Articles Posted in Collections

In these challenging economic times, many businesses face substantial struggles. Sometimes, those struggles may lead a business that owes money to yours to fall behind on paying its debts. Of course, your business’ own success is predicated on getting paid the sums that are owed to you, and getting paid on a timely basis. When someone doesn’t, there may be an opportunity to work things out between the two sides. Other times, legal action may be necessary. When the latter is true, look to a knowledgeable Atlanta commercial debt collection lawyer for the legal representation your business needs.

If you’re a lender, dealing with a delinquent borrower can be complicated. There are various steps you can take to deal with the problem. However, if your situation reaches the point where litigation is necessary, you want not only to win your case but also to do so as quickly and efficiently as possible. Doing that may involve bringing — and winning — a motion for summary judgment.

A commercial lending dispute between an Atlanta business intelligence and data analytics company and its lender is a good example. The pair inked a loan agreement in late 2018. On the same day, the borrower submitted two promissory notes to the lender.

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In any sort of business or commercial dispute, there is a high probability that certain written documents will play an important role. Sometimes, though, it’s what isn’t written down that may hold the key to a successful case. In some situation, oral contracts may be valid and binding. In order for that to happen, though, there must be proof that a consummated agreement (in other words, a “meeting of the minds”) took place. Whether you are seeking to enforce or to oppose the enforcement of an oral contract in your business litigation, it helps to have the resources of skilled Georgia commercial debt collection counsel on your case.

One recent case in which the enforceability of an oral contract was at issue involved a farm and its agricultural products supplier. The farming business was owned by a husband and wife, and the wife’s father, T.E., signed a personal guaranty with the supply company guaranteeing payment of all of the farming company’s debts with the supply company. The wife’s father eventually decided he wanted to get out of farming and did not intend to continue guaranteeing the farm’s debts. He allegedly told the supply company’s branch manager about this decision, and the manager allegedly was “in total agreement” about the decision. No written document to this effect was ever produced at trial, however.

The farm racked up debts in excess of $200,000. The farm eventually missed payments, and the supply company asked T.E. to pay, based upon his guarantees. The man refused, and the supply company sued. The trial court eventually granted a summary judgment for the guarantor, which meant that the supply company lost its case before it even made it to trial. The judge concluded that T.E. had sufficiently established that he had rescinded his personal guaranty.

Please watch the YouTube video from Todd Poole, founder and managing attorney of Poole Huffman, discussing the importance of getting your fi fa as the first step in any Georgia judgment collection.

As a creditor, you understand that your business involves certain risks that “come with the territory.” Sometimes, a debtor’s business may fail to attract customers or may be destroyed by a catastrophic event. Other times, though, the debtor is not an innocent actor, such as cases where the debtor engages in fraudulent transfers to try to dodge having to pay. When that happens, you may have the opportunity to recover many forms of compensation, including punitive damages, but to do so, you have to know the right way to proceed in court. For that, rely on representation from a knowledgeable Atlanta creditor’s rights attorney.

An Ohio lender found itself in those shoes recently. The lender had lent substantial sums to the owner of a construction business. As the business faltered and the owner fell behind on his loan payments, he transferred numerous assets to a number of Florida LLCs and also to himself and his wife as “tenants by the entirety.” This had the effect of making those assets unreachable by the business owner’s creditors.

The lender was not without any recourse, however. The lender sued in federal court, asserting that the owner had violated Alabama’s Uniform Fraudulent Transfer Act by transferring certain real estate to an LLC. A fraudulent transfer takes place when a borrower transfers interest in an asset or assets “with the actual intent to hinder, delay or defraud” a creditor.

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If you are a creditor, you may not know that assets transferred in divorce settlements can be considered voidable transfers. The court can either reverse the transfer or enter a judgement against the spouse receiving the transferred property.

Under the Uniform Voidable Transactions Act (UVTA), previously known as the Uniform Fraudulent Transfers Act (UFTA), a transfer may be fraudulent or voidable if the debtor made the transfer with intent to hinder, delay, or defraud any creditor of the debtor, or without receiving a reasonably equivalent value for the transferred property.

In a recent case, the Georgia Court of Appeals determined that a divorce settlement transferring assets could be considered a voidable transfer. In Enlow v. Enlow, 352 Ga.App. 865 (2019) https://casetext.com/case/enlow-v-enlow-2 a minor threatened to sue her grandfather for molestation. Twelve days later, the grandfather transferred five parcels of real property in a trust, previously held by him and his wife, solely to his wife. A month later, the couple filed for divorce, and the grandfather deeded all five parcels to the grandmother in the divorce settlement. This settlement was approved by the trial court.

A “fraudulent conveyance” occurs when a debtor tries to avoid paying an unsecured debt by transferring property to another entity or person if the property is at risk of being seized by a creditor. In a Georgia appellate decision, a defendant LLLP appealed the lower court’s granting of an LLC’s motion asking to be substituted for the plaintiff in the lawsuit, as well as its motion for summary judgment denial. The defendant LLLP argued that the lower court had made a mistake in finding that the LLC had standing to recover under the Uniform Fraudulent Transfer Act (“UFTA”) claim.

The case arose in a trial of a different lawsuit. In that case, the court ordered the estate should specifically perform to buy the LLC’s stock from shareholders. A few months later the shareholders sued the estate, the LLLP and others asserting UFTA claims and asking for damages for fraudulent conveyances.

The plaintiffs claimed that a couple had created the LLLP in 2010 in order to transfer $5 million to the company with the goal of defrauding creditors. The couple asked for damages, including satisfaction of the $1.2 million judgment they’d been awarded. The plaintiffs argued that the UFTA allowed voiding of those transfers since they were made in order to defraud, delay or hinder the estate’s creditors (such as the plaintiff).

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If you should find yourself in the position, as a judgment creditor, of needing to pursue an adversary proceeding against a Chapter 11 debtor, it is important to understand that there are many procedural rules involved in the process. While the courts may allow parties a bit of leeway because the law favors decisions made on the merits as opposed to procedural technicalities, some procedural flaws can have disastrous results. By working with a skilled Georgia creditors’ rights lawyer, you can make sure that you are doing everything possible to avoid falling into procedural pitfalls.

One example of a case in which a procedural imperfection led to considerable federal litigation was a dispute that arose between two business partners, Gary and David. In the 1990s, Gary and David developed a plan to establish a business that dealt in discount home improvement and building supplies. The plan seemed strong, but the business never took off. By 2007, with business still poor, Gary sued David, and David countersued. Eventually, in 2011, a jury ruled for David and awarded him damages in the amount of $318,025.

The next year, Gary filed for Chapter 11 bankruptcy. David sought to file an action within that bankruptcy, asking the bankruptcy judge to declare the damages award handed down a year earlier to be a non-dischargeable debt in accordance with 11 USC 523. The bankruptcy judge gave David until Oct. 12, 2012 to file a complaint and initiate an adversary proceeding under Section 523. However, David didn’t file a complaint and initiate an adversary proceeding, at least not at first. He filed a “Motion to Dismiss or for Determination of Non-Dischargeability of His Debt” prior to the deadline. Then, on Oct. 17, he filed an adversary complaint.