How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Ely Your Own Question
Ely
Ely, Counselor at Law
Category: Bankruptcy Law
Satisfied Customers: 99988
Experience:  Licensed attorney in private practice.
7286322
Type Your Bankruptcy Law Question Here...
Ely is online now
A new question is answered every 9 seconds

I am being threatened with a lawsuit to someone I owe

Customer Question

I am being threatened with a lawsuit to someone I owe 400,000+ to. I also have 1.2 million in debt to another vendor and 300k to AMEX. All I have is business furnishing and inventory. What CAN this person do and should I consider filing chapter 7?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Ely replied 1 year ago.

Hello and thank you for requesting me. Please note: (A) This is general information and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms; and (B) please wait to rate until I ask you to do so. It may take a few replies for me to be able to render an complete answer. I will let you know when I do.

What state are you in, please?

This is not an answer, but an information request. I need this information to answer your question. Please reply, so I can answer your question. Thank you in advance.

Customer: replied 1 year ago.
North Carolina
Expert:  Ely replied 1 year ago.

Thank you

If they sue, and if they get judgement, they can do the following for the judgement:

1) Garnish up to about 25% of a paycheck;
2) Levy a bank account;
3) Lien a titled property; and/or
4) Attach and sell non-exempt assets for judgment satisfaction.

See HERE for what is exempt from judgment.

Filing a BK is likely to have reduce the judgment to pennies on the dollar or void it all-together. If you feel that you have assets worth protecting and that they may be seized for judgment, a BK is a good idea. There are two main types of BKs for private parties - Chapter 7 and 13. See HERE.

I hope this helps and clarifies. Gentle Reminder: Use the SEND or REPLY button to keep chatting, or please RATE when finished. You may always ask follow ups at no charge after rating. Kindly rate my answer as one of TOP THREE FACES/STARS and then SUBMIT, as this is how I get credit for my time with you. Rating my answer the bottom two faces/stars or failing to submit the rating does not give me credit and reflects poorly on me, even if my answer is correct. I work very hard to formulate an informative and honest answer for you; please reciprocate my good faith.

Customer: replied 1 year ago.
I am not worried about losing anything, assets wise. Does bankruptcy wipe away all amounts due? This person is wanting to me to sign a paper to personally guarantee the business debt at a $10,000 per month payment. If I default on that, all he can take is assets, correct? Or what would be the worst he could do if he did sue, my local (non bankruptcy attorney) said he could get a judgment and possibly grow that 400k up to and possibly over $1,000,000. Can he shut my business down and take away my ability to repay the others I owe money to? If so, wouldn't I be better off just filing bankruptcy now and not fighting in court? IF granter a judgment, would the levy on the bank account be at periodic times, or anything going in to the account would go to them, thus in essence forcing me in to bankruptcy?
Expert:  Ely replied 1 year ago.

Please see the second link I provided that discusses what happens to debts. It is not a "yes" or "no" answer, so it depends. Here is is again - LINK.

Please see the first link in regards ***** ***** he CANNOT take. Here it is again - HERE.

It is easier for you to see how the rules apply since you are more familiar with your assets than I am.

I cannot make the decision whether it is best to file a BK or not, I am sorry!

No, a judgment and the levy would seize the whole amount minus exemptions.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 1 year ago.
if I fought him in court, lost and he was awarded a judgment, I would more or less be forced into bankruptcy. because he could take everything my business has, and other debtors of mine would lose out because they didn't sue me first?
Expert:  Ely replied 1 year ago.

I am afraid so. At least, this is likely. Businesses also have exempt assets, but many find it impossible to continue operating left only with them. And yes, with multiple creditors, it is basically a "race to judgment" as to who can get and enforce theirs first.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 1 year ago.
but, worst case, I file bankruptcy and we are discharged of the debts and we can start over? Nothing else legally they can do once we file?
Customer: replied 1 year ago.
Should I agree to his terms and try to pay, then if we miss payments file before he would have a chance to file a lawsuit? Or just give up now and be done with it all?
Expert:  Ely replied 1 year ago.

For your business, it would be a Chapter 11. See HERE on how this works.

I cannot tell you what to do, I am sorry!

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 1 year ago.
I understand. but are there more ramifications from trying to pay and then not being able to, or just stopping now?
Expert:  Ely replied 1 year ago.

Not really... they would have the same enforcement options whether one tried to pay and failed now, or, simply did not pay.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 1 year ago.
trying to pay it out and failing, then going BK would be no different then filing BK now.. in the courts eyes?
Customer: replied 1 year ago.
Can a chapter 11 be switched over to chapter 7? Or is it Chapter 11 until complete
Expert:  Ely replied 1 year ago.

Let me put it this way: it more depends on one's ability to pay as calculated by the court from total assets. However, Judges do have some discretion in deciding what the debtors can pay and tried to pay, etc, so that is calculated in.

Occasionally Chapter 11 cases convert to Chapter 7 but this is unusual. See HERE.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 1 year ago.
Was meaning if someone under Chap 11 failed to pay would it or could it be converted over to the Chap 7? By the debtor or the courts either one?
Expert:  Ely replied 1 year ago.

Ah, no. It does not convert into another chapter if the debtor does not abide by the rules set in Ch. 11.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Customer: replied 1 year ago.
What happens then? Lets say the industry I am in goes down and we cannot repay per the terms of the BK... what happens?
Expert:  Ely replied 1 year ago.

Hello - your original question was "What CAN this person do and should I consider filing chapter 7?." With all due respect, we are now past that question which I have answered, and beyond the original subject-matter. You can rate this question and open up another one and I (or another expert) would be happy to answer it for you.

Gentle Reminder: Please, use REPLY or SEND button to keep chatting, or RATE POSITIVELY and SUBMIT your rating when we are finished. You may always ask follow ups at no charge after rating.

Related Bankruptcy Law Questions