Personal Bankruptcy : Trustee Extortion : seizure of biz equipment

[tb66k1]

What is the name of your state? NY
Hello Forum : I wish i never declaired bankruptcy. My lawyer sucks. has given me very bad advice throughout. I have had 2 creditor meetings. I declaired $4000 in business assets (S Corp : I am sole owner). this is computer equipment i need to make a living. the trustee demanded $10,000 under threat of seizure without even looking at what I had (Old compute equipment).

What can I do? My lawyer says this is extortion, but perfectly legal. I am frankly terrified that I can't make a living. (I am a web developer). What's Fair in this process? NOTHING. Also - If my business collects receipts while i am in bankruptcy, can the trustee demand those funds?

::: Thanks in NY ::: Tom

 

[olgethorpe]

Well...

Hopefully some others will jump in here with additional advice...but...

Its my understanding that the BK forms are official as of the day you FILE. If you have outstanding receivables at that time, they should be listed, and the trustee can probably grab them....on the other hand, any billing you do for work after the filing date should be untouchable.

As for the computer equipment, I'd suggest you buy a new hard drive...ghost your current computer onto it, put it away somewhere and then tell the trustee he's welcome to take the old computers. If your machines are more than two years old, you can buy new machines that are 100 times faster with bigger drives and more memory for less than $1000. Once your BK is discharged, you should have little trouble getting new equipment.

If you need some web space, PM me and we'll see what we can do...

 

[tb66k1]

Thanks for Reply

Thank you for your reply. The Equipment is between 5-3 yrs. old. Of course you're right that i can replace the most important comptuer for a faster machine at a fraction of the original purchase price.

I have backed up all of my data and can lease a new machine with help from a relative. At the time of filing i had no AR but did submit an invoice after filing BK, which was paid by the customer about 30 days later.

I have been provided no legal guidelines (or indications of rights and responsibilities) for seizure. The trustee has also threatened to file a motion to deny tools-of-trade exemption. (for no reason that i can ascertain other than he feels it's a widely abused exemption).

What constitutes Business Equipment? I am concerned about the software for which i hold licenses. Can you provide guidance about Software? Am i required to give them the software CDs too? How does this impact the licenses I hold? Don't they have to obtain license transfers from each OEM?
All my software, save one or two titles are 1 or more generations older than current versions.

Thanks very much for your input and advice!

 

[olgethorpe]

Wow...

Sounds like you might need to find a new lawyer. As I understand it, the trustee is paid a flat fee (like $60) to process the application for BK...and then a percentage of any monies he can collect on behalf of the unsecured creditors...I wouldn't think that his percentage of what you've described so far would be worth all this hassle.

Are you doing a personal BK or Bk'ing the Sub S corp? Does this lawyer go with you to the BK meetings? Have you noticed any evidence of bad feelings between the lawyer and the trustee? Why two meetings? What happened at the first to make the second?

Software should be considered tools of the trade, but I'm not sure the trustee would understand that.

 

[tb66k1]

Sounds like you might need to find a new lawyer.

>>> I've been thinking the same thing for a while. But $ is very tight and I don't know what effect that would have. This fiasco has caused me tremendous stress and grief (more than before i filed) and I may have to move out of my Rented home and move in with relatives. Especially if my business is effectively shut-down temporarily by the Trustee (effect of seizure).

As I understand it, the trustee is paid a flat fee (like $60) to process the application for BK...and then a percentage of any monies he can collect on behalf of the unsecured creditors...I wouldn't think that his percentage of what you've described so far would be worth all this hassle.

>>>>> I totally agree, and my lawyer has indicated this too. They seem shocked that this has happened. I can't understand this at all -- I've valued the assets on BK petition at about $4000 (Garage sale value) -- and yet he's demanded $10K. I can't figure out why this guy is going after me so aggressively.


Are you doing a personal BK or Bk'ing the Sub S corp? Does this lawyer go with you to the BK meetings?

