Legal Question in Bankruptcy in Virginia

Claiming investment in light of bankruptcy of individual

Dear law expert,

Almost two years ago, I invested 5,000 with a private individual who stated I would be able to gain profite over a period of a few months. That period of time has passed and I was notified of bankruptcy status of this individual. I have a signed document indicating his promise to pay. I do realize that I can no longer ask him for this money due to bankruptcy status. I am considering this a loss and have been told to report this as a loss on my taxes. Would you think that I should proceed with reporting this as a loss?

Sincerely,

Eric


Asked on 3/06/04, 12:33 pm

1 Answer from Attorneys
Richard S. Stolker Uptown Law, LLC

Re: Claiming investment in light of bankruptcy of individual

If it is a Chapter 7 bankruptcy, a debt incurred by means of fraud can be held nondischargeable, which means that you would be entitled to collect the debt once the bankruptcy is over.

However, you first need to file an Adversary Proceeding in the Bankruptcy Court; otherwise the debt will be discharged and you will not be able to pursue the individual.

There are very short time limits for filing Adversary Proceedings and they are strictly enforced, so you should consult with counsel as soon as possible.

On the other hand, if the individual has filed a Chapter 13 case, that means there will be monthly payments to creditors (though usually in a reduced amount). In order to receive your share, you will need to file a Proof of Claim in the bankruptcy case.

Please contact me if I can be of further assistance.

Richard S. Stolker

301-294-9500 -

[email protected]

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Answered on 3/06/04, 12:58 pm


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