Re: PROOF OF CLAIM in Chapter 7 Bankruptcy

Posted by lawguy (68.119.155.69) on March 22, 2003 at 12:41:46:

In Reply to: PROOF OF CLAIM in Chapter 7 Bankruptcy posted by Luz on March 21, 2003 at 17:02:00:

It sounds like you just had a "regular" partnership. Rather than something like an LLC, PLLC, etc..

As a general partner, you are liable for the debts and obligations of the partnership up until the time you withdrew.

Unless you had a written partnership agreement that prohibited this conduct, your partner could take out a loan on behalf of the partnership without your signature or approval. The partnership, and its partners, are bound by his actions.

By filing a proof of claim, you were listed in the BK as a creditor. Whether you filed or not, the debt would have been discharged. By filing, you "might" have received a portion of the amount owed. However, as an unsecured creditor, it would be very unlikely. You probably got nothing, right?

HOWEVER, you might have a claim against your former partner, in spite of his bankruptcy. You will need an experienced debtor/creditor/bankruptcy attorney for this though.

As a partner in the parntership, your former partner owed a fiduciary duty to the partnership. By obtaining the loan and using the funds for his own use and benefit, rather than for the partnership's, he violated that duty. Also, it could be argued that he embezzled the money.

These kinds of debts ARE NOT discharged under a bankruptcy. You should be able to file suit against your former partner to recover the funds, in spite of his bankruptcy, so long as you can prove that the debt was incurred by violating his fiduciary duty to the partnership.

But, this will be very complex and will require a knowledgable and skilled attorney to handle. There will be legal issues involving partnership law and bankruptcy law, and the specific facts surrounding your case. You won't be able to find adequate advice for this on a message board. Also, a good attorney might be able to find a way for you to avoid liability with the bank.

There's some hope for your situation, but you really need face to face legal advice. If the previous attorney didn't see this, or didn't discuss any of it, then don't use him. Find a well respected one.

Also, let this be a lesson about NEVER doing business as a partnership. Always either incorporate, either as a C-Corp, S-corp, or statutory close corp, or organize as an LLC. If you all had done that, then you wouldn't be on the hook personally.

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