>>>>>> I am doing Personal BK (I am 100% owner of the Sub S Corp -- I have no employees, it's just me); The lawyer i hired has had his associate meet me at court -- he's never there.

Have you noticed any evidence of bad feelings between the lawyer and the trustee? Why two meetings? What happened at the first to make the second?

>>>>> YES. As soon as the trustee stated at the 1st 341 Hearing "I want the business equipment" (My lawyer just sat there and said NOTHING) i made an offer to the trustee to buy-out the biz assets for $2500. We also indicated to trustee we intended to amend petition to include the tools-of-the-trade exemption (which was (by error?)) excluded from the original petition. The trustee 'Fired' back in a letter :: ...'if you do that I will file a motion to deny...'

The lawyer indicated ... "this is him yelling at us".

>>>>> At the first creditors meeting the trustee requested 4 years of business and personal tax returns, and then adjourned. I provided the returns without delay. The 2nd meeting was a joke - one quick question ... "I see you have an equipment lease, did you turn that equip back in?" ... My reply: "No... I negotiated a pay-off of the lease with borrowed funds from a relative so that I could continue to work"....

His reply came days later in a letter demanding $10,000 or he would send an auctioneer over to seize and liquidate::UNREAL::

Software should be considered tools of the trade, but I'm not sure the trustee would understand that.

^^^^^^^^^^^^^^^^^^^^^^^^^

Do you really think i should get another lawyer?
what effect do you think that would have on my case?


Thanks, Tom

 

[olgethorpe]

Hmm...

Well, "borrowed funds from a relative" could have been the tip-off. The trustee may smell blood. Remember, the only reason these guys work for the $60 flat fee is for the chance to make a percentage of what they can squeeze out of the filer. He probably thinks you've got a source of money he can tap into.

What to do? I'm not sure...technically, (I think), your lawyer is not supposed to speak at the meeting. He can if asked a direct question, but otherwise he should remain silent. Another lawyer? Don't know if that would help?

How much debt are you trying walk away from? Lots of CC's, or things like equipment leases, rent, so on?

 

[InsulinRules]

Here's how I'd handle this (MY OPINION ONLY)

1) Back up your data
2) Consolidate to the fewest hard drives possible.
3) Get ready to pull those hard drives and claim them as personal property if necessary.
4) Software Licenses-Most EULAs say that you CANNOT transfer the license and to do so violates the commercial contract and may violate the Milly Digital copyright act-in other words, the trustee may be forcing you to commit a federal crime. So check those EULAs. Then point out these small problems to the trustee. If he sneers at you, file a motion with the bankruptcy court and file a complaint with the US Trustee. If the BK Court orders you to turn over the licenses, then you must comply....but then you're off the hook with Microslime or whoever. Just to stir the pot, notify the software people that your licenses were terminated and transferred by court order, include serial numbers and a copy of the order.

5) Have your worthless attorney file a motion with the bankruptcy judge asking the trustee to explain why he is denying you the use of the tools of trades exemption. (Many BK attorneys hate confronting trustees)

OR

5) Tell the trustee to call the auctioneer and back the truck up. Tell him you're giving him everything. Explain to him that after the sale you expect the full dollar value of ALL your exemptions in cash. Otherwise, you charge him with fraud, theft, and violation of your civil rights under the color of authority. A trustee is immune ONLY as long as he/she does not abuse their authority and the US Trustee manual is very clear about those lines.

Lastly, don't be afraid of this clown, unless you're doing something wrong.

You may wish to get your attorney's fees back from your attorney, if he balks, file a complaint with the bar association. Remember, an attorney is there is represent your interests...EVEN if it's a losing battle. (Actually, especially if it's a losing battle).

Heck you could've gotten into this mess Pro Se and saved money!

