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gondwanalon's avatar

Would you be on creditors’ committee of a bankrupted family member?

Asked by gondwanalon (19118points) March 17th, 2015

Have you been on a creditors’ committee?

What was it like?

Did you bring an attorney with you?

Our attorney said that there is no reason why I should not be on the creditors’ committee. And he doesn’t need to be there. All I need to do is to file all the documents that he has OK’d and vote. I worry that the other creditors will walk all over me.

My brother in law has gone bankrupt after losing a $20 million suit. Up for grabs is a horse ranch, 2 apartment buildings and 2 bowling allies (all mortgaged to the hilt). He also owes a lot of people a lot of money. We have documentation proving that he owes us over $482K.

When we loaned the money, I told my wife not to expect to get any of it back. But now the situation has dramatically changed. If I’m not on the creditors’ committee then whatever money is recovered will just go to other creditors. So I might as well grab a piece of the pie. Yet I feel kind of like a vulture picking over the bones of my brother in law’s life.

I have no bad feelings for my brother in law and I worry about his mental health. He now is 68 years old and broke. He has a lot of pride and it wouldn’t surprise me it he does himself in. He’s a good guy that made risky choices and had a lot of bad luck.

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10 Answers

gailcalled's avatar

Can you afford to lose almost half a million dollars?

Is this man your wife’s brother?

SQUEEKY2's avatar

My GOD I couldn’t just walk away from almost a half million, he might be a fine human but he did lose your 482k as well.
Get what ya can.

CWOTUS's avatar

I had never heard of, much less been a part of a creditors’ committee.

However, I cannot believe that it’s a free-for-all of those on the committee picking and choosing who gets what, like a dysfunctional family’s division of spoils of an incompetent parent near the end of life. It would seem to me, now that I’ve heard the term, that the committee would be more interested in 1) inventory and assay of the assets, i.e., knowing what they are, where they are, their condition and quantity, 2) getting a fair market valuation for the assets, and 3) determining the best way to dispose of the assets for “highest price in the least time”.

After all, there has to be a priority of creditors, whereby secured loans such as mortgages are paid first, according to the law of the jurisdiction. (Some mortgages may be underwater, for example, but if secured only by the property itself, the lender for an underwater position would have his first claim satisfied by “the property”, and would then wait in line with other creditors for any balance still owing.)

Federal and state tax liabilities may even take precedence over the mortgage (but I don’t know about that, having never had to deal with the issue). Lower on the list would be formal debt obligations such as bonds, and lowest on the list would be personal, unsecured loans (probably including your own) and business creditors such as vendors who deliver and invoice later.

That pecking order, whatever it is, is pretty much established by the form of the debt and the jurisdiction’s law. You’re not going to be able to jump the queue (or have anyone jump ahead of you) without breaking laws. (Not that that never happens, of course.)

However, as a family member it would seem reasonable to me if I were another creditor that you should be an asset to such a committee, even taking into account your personal stake in an equitable (including “to you”) disposition of assets and your personal interest in your brother-in-law’s well-being. I think you might need to prove that to the committee, though (depending on how it is made up; can you simply insert yourself into the committee without a vote or trustee approval?), that you are not trying to shield, hide, undervalue-with-an-eye-to-acquiring for yourself or other chicanery that would or could prevent equitable settlement.

Good luck to you and to your brother-in-law.

Darth_Algar's avatar

If that family member were in debt to me for almost half a million fuck yes I would. Granted I couldn’t see myself allowing someone run up that much debt with me in the first place.

Earthbound_Misfit's avatar

Your brother-in-law felt comfortable to come to you to ask for a loan. For whatever reason, he’s now bankrupt and he can’t pay you back. Regardless of whether you expected to be paid back by him or not, I doubt he would want you to give up an opportunity to recoup some of the money you loaned him to save his feelings. If you don’t go, you will end up with nothing. If you go, you may end up with something. It’s a no-brainer. Of course I would go.

LuckyGuy's avatar

Whether you are on the committee or not, they will take everything. Your presence will not be taking anything more out of his pocket. You might as well get at least something.

gondwanalon's avatar

Thank you all for the responses. It helps.

Here’s more information that I found out:
-All bankruptcy assets have been secured.
-Its going to take some time to get through this mess.
-Top creditors get paid first.
-I’m the fourth top creditor.
-After all creditors are paid off then whatever is left over goes towards paying the $20 million law suite. And I hope that the SOB who sued my brother in law gets NOTHING!!!

If I get a lot of money out of this then I want to help my brother in law. But I’m not sure how. Just handing him a pile of money may not be the right thing to do if he has not learned a lesson from this.

Earthbound_Misfit's avatar

It sounds as though you’re helping him by taking such a reasonable and caring approach to his problem. Perhaps once this is resolved you can talk to him and his family about how you might be able to help him.

LuckyGuy's avatar

Just for fun, keep track of how much the lawyers get. Shocking.

JLeslie's avatar

I think I would be on the committee and if I wanted to help out in some way I would give some of the money back to my BIL if you actually get any money. I assume you are low on the totem pole to be repaid when it comes to the law and how the money will be distributed.

You can tell him you’re not angry and want to help him through the hard time. Even if it is just emotional support. I would think if the guy has any integrity he knows he should have paid you back. I also assume he prefers you get paid than some of the other creditors that are business entities.

He is going to lose the money no matter what, the question is to who. Can you talk to him about it?

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