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I paid a guy a couple grand to put gutters on my house, but instead of him showing up to do the work, I got a postcard saying he’s bankrupt and I can’t do anything about it. What can I do to this scam artist to get my money back? I’m thinking a torch and pitchfork ought to be a good start.
Words by Nelson P. Miller
Hold your horses, Lone Ranger.
If you gave a couple thousand dollars for gutters but did not get them, then you deserve your money back. Yet if the postcard was a correct notice that your gutter contractor has indeed filed for bankruptcy, then federal law protects the contractor under a bankruptcy stay.
While you certainly may address the bankruptcy court to challenge the contractor’s filing, you must not make other attempts to collect the debt while the stay remains in place. No torches and pitchforks, which of course would never be a good idea.
You must also not telephone, email, write, or otherwise contact the contractor, or take other action other than through the bankruptcy court, attempting to collect the debt. If you do attempt to collect the debt outside the bankruptcy court, then the court may sanction you with fines and other penalties.
The bankruptcy stay has the effect of a federal court order. You may yet find some relief from the bankruptcy court. To file for bankruptcy means to petition the federal bankruptcy court for a discharge of debts. An order of discharge follows a process that may take several months or longer. The bankruptcy court does not grant every petition. Some filers do not follow through to the final order for discharge. Other filers do not qualify for discharge. Some specific debts do not qualify for discharge.
If the contractor fails to obtain an order for discharge, then at the dismissal of the bankruptcy case you should be able to pursue the contractor once again for the debt (for instance, suing him in small-claims court). Depending on whether the contractor is an individual or company and plans to remain in business, the contractor may also be pursuing a type of bankruptcy in which creditors like you receive at least some payment from the contractor on your debt.
You are probably wondering about the justice of letting bankrupts take someone’s money for nothing and then discharge the debt. The policy behind bankruptcy is to give deeply indebted individuals, companies, and even governments a fresh start.
Whether by their own fault or not, debtors can simply reach a point of no return when they are unable to pay their debts. Rather than let them languish with crippling debt, bankruptcy gives them a chance to return to productivity, which can certainly be good for them but also good for society. Bankruptcy can hurt creditors in the short term. You may have lost your couple-thousand dollars. Yet bankruptcy can help creditors and others in the long term.
The bankruptcies of General Motors and Detroit certainly hurt thousands of creditors, but those same creditors may have the opportunity to go right back to doing business with a healthier GM and Detroit, if they choose to do so. Congress designed bankruptcy to protect innocent or foolish debtors, not scoundrels.
One of the types of debt that do not qualify for discharge is a debt that the bankrupt incurred through the bankrupt’s fraud. If your contractor was a scam artist who never intended to install gutters and was instead simply cheating you out of a couple-thousand dollars, then you may object in the bankruptcy court to the contractor’s discharge, and the court should grant your objection, requiring the contractor to pay you
Whether you actually got any money back would be another question. The proverbial wisdom is that you cannot get blood out of a turnip or water out of a stone. If the contractor is utterly financially and legally irresponsible, and for instance simply disappears to another state or nation, then best wishes in getting any money back.
So what do you do? Well, next time be sure that you are dealing with a reputable contractor, and maybe pay only part of the money up front. Creditors actually have many ways that they protect themselves against the risk of a debtor’s insolvency, although that issue is for another story. As to your claim against this contractor, consider meeting promptly with a lawyer who represents creditors in bankruptcy proceedings to see if you have grounds to recover your money. The contractor may have treated other homeowners in the same way in a last-minute scheme just before a long-anticipated bankruptcy filing.
If so, then that scheme may have been fraudulent, meaning that the contractor should not be able to discharge your debt. The other homeowners may also share in the cost of pursuing the contractor through bankruptcy.
So again, no torches and pitchforks, but check around. Look into it a little further with local suppliers and tradespersons who know the contractor. See if you can locate others whom the contractor treated in the same way. Get a committee of creditors together to contact and work with a lawyer promptly, before any of the bankruptcy court’s deadlines pass.
Your lawyer can examine the contractor in bankruptcy court, helping you to determine whether to proceed. And if not, then consider your this affair an education in how to identity and deal with poor financial risks. At least it was only a couple-thousand dollars.
To read more from Nelson Miller, check out his book Top 100 Questions Friends & Family Ask a Lawyer on Amazon.
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