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Critical Vendor Payments: What are They and When do Bankruptcy Courts Authorize Them?

September 15, 2014 Banking & Financial Services Industry Legal Blog

By Austin B Calhoun

Vendors are sometimes presented with customers going into bankruptcy. Vendors experienced in this dilemma are aware of preference actions pursuant to 11 U.S.C. § 547(b), whereby the trustee seeks to recover from the vendor all payments received from the debtor within the 90 day period prior to petition. There are various mechanisms and defenses a vendor can employ to block preference action recovery. One such tool is the critical vendor doctrine. This blog examines the steps a vendor must take to successfully implement the critical vendor doctrine in Florida bankruptcy courts.

When Claimed Exemptions for Head of Household may not Apply to Garnishment Actions

May 13, 2014 Community Association Industry Legal Blog, Construction Industry Legal Blog

Once a creditor obtains a judgment against a debtor, attempting to garnish the funds, accounts and assets of that debtor held by a third party is an extremely efficient and often successful means for collecting on that judgment. Chapter 77, Florida Statutes, governs garnishment actions within the State of Florida and provides for two main types of garnishment, which have been discussed in previous Blog posts. These include a Writ of Garnishment issued to a bank or financial institution and a Continuing Writ of Garnishment issued to a debtor’s employer. Although a judgment creditor can utilize both forms of garnishment in attempting to collect on the judgment, under Section 222.11, Florida Statutes, a debtor has the right to make claimed exemptions to garnishment actions when the debtor is head of household. However, such claimed exemptions may not preclude a creditor’s attempt at garnishment in certain situations. This Blog post discusses when claimed exemptions for head of household may not apply to garnishment actions when the debtor is an independent contractor, the sole owner of a corporation or an owner of a single member LLC.

Lenders and Vendors Beware: Deprizio can Spoil Your Insider Guarantees – but a Waiver may Protect You

April 22, 2014 Banking & Financial Services Industry Legal Blog

Lenders and trade vendors often sagely require personal guarantees from the insiders of their debtor. In the event of debtor bankruptcy, a creditor may look to the insider-guarantor to satisfy the debt. The creditor’s ability to be made whole, then, is directly related to the financial position of the insider-guarantor. There is a problem: the Deprizio doctrine can erode the insider-guarantor’s financial position. Under the doctrine, the bankruptcy Trustee may disgorge assets from the guarantor that could otherwise satisfy the debt. Luckily, there is a solution to the Deprizio problem: a carefully crafted guaranty agreement that waives the guarantor’s claim against the bankruptcy debtor. This blog post explains the problem and clarifies the solution.

Those who Operate Dissolved Corporations can be Held Personally Liable for the Corporate Debt Incurred

February 21, 2014 Professional Services Industry Legal Blog

Under Florida law, the dissolution of a corporation can occur for many reasons. Section 607.1401, Florida Statutes, covers dissolution occurring by the actions of incorporators; section 607.1402, Florida Statutes, concerns dissolution by the board of directors and/or shareholders; and section 607.1420, Florida Statutes, governs administrative dissolution, which is an action commenced by the department of the Florida Secretary of State for various reasons. Whatever the cause for the dissolution, Florida law is clear on the process for winding up the corporation, including the allowable actions by agents, officers and directors subsequent to the dissolution. Specifically, those individuals may not carry on any business except that appropriate to wind up and liquidate the business and its affairs. Fla. Stat. § 607.1405(1). If a person enters into contracts or conducts other business in the name of a dissolved corporation then that person can be held personally liable for those contracts and business obligations. This blog post will discuss the extent of that personal liability and the remedies available to those damaged by corporate action subsequent to dissolution.

The Statute of Limitations for a Breach of Contract Claim Does not Apply to all Contracts Equally

February 12, 2014 Professional Services Industry Legal Blog

The statute of limitations refers to the period of time in which a potential plaintiff is allowed to bring a legal claim against a potential defendant. Chapter 95, Florida Statutes, provides the statute of limitations period for all possible causes of action under Florida law. For a breach of contract claim, Section 95.11(2)(b), Florida Statutes, makes clear that the statute of limitations is five years for most contracts (contracts for the improvement of real property have a 4 year statute of limitations). This means that if suit is filed five years and one day after the breached occurred, the defendant could raise a statute of limitations defense and have the suit dismissed. However, not all contracts are the same and, therefore, the statute of limitations does not apply to all contracts equally. This blog post discusses how the statute of limitations for claims involving a breach of contract applies to what is known as installment contracts.

What Language must be Included to have a Valid Personal Guaranty in Florida: Part Three of a Three Part Series

November 13, 2013 Banking & Financial Services Industry Legal Blog

Most of the cases alleging an insufficiently drafted  personal guaranty concern corporate officers guarantying corporate debt, and the officer’s  subsequent defense that he was signing in a strictly representative capacity.  In deciding these cases, courts have also outlined the language requirements for a valid guaranty. This post is the third […]

Unsuccessful Defenses to Enforcement of a Personal Guaranty in Florida: Part Two of a Three Part Series

November 12, 2013 Banking & Financial Services Industry Legal Blog

This post is the second part of a two part series examining defenses to enforcement of personal guaranties in Florida. Part one identified successful defense to enforcement of a guaranty and can be found here. Part two seeks to analyze defenses that have been unsuccessfully asserted in defense of personal guaranty enforcement.

Successful Defenses to Enforcement of a Personal Guaranty in Florida: Part One of a Three Part Series

November 11, 2013 Banking & Financial Services Industry Legal Blog

A personal guaranty is a contract signed by an individual wherein the guarantor affirms his or her personal obligation on a loan or some other debt obligation, such that if the original debtor becomes unable to pay the debt, the guarantor is personally liable for that debt and is legally responsible for its repayment. In a typical case, a President, CEO, or other officer signs a personal guaranty for the debts of his or her business and becomes personally liable for the debt if the business doesn’t pay it off. Florida case law demonstrates that a simple, but well-drafted personal guaranty that specifically enumerates the personal nature of the debt assurance is adequate to form a legal, binding personal guaranty. This Blog post seeks to identify successful defenses utilized in Florida case law to consider when drafting or seeking to enforce personal guarantees.

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