 

[tb66k1]

Massacre in NY

Thank you for your replies:

^^^^^^^^^^^^^^^^^^^ olgethorpe >>

Well, "borrowed funds from a relative" could have been the tip-off. The trustee may smell blood.... ...He probably thinks you've got a source of money he can tap into.

>>>>>> Sounds right to me. I've never been through this before and I naively thought the process was 'fair' and that I wouldn't have my livelyhood threatened beyond the devistation that brought me to BK.

How much debt are you trying walk away from? Lots of CC's, or things like equipment leases, rent, so on?

>>>>>> Approx. 130K debt - combination of leased vehicle, Personal and Biz CCs; Small Biz Credit line.


^^^^^^^^^^^^^^^^^^^ InsulinRules >>

Thanks very much for your advice / opinions...

1-5:

I understand and agree. i have backed everything up onto to 300Gb drives and have copies of the most important software.

re: your 2nd #5 -- I figured myself they wouldn't ever take software 'cause 1, the hornet's nest of legal issues regarding licenses - 2, who in their right mind would buy a software program on CD at auction that's 1 or more generations older than what's currently available -- when they can get a pirate copy online for free, pretty easily? (clearly not legal).

"...Lastly, don't be afraid of this clown, unless you're doing something wrong."

>>>>> As much as I'd like to hide some of my business equipment it simply isn't worth a fraud charge. I've already provided a list of the equipment I am prepared to part with. Anything excluded (like my laptop) i consider 'personal property' and not biz equipment.

I am so oblivious to the law here, and have been given no guidance about what is and what is not 'business equipment' - no matter how many times i aske the attorney for clarification.

I am assuming hardware (Case/Tower/CPU/Monitors), printers, keyboards, cables, mice etc. and some software. At this point, if i err it will be on the side of caution. Right now they're getting approx 11 computers between 3-6 years old; 10 monitors - 17" and 21"; a killer Post Script Workgroup printer; fax/printer/copier; Frankly - most of it is junk and i am happy to give it to them in leu of tossing it in the trash. What's really important is one Workstation and the 21" monitors and one printer. Not alot of resale value ($3.5K +/-), but alot to replace - about $10K +/-.

I have made one last ditch effort to end this nightmare... After a discussion with my attorney I have decided to up my original offer from $2,500 to $4000. This - so i can get back to work. I am in such serious jeopardy of an extended period of disruption to my biz and likely having to leave my home that yes, i am running very scared. if this offer is not accepted then i am fully prepared to give it all up and lease new equipment through a relative to get back to work without further delay.

Again... Thanks for your posts....!

 

[olgethorpe]

Sound like you're doing what you can..

Hey...stuff happens. Sounds like you're doing the right things. The important thing is to get this behind you and get on with getting on. Make your final offer, and then take what the man throws at you...his auctioneer isn't gonna get him much. And, if you can get new equipment and start over, that sounds like a plan...

And remember, we do have some things in place (no money from us...no money from you) that might help out...get your BK settled then PM me for details.

Good luck...

 

[anabanana]

You need to understand that most BK lawyers are paper pushers. The standard Ch. 13 is a matter of filling out the forms and making a few appearances that they do in carload lots. If you want actual REPRESENTATION from your lawyer, you need to TELL HIM TO WORK!!! Sounds like he's a lazy lawyer, and if you don't advocate for yourself, he is going to throw you under the bus, dude. Tell him to file that motion compelling the trustee to justify himself. AND MAKE HIM ANSWER YOUR QUESTIONS. Send them to him in a LETTER, and close by saying you look forward to his written reply. MAKE HIM WORRRRRRRRK.

This is one of those fields where you have no idea if you're getting what you're paying for or not, because as consumers we're just totally ignorant. Not to mention the fact that BK lawyers are dealing with people who have no money, which in this country equals NO CLOUT, which means the lawyer can b-tch slap you around pretty much with impunity. There are BK lawyers in my town who routinely send clients running out of their office in tears. No respect... you're the dirtbag who couldn't pay his bills, remember? That's what he's thinking, and he's not going to make much effort on your behalf unless you MAKE HIM.

