse do I and his other creditors have? Is he allowed to do this?

Thank you for any advice.

 

[justalayman]

well, until he actually does file bankruptcy, you take whatever legal actions are available to you to collect the money.

many people often threaten creditors they are going to file bankruptcy with no intent to do so simply so they will leave them alone. I would call his bluff and do what you can to get the money now. If he files BK, then you will be listed as a creditor and the BK will distribute any assets, if there are any, as they see proper.

 

[swalsh411]

Why are people selling things to him on credit if he is about to declare bk?

 

[pacreditor]

Thank you for your responses.

Justalayman...

There is no time to go through the mormal channels. The bankruptcy will be filed in the next few days. He is hustling right now to sell off and hide all assets.

This is not a bluff. What good is "being listed as a creditor" going to be to me and the others? That is not the point. I have been involved in other bankruptcies in the past and I have no problem with that all. As far as I know they were legitimate. In my mind this is not the way the legal system is designed to work.

Do the courts see this as proper?

Swalsh411...

No one is extending him credit at the present time. He stocked up through November and December with the full intention of doing this...his concept of an "exit strategy".

Isn't this considered some sort of fraud? I know this isn't morally right, but is it legal?

 

[Zigner]

There is no time to go through the mormal channels.

It'll only take an hour or two at the courthouse to file a small claims suit...

 

[pacreditor]

I'm not too concerned about getting a claim in. I know I'm being listed as a creditor. I'm concerned about ALL his creditors. We're both in the same industry using the same suppliers. These are all hardworking good people that are getting purposely screwed by an arrogant little miser.

What I'd like to know is, doesn't he have to account for his actions for a certain time period previous to filing?

Can he just hide, sell, transfer and hoard assets? Are there no consequences for what he's doing?

Is there some point in the proceedings where we get a chance to bring this to light?

 

[Proserpina]

I'm not too concerned about getting a claim in. I know I'm being listed as a creditor. I'm concerned about ALL his creditors. We're both in the same industry using the same suppliers. These are all hardworking good people that are getting purposely screwed by an arrogant little miser.

What I'd like to know is, doesn't he have to account for his actions for a certain time period previous to filing?

Yes, he will.

Can he just hide, sell, transfer and hoard assets? Are there no consequences for what he's doing?

Sure he can - but therewill be severe consequences for him doing so. The Trustees are not idiots - if they even suspect something they'll rake him over the coals.

Is there some point in the proceedings where we get a chance to bring this to light?

The 341 creditors meeting. You can also file an adversarial proceeding.

 

[pacreditor]

Thank You Proserpina!

You answered all my questions perfectly.

There is justice!

Thank you all.

I can now rest easy.

 

[labrat247]

Using BK to screw people, rather than as a legit tool to save a failed financial life

Yes, he will.

Sure he can - but therewill be severe consequences for him doing so. The Trustees are not idiots - if they even suspect something they'll rake him over the coals.

The 341 creditors meeting. You can also file an adversarial proceeding.

These statements are not necessarily true anymore. i recently went through a BK (as a creditor) with what sounds like this very person. I attended the 341 meeting (with plenty of advanced warning, and was told I could have exactly 3 minutes to question the debtor, due to the heavy caseloads being taken on with the bad economy. I objected to get it on the record, and then used my 3 minutes to establish that he was renting his home out *To Himself!*, to prove that he had underreported assets in at least three places, and he showed everyone how crooked he was by showing up at the 341 with a 100% revision of all previous filings (which was allowed by the Trustee, without requiring another 341!).

The courts are backed up, and they are clearing dockets regardless of a just outcome: they simply don't care anymore. I got this directly from my interactions with the Bk courts this year, as well as hearing several dozen similar stories from this particular court (8th Ct.). Its logical to infer that if the 8th ct is this backed up then all of the other ckts are too.

Since everyone's situation is very different, Im not going to even try and give you any other advice than this: use every tool at hand to establish the facts on the record. Once the record has been made, you can use civil proceedings to go back are rearrange this guys world.