Business Bankruptcy Lawyer
Q.Situation: In early 2006, my friend came to me asking to borrow money to help fund his auto repair business. He was doing OK generally, but the creation of some new products was costing him enough money that he'd lost his financial buffer to handle routine purchases. So, he needed the funding to get over the hump until the product was shipping, and he had revenue. He already had buyers for the new product, and a steady stream of repair customers. I had he and his wife, and a relative that is involved in the business sign a promissory note, identifying the sum of money, and repayment terms. I was using my own credit to take out a loan to then loan to him. He was to pay the interest and any minimum payments, along with 20% of his revenues. Projected payback was 2-3 months, and I wasn't going to get anything out of this other than goodwill on his part. As the new business got going, the space in their shop was an issue. Since the 2-3 months was already up, I offered to store the car that I had an interest in, rather than have them working around it all the time. His business continued, but never got to the point where he could repay any of the principal. He paid only minimum to cover interest. He was evicted, got divorced, and went out of business (effectively). He has not filed for bankruptcy. So, it's time to do something. I have possession of the car and pink slip, and a copy of the original promissory note. What is the appropriate way to proceed?
A.You lent money to a friend, with a written loan agreement and a non- drivable vehicle as collateral. The loan was to be paid ff within two to three months, but that was a year and a half ago. The vehicle supposedly needed just one part to be made driveable, and that part was supposed to be supplied, but it's not clear whether this was part of the written agreement or just a side comment by your friend. The friend's business failed, but he has not (yet) filed for bankruptcy. He still says he'll finish the car, but has made no move to do so. He's been missing payments. You ask for advice. (1) Try to get him to agree to a *specific* schedule for making the vehicle driveable. At this point it would seem that selling it is the only way you're going to get back your money. The two of you should agree, in writing, to what needs to be done and a specific schedule for each significant part of the work. You should also agree, in writing, to who pays for parts and whether your friend gets paid for labor. (2) I can't really think of another practical alternative. You could sue him, but reading between the lines it sounds like this is too big for small-claims court, and anyway he's unable to pay so a judgment would just force him into bankruptcy.
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