Best way to handle adversary proceeding

[jturk]

hi all, i have a question about an adversary proceeding:

I filed my petition in july 09.

In september 08 i charged up about 10k on one credit card paid to someone else (not cash advance) over the course of 2 days. I never made 1 payment on the card.

I paid money to get involved with a virtual dating website as a business venture which i eventually got ripped off, the guy never paid me according to our agreement. which is really the reason i never made 1 payment on the card. so the business venture didnt work out & i really didnt benefit from the 10k i charged to the credit card.

American express filed an adversary proceeding claiming the debt should not be dischargable and i have been ordered by letter to respond to theyre claims.

Can anyone here give me some advice on the best way to handle this situation? Any advice is appreciated.

[backtoschool]

That big a debt (10k) charged less than a year before filing, with no payments ever made on it, will give AMEX a good case for an AP. Amex will try to show that your intent was to never pay that charge back. This is hard to prove, but the fact that you never made a payment on it, is not going to help.

If they win, it means that that debt will not be discharged, but it won't affect the rest of your bankruptcy.

The fact that you got ripped off is not going to help you if you didn't file a fraud or theft claim with amex after you made the charge.

The fact that you didn't like the goods and services that you charged is not going to win the AP for you. You need to have a really good reason for why you never made a payment on the charges in order to beat this in my opinion.

[justbroke]

Well, if it's a business debt, it is non-dischargeable. Also, since you made absolutely no attempt to repay the debt... they are probably claiming that it was fraud under the guise that you never intended to repay the debt.

The burden of proof is now on you.

So, questions are...

1. Was this a business debt?
2. Was this done on an American Express business card?
3. What was your intent?
4. Why did you never make a payment?
5. If you were a business, what type of organization did the business have?
6. If it was a business card, I'm assuming a personal guarantee, was it?

[jturk]

also if there are any attorneys on here, i would like to know from your experience...how often do creditors win ap's such as in the situation i described.

[justbroke]

also if there are any attorneys on here, i would like to know from your experience...how often do creditors win ap's such as in the situation i described.

Not an attorney, but they are easily won, just on what I just wrote above. You may be able to get a stipulation to pay less. However, it would still be non-dischargeable.

[jturk]

justbroke, in answer to your questions...

yes it was a business debt.

yes it was done on a business credit card.

my intention was to buy a minority ownership in a virtual dating website.

i never made a payment because my financial situation started to snowball after that & was only able to pay for bare necessities.

the business is an online virtual dating service.

yes im pretty sure it was a personal guarantee.

[HHM]

This is a no brainer AP for the creditor. You will lose based on the facts provided.

As for best approach, contact them and offer to pay them $5,000 on a payment plan, something you can afford, but they probably won't stretch it out any longer than 24 months, at best.

Good luck.

Hopefully you are discharging a bunch of other debt in your BK, so big picture, it may be a small price to pay to come out of BK only owing this $10K.

[justbroke]

I think that they (AMEX) will be able to win solely on you entered into that financial arrangement and never made a payment. I don't know how you'd win this AP. You may want to settle and stipulate to a certain amount.

Are you represented? BTW, what was the organization of your business (LLC, Partnership, S Corp, C Corp, Sole Proprietorship).

[jturk]

justbroke,
its an llc

[jadams]

Why do you say it's definitely non-dischargeable just because it's a business debt?

I included my Amex Business in my petition...

I'm confused.

[whipster1]

You can probably offer a settlement for say 50% and see if they bite. It will cost them $$ to go forward so they may bite.

[whipster1]

Business debt is dischargeable as to your guarantee of it. The LLC will still owe it unless you BK that entity also.

[justbroke]

justbroke, its an llc

You're the sole stockholder (single member), I assume? Or was this other person a member of the LLC?

I still think you have issues since you never paid a dime on it. They will claim fraud and you'll have to overcome that assertion. Even if you overcome the claim of fraud, they can still get you on insolvency. They will claim that you were insolvent at the time you made that purchase (or obtained that cash advance) and knew that you couldn't afford to repay it. Either way, their case it pretty cut and dry.

When you signed a personal guarantee, you removed your "limited liability" from that debt. The LLC, as a corporation, would have protected you as an individual. Unfortunately, day in and day out, owners (including myself as an S Corp owner), sign away their protection by affixing their signature on that "Personal Guarantor" line.

Why do you say it's definitely non-dischargeable just because it's a business debt? I included my Amex Business in my petition.

I included mine as well, but this case is different. The poster charged a significant amount of money to the account ($10K). The poster never paid a single dime towards it. The poster was probably insolvent or knew he didn't have the money (thinking he'd make it with this venture). The fact that the poster never attempted to make a payment, makes this non-dischargeable as this falls under fraud. If you obtain credit under false pretenses, or in any fraudulent manner, it's non-dischargeable (11 USC 523).

I'm pretty sure -- having not read the complaint or letter -- that the Creditor is claiming fraud under 11 USC 523.

[jturk]

thats correct they did mention fraud several times in the complaint letter. do i have anything to be concerned about as far as consequences go beyond a judgement or non discharge?

[jturk]

i would like to raise another question, should i just let them get a judgement against me & then wait it out & negotiate a lesser amount in the future?