Legal to collect money outside of BK court?

[AngelinaCat]

We were strongly warned by our attorney that if we entered into any kind of side arrangements with any of our creditors outside of the bankruptcy, that we ran the risk of having our bk dissmissed. Of all the mistakes we made, this wasn't one of them.

I also would get that proposal in writing, then depending on how you feel about the LL. contact the trustee.

[LadyInTheRed]

We were strongly warned by our attorney that if we entered into any kind of side arrangements with any of our creditors outside of the bankruptcy, that we ran the risk of having our bk dissmissed. Of all the mistakes we made, this wasn't one of them.

But the question here is whether the debtor can make a side arrangement with somebody who owes him money (the OP), not whether he can make a side arrangement with a creditor. I think the answer is that it depends. We don't know enough about the landlord's BK case to know the answer.

I'm of the opinion that, if your LL is in bk that any rent due is the property of the bk estate.

That may be true, but that doesn't mean the landlord can't collect it, even if he does have to turn it over to the trustee. This landlord isn't even try to settle, he wants full payment. If the tenant hasn't been notified by the trustee that payment should be made to the trustee, I don't think his obligation to pay the landlord has changed. If the tenant suspects the landlord is hiding the receivable from the BK court, then he/she should investigate further or simply bring it to the attention of the trustee.

[AngelinaCat]

The LL will be asked at his 341 if anyone owes him money. Then he should reply that his tenants owe him X number of months' rent and what the amount would be. Then the trustee should take steps to recover that money for the BK estate. And he will probably ask why he let the rent slide for so long.

It's that attorney's comment that "this is just between us" that throws up the red flag for me.

[keepmine]

It's that attorney's comment that "this is just between us" that throws up the red flag for me.

That's the crux of the entire discussion.
Odds are the LL and his attorney are trying to slip one past the bk trustee.

[StartingOver08]

"this is just between us"

It's that attorney's comment that "this is just between us" that throws up the red flag for me.

That's the crux of the entire discussion.
Odds are the LL and his attorney are trying to slip one past the bk trustee.

Exactly. Difficult to prove the statement without the attorney putting it in writing though...

[frogger]

That may be true, but that doesn't mean the landlord can't collect it, even if he does have to turn it over to the trustee. .

But it does mean exactly that. When the landlord turns it over to the bk estate, it belongs to the bk estate.

The only way that the landlord can collect it is if the trustee abandons it as an asset.

I turned over several hundred thousand dollars of accounts and NONE of them have been abandoned by the trustee. They belong to the estate and the trustee has a lot more power to collect than I did.

[LadyInTheRed]

But it does mean exactly that. When the landlord turns it over to the bk estate, it belongs to the bk estate.

The only way that the landlord can collect it is if the trustee abandons it as an asset.

The point that I'm trying to make is that we don't know anything about the landlord's bankruptcy. The landlord may have abandoned the receivable. Or it may be an exempt asset. The attorney may be saying "this is just between us" because it actually is.

Are you saying that if a debtor has a business (a sole proprietorship) where he regularly has receivables on the books, that he has to stop collecting those receivables as soon as he files BK? I don't know, but I'd be pretty surprised if that were the case. Yes, the debtor may have to turn around and turn the cash over to the trustee. But, based on what we know, we can't be certain the landlord and his attorney are doing anything illegal.

[JackBondLove]

Since you are upside down on the rent, why not just file BK yourself, that way your scheming landlord won't get anything.

[frogger]

Are you saying that if a debtor has a business (a sole proprietorship) where he regularly has receivables on the books, that he has to stop collecting those receivables as soon as he files BK?

No, he can still collect them, but they belong to the bk estate and will need to be turned over to the trustee.

I don't know, but I'd be pretty surprised if that were the case. Yes, the debtor may have to turn around and turn the cash over to the trustee. But, based on what we know, we can't be certain the landlord and his attorney are doing anything illegal.

True. The only thing you can be sure of are your actions. Make sure that you get signed receipts from your landlord for anything that you pay him. Then, if the trustee has you listed as an asset, you can show the receipts and trustee will visit with the landlord about them.