I've been trying to serve a defendant (Mr. X) on behalf of a local bank for about six weeks. He's been lying to the constable about his whereabouts (strange, but true -- defendants sometimes lie to avoid being sued). His last story was that he was out of state for an extended period. A few days ago this constable went to an address to serve Mr. and Mrs. Y on behalf of a completely different law firm. The man who answered said that Mr. Y didn't live there, that this was his, Mr. X's home. The constable said "Hold on a minute," went to his car, retrieved my summons and served Mr. X at his new address, in a completely different city from his former address.
You just can't escape from a good constable.
Friday, April 29, 2011
Thursday, April 28, 2011
Hiding Assets After Bankruptcy
A few days ago I received a call from a credit union about one of my clients. Apparently my client is hiding his motorcycle, which was security for a loan from the credit union. The credit union asked for my help in getting it back.
Now there's not a lot I can do for the credit union. For one thing, my client and it are in an adversarial situation and my client comes first. I did agree to send my client a letter telling him that he needed to either pay for the motorcycle or give it back. That's the rule with secured debt. The personal liability for the debt goes away, meaning the credit union can't sue my client and try to collect money from him. But the security interest the credit union had in the collateral, in this case the motorcycle, is unaffected by the bankruptcy. It just passes through the case without being harmed.
The bottom line is, if you want to keep your stuff, whatever that stuff is, and that stuff is collateral for a loan, you are still going to have to pay the loan after the bankruptcy. If you aren't willing to or can't pay, you have to give it back. Hiding it is not an option.
Now there's not a lot I can do for the credit union. For one thing, my client and it are in an adversarial situation and my client comes first. I did agree to send my client a letter telling him that he needed to either pay for the motorcycle or give it back. That's the rule with secured debt. The personal liability for the debt goes away, meaning the credit union can't sue my client and try to collect money from him. But the security interest the credit union had in the collateral, in this case the motorcycle, is unaffected by the bankruptcy. It just passes through the case without being harmed.
The bottom line is, if you want to keep your stuff, whatever that stuff is, and that stuff is collateral for a loan, you are still going to have to pay the loan after the bankruptcy. If you aren't willing to or can't pay, you have to give it back. Hiding it is not an option.
Thursday, April 21, 2011
Of Baseball, Divorce and Lawyers
Major League Baseball's commissioner Bud Selig has announced that MLB will take over day to day control of the Los Angeles Dodgers because the team's owners, Frank and Jamie McCourt, are locked in a nasty divorce where ownership of the team is up for grabs. Frank McCourt is threatening to sue Bud Selig and MLB for this move that is, to use an overworked word, unprecedented.
Frank McCourt bought the Dodgers in 2004 in a deal that was described as "highly leveraged" (read, McCourt bet the ranch and then some). The Washington Post referred to McCourt as "McBankrupt" after he shelled out $430 million just so he could sit in the owners' box at Dodger Stadium. But, hey, the San Gabriel Mountains, Elysian Hills, sunny weather, 80 degrees? Who could resist? And the Dodgers have a storied history, going back to the days when they were the Yankees' cross town rivals as the Brooklyn Dodgers. Beginning with Sandy Koufax and Don Drysdale, who silenced the Yanks' bats in the '63 World Series, shutting them out 1-0 in Game Four for the sweep, and continuing with Steve Garvey and Ron Cey in the 1970s and 80s, the Dodgers were one of MLB's premier franchises.
But the Dodgers haven't won a series since 1988 and are reported to be in the position of having to borrow money to make payroll. With ownership on the block, the owners squabbling themselves, and now MLB stepping in, you can bet the ones really licking their chops are the lawyers. They're going to come out as the only real winners.
Frank McCourt bought the Dodgers in 2004 in a deal that was described as "highly leveraged" (read, McCourt bet the ranch and then some). The Washington Post referred to McCourt as "McBankrupt" after he shelled out $430 million just so he could sit in the owners' box at Dodger Stadium. But, hey, the San Gabriel Mountains, Elysian Hills, sunny weather, 80 degrees? Who could resist? And the Dodgers have a storied history, going back to the days when they were the Yankees' cross town rivals as the Brooklyn Dodgers. Beginning with Sandy Koufax and Don Drysdale, who silenced the Yanks' bats in the '63 World Series, shutting them out 1-0 in Game Four for the sweep, and continuing with Steve Garvey and Ron Cey in the 1970s and 80s, the Dodgers were one of MLB's premier franchises.
But the Dodgers haven't won a series since 1988 and are reported to be in the position of having to borrow money to make payroll. With ownership on the block, the owners squabbling themselves, and now MLB stepping in, you can bet the ones really licking their chops are the lawyers. They're going to come out as the only real winners.
Monday, April 11, 2011
Gift Card from Blockbuster? Fuhgetabboudit
Did you get a gift card to Blockbuster that you haven't used completely? If so, throw it away.
Blockbuster filed Chapter 11 bankruptcy last year, as was widely expected. Up until last week, it looked like Blockbuster might be destined to become one of those companies that just quietly fade away until one day you suddenly notice they aren't there anymore. But last week Dish Network offered $320 million for Blockbuster, a higher number than the liquidation value of the entire chain. So it looks like Blockbuster might live on.
If so, its gift cards are no longer accepted. Gift cards are a form of "executory contract" under the Bankruptcy Code. An executory contract is one that still has to be performed by one or both parties. In this case, Blockbuster still had to perform by renting movies to holders of the cards. In Chapter 11 a debtor can "reject" executory contracts, meaning the debtor simply says, "I'm not going to perform my obligation under the contract." And that's exactly what Blockbuster has done. Go into any of their retail outlets and you'll see signs posted that say that after April 6, 2011, gift cards are no longer accepted.
The other parties to rejected executory contracts, in this case holders of gift cards, become general unsecured creditors in the Chapter 11 case. General unsecured creditors are the lowest form of creditor life in a bankruptcy, entitled to be paid after virtually everyone else gets something, and then only if there is any money left. In reorganizations, general unsecured creditors sometimes get a few cents on the dollar. But in order to get paid, they have to file a proof of claim. In the case of Blockbuster gift cards, the potential return to holders probably isn't worth the price of a stamp to mail the claim in.
Blockbuster filed Chapter 11 bankruptcy last year, as was widely expected. Up until last week, it looked like Blockbuster might be destined to become one of those companies that just quietly fade away until one day you suddenly notice they aren't there anymore. But last week Dish Network offered $320 million for Blockbuster, a higher number than the liquidation value of the entire chain. So it looks like Blockbuster might live on.
If so, its gift cards are no longer accepted. Gift cards are a form of "executory contract" under the Bankruptcy Code. An executory contract is one that still has to be performed by one or both parties. In this case, Blockbuster still had to perform by renting movies to holders of the cards. In Chapter 11 a debtor can "reject" executory contracts, meaning the debtor simply says, "I'm not going to perform my obligation under the contract." And that's exactly what Blockbuster has done. Go into any of their retail outlets and you'll see signs posted that say that after April 6, 2011, gift cards are no longer accepted.
The other parties to rejected executory contracts, in this case holders of gift cards, become general unsecured creditors in the Chapter 11 case. General unsecured creditors are the lowest form of creditor life in a bankruptcy, entitled to be paid after virtually everyone else gets something, and then only if there is any money left. In reorganizations, general unsecured creditors sometimes get a few cents on the dollar. But in order to get paid, they have to file a proof of claim. In the case of Blockbuster gift cards, the potential return to holders probably isn't worth the price of a stamp to mail the claim in.
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