Legal Question in Credit and Debt Law in Michigan
I lend money, now I'm being sued
Three years ago, I lent my cousin $10,000. She paid me back in Sept. 02 when she cashed out her 401K. Five months later she lost her job. Three months after that, she filed bankruptcy. Her bankruptcy lawyer made a list of how she spent her 401K money. My name was listed. I just received a summons by a trustee stating she defrauded the courts. Am I being sued 18 months after she paid me for the money back? What do I need to do? Thanks.
2 Answers from Attorneys
Re: I lend money, now I'm being sued
It sounds as thought you MAY be part of a 'preference' action. You were a creditor, and she paid you back and in essence 'preferred' you over her other creditors. Typically, in a chapter 7, all creditors get a share, however small, of whatever the assets the trustee can obtain. However, preference actions have time constraints, and there may be some defenses in your case. On the other hand, it may be possible the trustee believes that she transfered assets to relatives or friends in order to avoid those assets from being part of the estate. At a later date perhaps she would get the assets back, thereby escaping the trustee's collection. You should contact an attorney as soon as possible so that they can determine what is occuring and how best to protect your interests.
Re: I lend money, now I'm being sued
When were you served with the summons and complaint? A party generally has 21 days after they were personally served with a summons and complaint to to file an answer, otherwise the trustee/plaintiff may obtain a default judgment. This means that the court will grant the plaintiff the relief requested. I your case, the court could enter a judgment against you in favor of the trustee for the $10,000.
You should consult an attorney who specializes in bankruptcy law, such as myself, as soon as possible to defend what sounds like a preference action.
Generally, when a person files bankrutpcy his/her assets become a part of the bankruptcy estate. The trustee can seek to recover funds the debtor has paid to creditors that he believes were paid as a "preference" or were intended as a fraudulent transfer to avoid creditors. If the trustee is successful, the person or entity that received the alleged preference, in your case, the $10,000, could be ordered to return all or a portion of the monies recieved from the debtor.
However, there are certain defenses to a preference actions which depending on your facts and circumstance, may allow you to keep all or a protion of the $10,000 payment.
I offer free consultations and would be happy to sit down and discuss this with you in further detail. Call me at 586-979-7302. Good luck.
Janet Ziulkowski
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