People are preparing to sue my mother for fraud! help please!

[prideofjc]

What is the name of your state? VA

Hello, I am a 23 years old man living in Virginia. I was not sure which section to post, I hope I did in the right section. English is my 2nd language, please excuse if I make grammatical mistakes.

Anyway, here is my story.

My mother owned a Bar/restaurant for 4 years. Unfortunately, the economic crisis hit the business hard last year and we had to file a bankruptcy last month. Sounds like an ordinary story but it's a TOTAL MESS if you go into the details.

My mom met this guy named Mike when she was working as a waitress about 5 years ago. Mike was a loan officer. Even though my mom had no credit history because she came to the U.S. 8 years ago, Mike helped my mom get her loans and buy a $300,000worth restaurant. However, because nobody wanted to lend their money to my mom who had no credit history and no assets, she had to get a loan from those small finance firms that had 20% and 30% annual interest rates. When my mom bought the business, there were lots of problems like having to reinstall all the springklers and remodeling, so she had to get some more personal debts. Those personal debts also had VERY HIGH interest rates.

I wanna talk little bit more about those personal debts. One of the personal loan we got was like this: We borrowed $10,000. The interest is $3,000 in 3 months. So, we pay $1,300 a week for 10 weeks. I don't know how to calculate the interest percentage for this one but I am sure it is very high. And some of the other personal loans, we borrowed $220,000. We paid "interest only' $6,600 a month for four years and we still owe him $220,000 + interest we didnt get to pay.

Anyway, the business did really well until end of the 2006. Some people offered to buy our business for 1.1 mil but we refused because we didn't have plan to start another business. Unfortunately, when 2007 came, the economic crisis hit the business hard. We started going down hill.

We tried to get some bank loans to pay off those high interested loans but we failed. Back then, we didnt even know what bankruptcy was(In Korea, you go to jail if u can't pay ur debts), so we didnt even think about filing a bankruptcy back then. To pay those high interests, we had to get more personal debts and our debt started increasing dramatically.

It came to a point where our debt went way over the price of the business. The price of the business was cut down by half and the debt almost trippled. At that point, I found out about bankruptcy and talked to some lawyers. But one of the creditors intimidated me saying if we file a bankruptcy, he would buy a hotshot lawyer and stop the bankruptcy and put my mom in jail for fraud. We didn't know what to do because we were really scared and we just tried to find another buyer. However, everytime we found a potential buyer, things went really bad and we came to a point where we can't even open the business anymore.

That day, my mom and I decided to file a bankruptcy and we talked about serving a jail time if we did something unlawful, because we were so sick and tired. And, there was nothing else we could do.

So, we filed a bankruptcy last month. And the meeting with trustee is about 20 days away. The problem is, the guy who intimidated me is preparing to sue my mother for fraud. I think he is going to say we had no abilty to pay back when we borrowed money and we have been preparing to file a bankruptcy since long time ago.

When we borrowed those high interested loans, we had no intention of filing a bankruptcy. Also, we were trying very hard to get bank loans to pay off. Also, The business was listed for 1 mil. by a real estate agent(Also a creditor).

know it's our fault that we borrowed money and we filed a bankruptcy because we can't pay off. But, I am really worried that my mom could go jail if things go bad.

Please ask questions if you need to know more details and please tell me what you think will happen... Thanks in advance!

P.S. Well, I read from other thread that there is no debtor prison. but I guess if my mom is found guilty for w/e reason, she goes to jail, right?

[racer72]

Please ask questions if you need to know more details and please tell me what you think will happen... Thanks in advance!

Where is your bankruptcy attorney?

P.S. Well, I read from other thread that there is no debtor prison. but I guess if my mom is found guilty for w/e reason, she goes to jail, right?

No one can go to jail if sued. It is strictly a civil case. If the guy threatened you after filing bankruptcy, you need to tell the trustee, once the bankruptcy was filed an automatic stay is put in place and the creditor must cease any and all collection efforts, including threatening of lawsuits. The guy threatening the lawsuit could be fined. The only real recourse the creditor has is to be at the meeting of creditors. Again, where is your bankruptcy attorney?

[prideofjc]

Originally Posted by racer72

Where is your bankruptcy attorney?


No one can go to jail if sued. It is strictly a civil case. If the guy threatened you after filing bankruptcy, you need to tell the trustee, once the bankruptcy was filed an automatic stay is put in place and the creditor must cease any and all collection efforts, including threatening of lawsuits. The guy threatening the lawsuit could be fined. The only real recourse the creditor has is to be at the meeting of creditors. Again, where is your bankruptcy attorney?

Thanks for replying. I have a bankruptcy lawyer. He said we would be fine but, to be honest, I don't have much faith in him. I really wish I went to a different lawyer but we made few thousand dollars payments already and we don't have money to hire another.

And no, the creditor didn't threaten me after filing a bankruptcy. It was before we closed down the business. Plus, he said that on person and on the phone; We have no evidence to prove that he did. Anyway, he gathered up creditors last week and convinced them that I have hidden some money(which isn't true) and that everybody should show up on the meeting with trustee to stop the bankruptcy.

[Ladynred]

They can't stop the bankruptcy. IF they show up at the 341 meeting, they will not even be allowed to speak unless the Trustee allows it and they cannot grill you. There are rules, and the Trustee holds all the power at the 341. IF they make enough of a case, WITH PROOF, to get the Trustee to dig further, the TRUSTEE will then ask for whatever he/she needs to investigate these creditor's claims. You may get asked for more documentation, and they likely will be too.

I think he is going to say we had no abilty to pay back when we borrowed money and we have been preparing to file a bankruptcy since long time ago

.
He would have to PROVE that, the accusation isn't enough to win. When you get loans to start up a business, you expect to make enough money to pay those loans back, that does NOT constitute fraud. Creditors expect that you'll MAKE the money to pay back the loan by building the business. It's one thing to accuse someone of fraud, it's quite another to PROVE it. You should be prepared with every shred of documentation you have to show that you were not just taking money with no intention of paying it back.

In order for your mother to go to jail, it would have to have been a pretty big scheme to commit bankruptcy fraud, or the type of fraud this guy is screaming about. Make sure your bankruptcy attorney is on the ball to face this creditor's challenges. You're paying the attorney, make sure he earns it, don't let him jerk you around, stay on top of it!