Person we have a judgment against filed bankruptcy. After meeting of creditors, his lawyer wants to make a deal with us. Legal?

Asked about 2 years ago - Rome, GA

An ex-partner of ours that we have a judgment against filed bankruptcy. We attended the meeting of creditors and showed he was lying about income, assets, expenses, etc. He admitted there were about 15 so called "errors" in his papers. The trustee has objected to the plan and has said the bankruptcy claim should be dismissed or converted to chapter 7. His attorney amended some of the errors, but not most, included income. On paper he said he makes $18,000 from his business monthly, during the meeting of creditors he said it was $33,000+. This still has not been amended, along with other major "errors" His lawyer called us and wants to make a deal that he will pay back a portion of what owes us at $200 a month until is paid off through bankruptcy court. Is this legal? Is he just scared?

Attorney answers (4)

  1. Jeffrey B. Lampert


    Contributor Level 19


    Lawyers agree


    Best Answer
    chosen by asker

    Answered . Yes, lawyer is worried. Your question doesn't specify the type of BK debtor is in, but by mentioning conversion I am guessing he is in a chapter 13. I am not sure by what you mean when you say "...that he will pay back a portion of what owes us at $200 a month until is paid off through bankruptcy court" Does that mean an agreement to pay $200/mo on the lowered total amount?

    Here are my thoughts, in no particular order of priority:

    The debtor probably went into chapter 13 to save property, possibly a home. He doesn't have enough income to save the home and pay unsecured creditors, based upon what he owns. By getting you to commit to $200.00 a month it may free up income to apply to other creditors. It is "legal" for the attorney to negotiate with you to obtain a Stipulation, legal word for agreement, that is made a part of the bankruptcy case. I would not worry so much about his statement at creditors meeting that he makes $33k, he could have been confused as to gross vs. net income.

    My question for you is: where do you think you would be better off--in a Chapter 13 where he would at least be making payments for 36-60 months, or in a Chapter 7, where his assets would be liquidated at extremely low values and then shared with other creditors. The amount to be shared obviously depends upon how much $ he owes to other creditors. If I am correct and he is attempting to save his home from foreclosure and you are the only creditors he has that are no secured, then a liquidation of his assets in a Chapter 7 might be wonderful. The house, if that is what it is, would be sold and the proceeds used to pay off any secured loans on the house. If there is equity, you might see some of that. If there is no equity, you won't and the secured creditor can also put in a proof of claim and share with you on a pro rata basis the proceeds from the sale of his other assets. If you are the only unsecured creditors, then you have tremendous leverage in the Chapter 13, if it is a 13, because you can object to his Plan also, in addition to the Trustee.

    On the other hand, if your claim is just one of zillions out there, his going into a Chapter 7 would probably not benefit you, since, depending on what he owns and what it is worth, you might be getting just a tiny sliver of the proceeds from the liquidation sale of his assets, and that might be less than $200/mo for 36-60 months.

    Clear as mud? lol

    Obviously, bankruptcy questions are very detail oriented. I know people hate to get the advise here on Avvo to "consult with an attorney", but that is what is called for here. You need the advise of a BK attorney in the state where the judgment debtor filed so that you will learn whether the mistakes are major or minor, how much money you could expect to receive in a Chapter 13 if you did not cut a deal with the debtor for $200/mo, the effects of a conversion to Chapter 7, etc. etc. etc.

    PS--you should know that the debtor has the absolute right to dismiss a Chapter 13 bankruptcy without court approval. So, when exercising your leverage in your negotiations with debtor, consider that as well.

    Best of luck to you.


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  2. Glen Edward Ashman


    Contributor Level 20


    Lawyers agree

    Answered . If a significant amount of money is involved, you need to shut your computer, retain a lawyer, and file proper objections before you miss the very short deadlines in a Chapter 13. No one here can possibly answer details without seeing the schedules (and analyzing your numbers). You may have altready missed deadlines since the 341 hearing is history, so Monday morning cancel all your plans and see a lawyer that morning.

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  3. Michael S. Marr

    Contributor Level 11

    Answered . Regardless of whether his income is 18K monthly or 33K monthly, he is likely in a 100% repayment plan and you will get your money in 3-5 years, or less, depending on the amount of debt and his monthly payment. You want his Chapter 13 Plan to succeed. In Chapter 7, depending on his assets and debts, your judgment may be wiped out subject to 19 exceptions, including debts arising from fraud while acting in a fiduciary capacity. 11 USC 523(a)(4).

    Why haven't you retained a lawyer yet?

  4. Alan D. Walton


    Contributor Level 19


    Lawyer agrees

    Answered . You may also have a fraud claim that could be determined not discharged. See an attorney.

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