Person sold loan collateral. Alternate options

[Trevor N]

What is the name of your state? North Dakota

I gave an $11k loan to a friend for his up-and-coming business, with a written contract and using some of his equipment as collateral. I agreed to allow him to continue using the equipment as it was part of how he was earning the money to repay the debt.
About two months after giving the loan, his other partner pulled out, and the business collapsed. He currently owes almost $7k outstanding on the debt, and I have found out that he sold the equipment he had for collateral without my knowledge or consent. And he has not made a payment in over a year.
So my question is: can I go after him in small claims court for other equipment he still has that would offset (while not completely cover) the debt?

 

[LdiJ]

What is the name of your state? North Dakota

I gave an $11k loan to a friend for his up-and-coming business, with a written contract and using some of his equipment as collateral. I agreed to allow him to continue using the equipment as it was part of how he was earning the money to repay the debt.
About two months after giving the loan, his other partner pulled out, and the business collapsed. He currently owes almost $7k outstanding on the debt, and I have found out that he sold the equipment he had for collateral without my knowledge or consent. And he has not made a payment in over a year.
So my question is: can I go after him in small claims court for other equipment he still has that would offset (while not completely cover) the debt?

So, you didn't put a lien on the equipment? If you have a written contract you can sue him.

 

[quincy]

What is the name of your state? North Dakota

I gave an $11k loan to a friend for his up-and-coming business, with a written contract and using some of his equipment as collateral. I agreed to allow him to continue using the equipment as it was part of how he was earning the money to repay the debt.
About two months after giving the loan, his other partner pulled out, and the business collapsed. He currently owes almost $7k outstanding on the debt, and I have found out that he sold the equipment he had for collateral without my knowledge or consent. And he has not made a payment in over a year.
So my question is: can I go after him in small claims court for other equipment he still has that would offset (while not completely cover) the debt?

You can sue for monetary compensation in a small claims action, to obtain a judgment for the $7000 owing.

Here is a link to North Dakota small claims information and forms, followed by a link to North Dakota's Legal Self-Help Center where questions can be answered.

https://www.ndcourts.gov/legal-self-help/small-claims
https://www.ndcourts.gov/legal-self-help/about-us
Good luck.

 

[Zigner]

What is the name of your state? North Dakota

I gave an $11k loan to a friend for his up-and-coming business, with a written contract and using some of his equipment as collateral. I agreed to allow him to continue using the equipment as it was part of how he was earning the money to repay the debt.
About two months after giving the loan, his other partner pulled out, and the business collapsed. He currently owes almost $7k outstanding on the debt, and I have found out that he sold the equipment he had for collateral without my knowledge or consent. And he has not made a payment in over a year.
So my question is: can I go after him in small claims court for other equipment he still has that would offset (while not completely cover) the debt?

You can go after him in court for money, not the unrelated equipment specifically.

 

[Zigner]

So, you didn't put a lien on the equipment? If you have a written contract you can sue him.

To be accurate - it doesn't really matter if the contract was written or oral; the OP can sue based on the breach of the contract either way.

 

[quincy]

To be accurate - it doesn't really matter if the contract was written or oral; the OP can sue based on the breach of the contract either way.

Fortunately, there appears to be a written contract.

Although oral contracts can be legally binding and enforceable, the terms and conditions of an oral contract are far harder to prove. The parties can, and often do, remember the agreement that was made in vastly different ways.

 

[Litigator22]

What is the name of your state? North Dakota

I gave an $11k loan to a friend for his up-and-coming business, with a written contract and using some of his equipment as collateral. I agreed to allow him to continue using the equipment as it was part of how he was earning the money to repay the debt.
About two months after giving the loan, his other partner pulled out, and the business collapsed. He currently owes almost $7k outstanding on the debt, and I have found out that he sold the equipment he had for collateral without my knowledge or consent. And he has not made a payment in over a year.
So my question is: can I go after him in small claims court for other equipment he still has that would offset (while not completely cover) the debt?

Well here is my question:

Did you perfect a security interest in the subject property by filing a UCC1 Financing Statement as provided by North Dakota's Uniform Commercial Code. (N. D. Code Chapter 41-09 - Secured Transactions)

If so, you may have recourse to replevin the goods from the buyer(s) and thereupon assert your lien rights. But only if the lien was properly perfected. (The link below will help explain the point).

Also in some states disposing of collateral securing a loan is a crime. I can't say if that is true in North Dakota. You'd need to consult with someone familiar with your state's penal laws.

https://www.cscglobal.com/blog/ucc-experts-corner-buyer-beware-unauthorized-transfer-provides-secured-party-with-multiple-causes-of-action/

 

[Trevor N]

When it all happened, I knew a written contract was crucial, but I did not know how to apply a lien. That was the mistake on my part (outside of making the loan in the first place).

My biggest question was about going after other equipment. I ask because he has already been taken to court over other outstanding debts in this same time period (of which I was unaware), he has lost, and has not paid one penny of restitution thus far. I'd say it's been about a year. So going after him for cash is "blood from a stone." The other equipment he has is worth about $3500. It's half of what's owed, but at least I know he still has it.

Just weighing my options here. Thanks.

 

[PayrollHRGuy]

When it all happened, I knew a written contract was crucial, but I did not know how to apply a lien. That was the mistake on my part (outside of making the loan in the first place).

My biggest question was about going after other equipment. I ask because he has already been taken to court over other outstanding debts in this same time period (of which I was unaware), he has lost, and has not paid one penny of restitution thus far. I'd say it's been about a year. So going after him for cash is "blood from a stone." The other equipment he has is worth about $3500. It's half of what's owed, but at least I know he still has it.

Just weighing my options here. Thanks.

When you have a judgment worth $X and the debtor does pay, placing a lien on property and/or having it seized and sold is one of the methods of collection.

 

[Trevor N]

That's good to know. I will get the ball rolling now that I know I can actually get something out of this situation. Thank you.