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Category: Bankruptcy Law
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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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Hi, I have a friend who was about to lose his home, so I

Customer Question

Hi, I have a friend who was about to lose his home, so I lent him some money. There was a contract and collateral. He owns a tanning salon and put up the most expensive tanning bed he owned. And has paid back 7K of a 25k loan but hasn't made a payment in two years now. Unfortunately, three events happened that hurt his ability to pay me back or collect the collateral. 1) People haven't been tanning as much with the economic downturn. The administration also added a strange 10% special tax on tanning salons. 2) He has been in bad health, and has developed a condition which at times severely affects his balance. 3) There was a lawsuit filed against him where someone is claiming that particular bed burned them. He is saying that they've filed some sort of something that means I can't claim it. Of course all the while my collateral is deprecating. So my question finally, (sorry about that) is, are there any steps I should take at this point? I trust his word pretty much but is there any way I can verify his financial condition just in case? He still claims he will pay me back as soon as he can and I believe he would if he could. I'd rather not make him so mad that he changes his mind. Thanks!
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 1 year ago.
There's not a whole a lot a secured creditor can do to not burn a bridge with the borrower: choices include the creditor either repossessing the collateral for non-payment, or demanding payments resume. I have also seen creditor s request financial documentation (tax returns, etc) to verify the borrower is still generating income.

However, a secured debt does not survive bankruptcy/probate/claims by other creditors unless the secured loan is both "attached" and "perfected," so generally secured lenders should ensure their security interests are attached and perfected in case the borrower files bankruptcy, dies, becomes insolvent, etc. "Attachment" and "perfection" are legal terms meaning some steps have been taken to ensure that the security interest in the collateral (in your case the tanning bed) will survive the claims of other creditors, and thus survive in a bankruptcy case, probate case, etc.

You can read more about attachment under Illinois law (810 ILCS 5/Art. 9 Pt. 2 SUBPART 1. EFFECTIVENESS AND ATTACHMENT) here:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=081000050HArt.+9+Pt.+2+Sub.+1&ActID=2301&ChapterID=66&SeqStart=57600000&SeqEnd=58400000


Pay particular attention to Sec. 9-203, since that it the basic rules for a valid security agreement.

You can read more about perfection under Illinois law (810 ILCS 5/Art. 9 Pt. 3 SUBPART 2. PERFECTION) here:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=081000050HArt.+9+Pt.+3+Sub.+2&ActID=2301&ChapterID=66&SeqStart=60300000&SeqEnd=61500000

You might want to peruse these sections and find the collateral type that applies to your security and ensure you have properly attached and perfected your lien. Then, you can hope for repayment, or if repayment never comes, pursue your other rights under the Illinois Uniform Commercial Code.

You can't worry too much about making him mad since you are the one with the lien and that did him a favor; he needs to be concerned about not making you mad so you don't repossess the tanning bed, thus potentially putting him out of business. But, I understand that maintaining good relationships can have as much value as maintaining good investments; it's not like you're Beneficial or Homecomings Financial, you're a friend who helped a friend, so this can be a tough situation to navigate.

But, at the very least, you can try to protect your investment by protecting your lien by ensuring you have complied with the UCC regarding your lien.

Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
JoeLawyer and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Hi joe,


he has offered to allow me to see his books from the Salon, but I wouldn't know what to look for. I'll read what you've sent and try to get the colatteral attached and perfected. in any case i'm pretty sure the collateral no longer covers the loan. I should have said that I don't want to make him mad more so because he is a friend. He claims he will pay me back if it takes 10 years. I don't want to lose that sediment going after 25 cents on the dollar now. still I'd like to start claming the loss on my taxes this year. Can you you help me, or tell me if there is another tax lawyer there t

Customer: replied 1 year ago.

sorry that got cut off. My Andriod is not the best for this. ....that can help? Thanks! I can wait - if you'd rather enjoy the game.


Rob

Expert:  JoeLawyer replied 1 year ago.
LOL I did enjoy the game, thank you.

We can't actually give tax or legal advice on this website (see here for more details on that: http://joelawyer.webs.com) but certainly the tax section on here can probably give you some helpful info.

I believe you need to re-submit your question to the tax section.

Thanks,
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.

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