LLC that I filed small claims suit against went bankrupt. Need help understanding...

[dmtran]

LLC that I filed small claims suit against went bankrupt. Need help understanding what his lawyer said.

Massachusetts-

So I was owed $3000 for work I did for a company. This morning, I filed a small claims suit against him. He emailed me back immediately saying he made an assignment for the benefit of the creditors. Moments later his lawyer contacted me saying:

"This office represents ---- LLC. ---- has made an assignment for the benefit of creditors, which acts as a judgment lien on all of its assets subject only to previously perfected security interests, or which there is only one. Any judgment and resulting lien you may obtain as a result of a small court claims suit against ---- is accordingly junior to the lien of the assignee. You may receive a pro rata distribution from ----'s unencumbered assets by filing a statement of your claim with this office on or before October 31, 2010.

If you have any questions please contact me."

So it sounds like I won't be getting all $3000 + the $100 filing cost. But I don't really understand that. Can someone please explain this to me? And what should I do now? Do I need to call the district court and cancel the court date/explain the situation (which I don't understand).


If I move forward with it, do I have to say or do anything? Should I ignore the claim with the lawyers office he mentioned at the end of the email?

Specifically should I ignore this "You may receive a pro rata distribution from ----'s unencumbered assets by filing a statement of your claim with this office on or before October 31, 2010."

I'm afraid because it was only an oral contract (with plenty of email proof in which i clearly state he owes me $3000 and he clearly replies not denying that he owes it). The MA small claims info sites say this is enough proof. But I'm afraid since I'm up against a lawyer and I don't have one.




I also posted this question on yahoo answers. I got a few answers but would like more input/details on the matter. Here is the original post http://answers.yahoo.com/question/i...obVAXdzM5HNG;_ylv=3?qid=20100914075952AA7PMqY


Thanks!

 

[HomeGuru]

LLC that I filed small claims suit against went bankrupt. Need help understanding what his lawyer said.

Massachusetts-

So I was owed $3000 for work I did for a company. This morning, I filed a small claims suit against him. He emailed me back immediately saying he made an assignment for the benefit of the creditors. Moments later his lawyer contacted me saying:

"This office represents ---- LLC. ---- has made an assignment for the benefit of creditors, which acts as a judgment lien on all of its assets subject only to previously perfected security interests, or which there is only one. Any judgment and resulting lien you may obtain as a result of a small court claims suit against ---- is accordingly junior to the lien of the assignee. You may receive a pro rata distribution from ----'s unencumbered assets by filing a statement of your claim with this office on or before October 31, 2010.

If you have any questions please contact me."

So it sounds like I won't be getting all $3000 + the $100 filing cost. But I don't really understand that. Can someone please explain this to me? And what should I do now? Do I need to call the district court and cancel the court date/explain the situation (which I don't understand).


If I move forward with it, do I have to say or do anything? Should I ignore the claim with the lawyers office he mentioned at the end of the email?

Specifically should I ignore this "You may receive a pro rata distribution from ----'s unencumbered assets by filing a statement of your claim with this office on or before October 31, 2010."

I'm afraid because it was only an oral contract (with plenty of email proof in which i clearly state he owes me $3000 and he clearly replies not denying that he owes it). The MA small claims info sites say this is enough proof. But I'm afraid since I'm up against a lawyer and I don't have one.




I also posted this question on yahoo answers. I got a few answers but would like more input/details on the matter. Here is the original post LLC that I filed small claims suit against went bankrupt. Need help understanding what his lawyer said.? - Yahoo! Answers


Thanks!

**A: did the LLC list the $3000 owed to you in their BK paperwork? If you were listed as an unsecured creditor then you are out the $$$.

 

[Zigner]

**A: did the LLC list the $3000 owed to you in their BK paperwork? If you were listed as an unsecured creditor then you are out the $$$.

Not to mention that fact that our OP may have violated Federal law by filing his suit...

 

[HomeGuru]

Not to mention that fact that our OP may have violated Federal law by filing his suit...

**A: I read the post again and it appears that the LLC did not file BK and its attorney is trying to settle with all creditors. Thus no violation of Federal law.

 

[Zigner]

**A: I read the post again and it appears that the LLC did not file BK and its attorney is trying to settle with all creditors. Thus no violation of Federal law.

Gotcha - I went at face value from the OP...specifically where our OP said that they went bankrupt...oops!

 

[HomeGuru]

Gotcha - I went at face value from the OP...specifically where our OP said that they went bankrupt...oops!

**A: I did the same thing. As you know there is a big difference between being bankrupt and filing BK.

 

[dmtran]

Sorry about the confusion guys! I know little to nothing about this kind of stuff. I'm a recent college grad working as a full time freelancer. Learning the business and this one definitely is the biggest issue I've run into so far.

 

[rooms222]

An assignment of the benefit of creditors is an alternative to bankruptcy that is filed in state court. It pretty much died out around the time of the great depression when the federal bankruptcy code started. It has seen a resurgence, particularly among small businesses and closely held corporations. It does not have the safeguards of the federal code for creditors, especially small ones without counsel, and the receiver is often hand-picked by the prior owners and may favor their interests (and try to head off further action by the creditor who may assume the ABC is just like a bankruptcy filing)...

This article helped me when I researched an ABC action:

http://www.clarktrev.com/PDF_R/assigmentforthebenefit.pdf

a google search on "Assignment for the benefit of creditors" will show other materials.

 

[latigo]

assignment of the benefit of creditors . . . pretty much died out around the time of the great depression when the federal bankruptcy code started.. . .

Just curious how you derived the notion that the Great Depression spawned the “federal bankruptcy code”.

It is true that there was the Bankruptcy Act of l933 and the Bankruptcy Act of l934, but congressional laws on the subject of debtor relief date back as early as 1800!

 

[rooms222]

When I did the legal research for my state, ABC caselaw started to rapidly decline in the early 1930's and become essentially non-existent after that date. There was a steady stream of caselaw from the 1880's through the 1920's.....

Also, my understanding is that, most of the initial attempts at Federal bankruptcy law (until 1898) were repealed within a couple of years of their enactment. Just like the idea of a federal banking system, the federal bankruptcy system was not thought of as a good idea by everyone...