 

[tb66k1]

Thanks

oglethorpe:

Thanks. Will do.


You wrote:

Hey...stuff happens. Sounds like you're doing the right things. The important thing is to get this behind you and get on with getting on. Make your final offer, and then take what the man throws at you...his auctioneer isn't gonna get him much. And, if you can get new equipment and start over, that sounds like a plan...

And remember, we do have some things in place (no money from us...no money from you) that might help out...get your BK settled then PM me for details.

Good luck...

 

[tb66k1]

Anabanana:

Thanks for your reply to my post. I sure do know now that these lawyers, trustees and judges don't give a damn about me; they don't care if my biz is destroyed; they don't care if i become homeless, period. Being a compassionate person I walked into it thinking they wouldn't threaten my livelyhood - clearly a mistaken assumption.

Much like if you had a medical condition requiring treatment you would want to be informed and involved in your own care - you have to be persistent in requiring an attorney to do his best job for your benefit - that i know now, but there's so much unknown... He's given me such bad advice, or should i say, drove my expectations in a much more rosy direction - that when the worst happened - his exuse was - ..."well ok, he's a prick; i don't have a crystal ball...' - i was ill prepared. I really don't think he's lazy - hes overworked and has too many cases to handle them effectively - i don't know which is worse!

The attorney wants $250 additional fee to prepare and file a motion; and additional to represent me in court for arguing motions. My financial situation is such that I'd really just rather get on with my life; Also - since i have admitted to being niave about BK - i am frankly very afraid that this trustee can make my life a living hell for the foreseeable future. Isn't that the very definition of Extortion?

Also -- My lawyer now says he can seize business income "Post petition" -- when does this sh*t stop? --

It's clear some people are willing to cheat and seriously harm others for personal gain. I believe strongly in the law of Karma -- (both action and it's consquences are intertwined) and believe they'll get theirs in the long run.

I got into debt when my business was doing very well (i went from making $40K annually to over $350K annually; then for five years my income declined by substantial margins after 9/11 and the economy went south) - I struggled for 3 years carrying that debt (without acquiring new debt) before having no choice but to file BK - Among the valuable lessons i've learned through this nightmare is that i will NEVER put my self in a situation like this again. If i want to buy something, pay cash and don't borrow to get it -- unless its guaranteed to be an income producing asset and not a liability.

Again.. thanks for your reply.

You need to understand that most BK lawyers are paper pushers. The standard Ch. 13 is a matter of filling out the forms and making a few appearances that they do in carload lots. If you want actual REPRESENTATION from your lawyer, you need to TELL HIM TO WORK!!! Sounds like he's a lazy lawyer, and if you don't advocate for yourself, he is going to throw you under the bus, dude. Tell him to file that motion compelling the trustee to justify himself. AND MAKE HIM ANSWER YOUR QUESTIONS. Send them to him in a LETTER, and close by saying you look forward to his written reply. MAKE HIM WORRRRRRRRK.

This is one of those fields where you have no idea if you're getting what you're paying for or not, because as consumers we're just totally ignorant. Not to mention the fact that BK lawyers are dealing with people who have no money, which in this country equals NO CLOUT, which means the lawyer can b-tch slap you around pretty much with impunity. There are BK lawyers in my town who routinely send clients running out of their office in tears. No respect... you're the dirtbag who couldn't pay his bills, remember? That's what he's thinking, and he's not going to make much effort on your behalf unless you MAKE HIM.

 

[anabanana]

Golly, what a shame that he's overloaded. He shouldn't be TAKING MORE CASES!!! THis is classic. It's like HMO legal, cram as many appointments in as possible, provide a minimum of care/service and make the money on volume. The problem with that paradigm is that these are PEOPLE with LIVES full of individual circumstances.

