Legal Question in Business Law in Maryland

Lien problem after chap 7 bankruptcy

A friend sold me a piece of farm equipment and I paid $50K for it. I don't have a bill of sale-only my canx check. He filed Joint No-Asset Chap 7 bankruptcy/Discharged Jan 08 and lost his home and everything due to real estate decline. Company now going to repo equipment due to lien. He's borrowed money from parents to give me $25K cash as settlement. Not enough for me. Should I sue him or accept $25K and claim on taxes as bad debt? Should I charge him with fraud? He has no assets and is self-employed. Note: Money I gave him to pay for machine was put on hold by his bank when he deposited the check due to past due loans with them.


Asked on 4/11/08, 9:49 am

1 Answer from Attorneys
Lawrence Holzman Holzman Law Firm, LLC

Re: Lien problem after chap 7 bankruptcy

Hmmm -- your problem may actually be bigger. If he committed the fraud (i.e. sold you a piece of equipment without disclosing the fact that it was encumbered by a lien) before the filing of the bankruptcy, his debt to you may have been discharged in the bankruptcy.

Since it was a chapter 7 case, the big question will be whether he listed you as a creditor. The reason is that if he had listed you, then you could have gone an filed a complaint objecting to discharge on the grounds of fraud.

Having failed to list you, there is an argument that your debt was not discharged.

I think there are risks and rewards no matter how you proceed at this point. You should talk to an attorney who works with commercial loans and bankruptcy issues to consider all of the relevant facts and then chart the course of action that has the least risk and expense and the highest payoff.

Larry Holzman

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Answered on 4/11/08, 10:01 am


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