In bankruptcy actions, creditors will often seek to recover some or all of the debts they are owed. While they have the right to do so, the Bankruptcy Code prohibits them from recovering the same debt twice. As discussed by the Ninth Circuit Court of Appeals in a recent case, though, payments and transfers that may seem like double recovery often are not recoveries at all. If you have debt obligations you cannot meet, you may be eligible to file for bankruptcy, and you should speak to a California bankruptcy lawyer.
History of the Case
It is alleged that in February 2018, the defendants entered into an agreement with the plaintiffs for the sale of a warehouse in California for $8 million. The plaintiffs’ company, a California business, transferred a down payment of approximately $2.4 million, with the remaining amount financed through a loan secured by the warehouse. The title of the warehouse was transferred to a special purpose entity created by the plaintiffs. This transaction was later discovered to be part of an extensive Ponzi scheme.
Reportedly, in December 2018, federal authorities raided the plaintiffs’ business operations, uncovering substantial fraud, which led to the plaintiffs and several related entities filing for Chapter 11 bankruptcy. The warehouse, owned by a non-debtor entity, was included in federal forfeiture actions against the plaintiffs’ properties. Despite an attempt by one trustee to enforce an automatic stay against the forfeiture, the sale of the warehouse proceeded, and the loan was repaid from the sale proceeds.