You need to get ahold of the trustee's boss. The trustee contracts with the court, and if there are too many complaints of people being abused or matters mishandled, the firm this jerk works for can lose the contract.

My experience with this system is as a creditor who is getting royally screwed, but in the course of it all, I've had to sit through an awful lot of brutally sad stories. My experience is that the judge (this particular judge) is very smart, very humane, and very interested in doing justice. I frankly don't know how he manages it, because all these lawyers, trustees, etc., sure they all have a heavy load, but he hears ALL the cases. And he never fails to impress me. I hope you have a decent judge. If you can, go to a couple days of cattle-call hearings and see how the judge treats folks, and see if you'd do better on your own. Then maybe you should dismiss your lawyer, appeal to the trustee directly, and if that doesn't work, to the judge.

I would only suggest this if you ARE ABLE to do the advance checking, and if you ARE NOT ABLE to hire another attorney.

 

[tb66k1]

Reply & Questions on Seizure by auctioneer...

Thanks for your post anabanana:

I agree with you completely they should only take on what they can handle.
I am in business and i understand this completely. My lawyer actually started to 'nod out' on me at one meeting -- UNBELIEVABLE. YES -- PEOPLE with LIVES -- they don't give a damn! To me the whole system is a scam. -- The trustee's mission is supposed to be oversee the case and make it fair to all parties. "FAIR"? What a laugh -- The system is set up so that trustees can go after you where it hurts most. And Enrich them selves in the process with bogus 'legal expenses'. I know that's painting them with a broad brush - and some may be honest - but they're probably the exception rather than the rule!

The other part is of course the debtors that abuse the system - For those of us who have struggled for years and years to avoid it - it's most troubling to be painted with this scarlet letter - in part becuase the perception out there seems to be that I've somehow intentionally cheated my creditors - simply not true here.

Re: Extortion by trustee - My lawyer says 'he's a mean man, but what he's doing is perfectly legal' - so i don't know at this point what claim of misuse of authority i have, if any.

I do like the idea of checking out the judge and considering firing my lawyer - but - by then the damage will have been done. I am very short on cash (and time to get back to work) - I am 4 months from being homeless and am frankly scared sh*tless. (real deal - not being overly dramatic).

:::::::::::::::::::::: QUESTIONS ON SEIZURE

For anyone interested and willing to reply (thanks in advance)...
I have some very serious questions regarding threat of seizure:


1. What are my rights/responsibilities -- my lawyer keeps evading this question and I can't find information online.

2. Can they 'Search' my home for 'business equpment' (it's a home based business) and make their own determination (i.e., "Oh, that stereo looks expensive - that's biz equip...").

3. Could i legitimately separate out some equipment i consider 'personal' in nature and not be concerned about claims of fraud ? If i erred so far it's in being way too honest for my own good.

4. Regarding "Post petition" income - Can a trustee actually demand those funds? -- If yes, for how long after bankruptcy? Am i screwed in perpetuity? or is there a 'safe-harbor' that the trustee can no longer 'come after my assets'. (( Iam just wondering now if he's going to continue to f*ck with me and for how long))

I remember reading somewhere that he has 60 days from 1st creditor's meeting. is this right?


Thanks in advance for your replies!!!

 

[Ladynred]

Have you ever gotten any kind of statement or estimates of resale value on your computer equipment to show this Trustee that its not even CLOSE be being worth the 10K he's demanding ??? If you haven't, I'd do so ASAP, get TWO statments if you can get them.

As for the 'mean man' Trustee, there ARE limits to this guy's authority and you can challenge what he's doing. You don't have to let him steamroll you. I am a web designer too and there's no way you can do business as a web designer w/o computer equipment so it sure as hell IS a 'tool of the trade' !!

That lawyer needs a smack upside the head or you should fire his butt. They all charge extra for anything that puts a bump in the road of a bankruptcy, but acting like there's nothing he can do is inexcusable.