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Suing a US-based client/bankruptcy claimed/fraud charges
Thread poster: Ulrich Leininger

Ulrich Leininger  Identity Verified
Germany
Local time: 23:15
English to German
+ ...
Jan 19, 2016

One of my company's clients owes us about USD 2000 and she now claims that she will file for chapter 7 to seek a discharge of debt.

The client has a history of not paying translators as evidenced by her blue board record (she was even banned from posting jobs on Proz) and abundant other information on the Internet. (Yes, we should have done a background check!)

I suspect she is trying to use the threat of bankruptcy protection to avoid full payment – not only because of her prior questionable/fraudulent behaviour, but also because of the fact that she offered us to pay half of the amount outstanding, which she wouldn't be able to do under bankruptcy protection and probably shouldn't do if she already knows that she has to file for chapter 7 (since she would disadvantage other creditors).

Furthermore, I think we should have a chance to recover the money even if she really does file for bankruptcy protection. As mentioned, she has a well documented history of not paying translators, and in addition, she happily assigned projects to us throughout 2015 up until October 24, when we finally (much too late) refused to accept further work without her settling the account. Three days later she then claimed that she is on the brink of bankruptcy. I believe that a case can be made that she committed bankruptcy fraud, since it appears she assigned projects to us knowing that she won't be able to pay, and showed a pattern of fraudulent behaviour over many years, so that she should be personally liable and not be protected by company law.

Any input regarding these legal issues is very welcome, although I realise that we will need professional advice from an attorney.

My main objective with this forum posting is to ask for general experiences with collecting debt in the USA, suing clients who refuse payment, and hiring an attorney. Maybe someone can even suggest an attorney.

Any ideas are appreciated!


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Sheila Wilson  Identity Verified
Spain
Local time: 22:15
Member (2007)
English
+ ...
Just a very quick first thought Jan 19, 2016

I really don't know much about dealing with clients in the US as happily mine have always paid (so far, at least). But my first thought is that you need to move fast on this one. So would it be worth contacting a debt recovery company rather than going the route of the courts, who always take forever and a day? You'll probably have to pay them out of the proceeds (unless you can add their fees to the client's bill?) but 70% or so of $2000 is still worth having.

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Ulrich Leininger  Identity Verified
Germany
Local time: 23:15
English to German
+ ...
TOPIC STARTER
Thanks Jan 19, 2016

Thanks for the idea, Sheila. Recovering 70% would indeed be a reasonable result under the given circumstances. I am not familiar with the conditions usually offered by debt collectors, but I will try to find some additional information.

Is anyone else maybe experienced with debt recovery companies?


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JL01  Identity Verified
United States
Local time: 17:15
English to French
+ ...
Have you looked at lawyer cost? Jan 19, 2016

I suppose you could file a claim in Small Claims Court, in the county where that individual/company is registered. Small Claims Court procedures are free, but plaintiffs are required to attend the hearing of their cases (defendants, too, otherwise they are found guilty by default.)
Even in such a case (I don't know whether someone not residing in the USA may have standing to represent themselves at a Small Claims Court hearing), you'll most likely need a lawyer (and some Small Claims Courts may not allow lawyers).

US lawyers are VERY expensive, to the tune of about $500/hour, even though fees may be lower in remote and rural areas.

You could go to a collection agency (I think some are recommended by the American Translators Association), but they will take a large cut of any collected amounts.

For $2000, I would accept the offer of half of the amount owed to you. You probably wouldn't collect more otherwise, and accepting the offer would save a lot of time and aggravation.


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John Fossey  Identity Verified
Canada
Local time: 17:15
Member (2008)
French to English
File suit first Jan 19, 2016

I don't have any experience with suing in the US but I do have experience with suing a client who was going bankrupt. The lesson learned was:

Get your lawsuit filed first!

It all depends on the date of filing of the lawsuit. If you file suit on, say, Feb 1 and the company files for bankruptcy on Feb 2, your claim will be treated as if the company was not bankrupt - in other words, your suit will hold up the bankruptcy until your suit is settled first, then the bankruptcy can proceed.

On the other hand, if your suit is filed after the bankruptcy is filed you are just another unsecured creditor and will most likely not get anything at all.

I was fortunate enough to get my suit against a very large company filed a few days before they filed for bankruptcy. Their management was condescending to me, saying I would not get paid anything, until their team of lawyers determined that actually they could not even begin bankruptcy proceedings, despite being a huge corporation and me being an individual owed just a few thousand dollars, until my claim was settled. They paid out of court so they could get on with things.


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The Misha
Local time: 17:15
Russian to English
+ ...
You have already lost that money Jan 20, 2016

when you agreed to do a job for an unreliable client in a jurisdiction where you have no easy recourse. You may be in the right, but it doesn't mean you will ever collect. Even if you, as a foreign national (I assume), have sufficient legal standing to file a claim in a US small claims court (which I am not sure you do), your travel costs (you do in fact have to be present, or the case gets dismissed) alone will easily exceed the measly amount of $2K. Forget the lawyers, no lawyer in his right mind would even accept a case involving such a small potential payout - unless you pay him a hefty retainer amounting to multiples of that. Case closed, at least on the legal side.

