Legal Question in Bankruptcy in Texas

bankruptcy debt seniority

Hello There,

In 1999, I cofounded a software development company with some other fellows, after a while I had dispute with the CEO (I discovered fraud) that ended into a Settlement Agreement that released him of any judicial responsability and also agreed to sell most of my shares back to the corp. that in exchange for an amount to be paid in several steps once they reach some fund-raising goals or if the company ''sells all or substiantially all of its assets'', or if its merged or sold.

The thing is that in recent visit to me his attorney argues that the company is about to go belly up, and that I better should take some money (a ridiculous offer) and sign a release letter giving up my rights, else the company's going to go bankrupt and ''you boy are going to be last in line to collect anything'' for supporting the latter statement he showed me a ''convertible promissory note'' signed with a creditor granting him in a clause debt seniority....

Can that be done?? (give one of your creditors exclusive seniority on your debts?)

How's debt seniority in case of bankruptcy determined?

Thanks

Juan


Asked on 1/15/02, 12:06 pm

1 Answer from Attorneys
Lawrence Maun Lawrence J. Maun, P.C.

Re: bankruptcy debt seniority

In a bankruptcy, genrally, there are two kinds of debt, secured and unsecured. Secured creditors are paid from the collateral securing their debt. If your former company is offering this new creditor collateral for a loan, that debt would be paid from the collateral. If the collateral were insfficient to liquidate the debt, the balance remaing unpaid would be an unsecured debt. Your debt also seems to be unsecured debt. Genrally all unsecrued debt is treated equally, that is if a company files bankruptcy the unsecured creditors share pro rata in any proceeds available to pay them. Also of concern to you should be taking a payout from the company if they are shortly going to file bankruptcy. Your payout may be treated as a preference and the bankruptcy court may require you to pay it back. Sounds to me like the attroney is trying to bully you into a settlement and not givining you all the facts you need to make a reasoned decision. Larry Maun 713.266.2560

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Answered on 1/15/02, 3:53 pm


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