Legal Question in Business Law in California

Re: we are the lender for business that might go bankrupt

Your husband needs to consult with a bankruptcy attorney. The laws which govern whether and how much he might be repaid are complex. How they will apply in this case will depend heavily on details about the the franchisor and about the loan.

Such a detailed analysis is beyond the scope of the LawGuru service. Besides, it would be impractical to include such details in your question. The only way your husband can get the guidance he needs is to discuss his situation with a competent attorney.

Re: we are the lender for business that might go bankrupt

That's a good question.

To rephrase your question slightly, it involves the issue of whether there is any asset protection benefits to be received under any jurisdiction under Canadian law. That is, can the Canadian real estate be protected from a judgment by your husband?

There is another issue which you have not addressed which is the question of under what form of title has your husband's creditor taken the Canadian real estate. This is question that could turn out to matter quite a bit.

You will certainly need to see a US lawyer even to start to verify this answer, but I am pretty sure that the answer is no. First off, for your narrow bankruptcy related question: your husband's creditor would be required to report his Canadian assets as part of any US bankruptcy court filing and failing to do so would constitute bankruptcy fraud. So that avenue is probably a dead end for him or her, however, there may be an issue that still make the fifty cents on the dollar a good bargain.

That said, your husband would need to incur some expense to obtain relief from asset overseas. First he would need to sue in a US court for a past amount due -- assuming that his creditor had not filed for bankruptcy -- your husband would then need to enter that judgment into the Canadian court where the real estate is located to take a lien against that property. However, this would be a matter of Canadian law, and a Canadian lawyer would need to be retained to do this.

Depending on the amount at issue, the fifty cents on the dollar could be fair. (Basically, there would be a sliding scale - the more that is at issue, the less that the transaction costs of recovering your money will eat into the amount you recover.)

Re: we are the lender for business that might go bankrupt

You have more problems than you understand. You have problems if the guy has to be sued in Canada, or even if he doesn't you'll have problems with service and enforcement of US lawsuit and judgments on him and his assets out of country. Even if you take the 50% or other offer, a bankruptcy filing could result in you having to pay that amount back to the BK court if he does file. There are some tough rules in that court. I could randomly speculate with you whether a filing is a real threat or just a negotiating strategy, but you won't know the truth until/unless it happens. You could pay for an asset investigation to learn some of the truth. You need to quickly review and consult with counsel to get an informed opinion and advice. If you're in SoCAL with the business here, feel free to contact me for the legal help you'll need.

Re: we are the lender for business that might go bankrupt

It depends on what the documents say. Was a personal guarantee signed, did the "franchiser" enter into the agreement personally?