I sold my business to a woman a few years ago, she gave me a downpayment and then was supposed to be making regular monthly payments to me on the loan, still owing about $40,000 to me. She had a lot of problems in the last year or two, and had a hard time making payments. We tried to be flexible and give her a break to get back on her feet, assuming she would eventually get back on her feet, but I just received notice
that she is declaring chapter 7
bankruptcy. I have a multi-part question about how to handle this.
- Her hearing is Wed, and I plan to go. What should I take with me?
- Will I be questioned or have the opportunity to speak? If so, what should I say?
- I understand that I may obtain the bankruptcy papers that she files from the clerk of the court, and I can review these papers to see if anything seems inaccurate. How do I go about doing this? And will this tell me what assets she has that will go toward paying creditors, and where I am in the line up of creditors to be paid? How does the court determine that?
- I also understand that I can obtain court approval to take a deposition from her, in order to gather more detail about her assets and debts. Again, how do I go about doing this?
- What do I need to do to with the court to file proof of claim
on the remainder of this loan, in the hopes that I can be paid out of the proceeds of her distribution?
- If there are assets (like the $5,000 server I sold her along with the business) that are company property or have been bought with company money, do I have a greater right to a claim on those than another creditor?
- Is there any chance at this point of getting her to reaffirm this debt or agree to voluntarily repay us, as she has said over and over again that she does plan and WANT to pay us? If so, how?
- Also, I am not 100% sure my loan should even be attached to this discharge, because the promissory note
is made out in the name of Bradford LLC, rather than her personal name -- but the bankruptcy filing is in her and her husband's personal names, not the business name. I thought chapter 7 was just for personal debt. My understanding is that if a business is a separate legal entity (like an LLC), she is only personally liable for the business's debts if the loan was in her own name or she guaranteed them --- otherwise, the LLC is responsible for its own debts and must file its own business bankruptcy
case to discharge them. But to my knowledge, she hasn't filed a business bankruptcy. Is this something I need to bring up with the court?
- I gather that a discharge can be denied if financial or legal impropriety can be shown -- what if she and her husband set up an LLC when they bought the business from me in order to have that "corporate veil" protection at closing, but are now claiming personal liability for a debt that should belong solely to the business? Can I dispute the discharge altogether?
- Is she required to close the business because of this? The site is still up, and she hasn't notified folks for whom she is selling their products online about the bankruptcy. What is her legal responsibility here? Do I have any right to warn friends of mine who are her vendors? And what if she shuts down the site, only to open it back up again later? Thanks!