What you can really do is get mean - as mean and nasty as you have to be, and then some. Do your research and based on where your bad payer is located find out exactly where and how you can complain. That may include the BBB, the specific state's attorney general's office (they usually have a complaint office), the Blue Board, the social media, individual translators you know in your market and what not. Then write your nonpayer a nice letter specifying exactly how you are going to make them miserable if they do not give you what you want within a certain period of time (say, two weeks). Do not bluff and be fully prepared to deliver on your threats if need be, exactly as advertised. This may take some time, effort and dedication, but make no mistake, this is war, and anything goes in a war, and never mind the love. Even if they cave in and pay you, make sure they get the bad rap they deserve in places that matter to them.

Even with all of the above effort made, based on my own experience (of an aggrieved US consumer, not a swindled translator; I simply do not work for unvetted clients outside of my immediate jurisdiction), I'd give you a 50-50 chance of ever collecting. Either way, you will sleep better knowing the @#$% don't just get to enjoy their ill-gotten gains at your expense.

And above all, next time do yourself a favor and DO NOT work for anyone anywhere you do not have reasonable recourse in case of a non-payment. There is no point in stepping on the same rake twice.

P.S. Don't expect any "legal costs" to be awarded even if you do qualify to file and win in Small Claims - there are none to be had since the proceeding are virtually free. That you have incurred travel expenses and lost time to be there is totally your loss. The judge wouldn't give a rat's batootie if you did. Oh, and there's always the issue of collecting your "award" which is by no means guaranteed. You see, this is hopeless.

P.P.S. JUST GET MEAN! How's that for a soundbite?


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xxxAdrian MM.
Local time: 23:15
French to English
+ ...
Chapter 7 in the USA - personal bankruptcy Jan 20, 2016

Perhaps she owes this money personally and will be filing as an individual debtor under Chapter 7, rather than through a corporation or partnership filing for bankruptcy, for instance voluntarily in the State of Delaware, the latter - to my limited knowledge - raising a red flag for various reasons.

You might also find - as I have done - that, apart from contacting a US-qualified/New York State Bar American or German attorney in Germany, phoning up a local US attorney Transatlantically and off-the-cuff might prove surprisingly informative and low-cost for an initial consultation.

[Edited at 2016-01-20 07:41 GMT]


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Ulrich Leininger  Identity Verified
Germany
Local time: 23:15
English to German
+ ...
TOPIC STARTER
Weighing Options Jan 20, 2016

Many thanks everyone for your suggestions!

JL01: The client's business is located in California and I have already checked out the website of the California courts. They have quite helpful information and basically step-by-step instructions for suing someone (but I haven't worked through all of it yet).

http://www.courts.ca.gov/1007.htm

I have also already located the responsible Small Claims Court.

I realise some lawyers charge as much as USD 500 per hour, but my client is located in a pretty rural area, it seems, and I don't think for this kind of small and relatively clear-cut lawsuit I will need that kind of attorney. From what I'm reading, USD 100 to USD 200/h seems more likely.

Now, of course I could tell myself maybe it's not worth the effort to try to collect the other half of the USD 2000, and this is probably true if you purely rationally look at it as an individual case. However, to me this is only 51% about getting my money back and 49% about inflicting pain to a business that tricked translators into providing services for free many times before. Also, by researching how to file a lawsuit, and actually filing it, I will gain experience and the next time something similar happens, I will be able to build a much more credible threat. I wouldn't consider it if we were talking about a small Third World country, but avoiding business with US companies altogether is not an option for me.

Thanks also for the hint regarding the ATA-recommended collection agency, maybe I will email them.

John Fossey: Thank you, this is very valuable information, although the laws might not be exactly the same in the US. I really shouldn't delay this too much.

The Misha: I have read in another forum thread of someone who represented herself at Small Claims Court by phone. I can't find that thread at the moment and I do admit it does sound somewhat unlikely. Maybe it depends on the court or the state whether this is possible or not. I should ask the responsible court whether I can do that or not.

I don't agree with your assessment that no lawyer will take such a small case. It must be possible to bring forward small cases in the US as well. In Germany, it is in principle possible to sue for even 1c, and while lawyers probably really wouldn't take such a pointless case (you'd have to do it yourself), finding someone to represent you in a, say, EUR 50 lawsuit is absolutely no problem. If USD 2000 were too tiny an amount to be worth to sue for, why would people even bother to pay their bills?

Otherwise, I do agree that exacting revenge by other means is an option as well. My client's reputation is already in tatters, but still. Who wants to see a domain called firstname-secondname-is-a-fraud.com on the web? I rather invest a bit of more time than I should from a purely rational perspective in my efforts to inflict pain than look back on my career and think that I have allowed every little thief to get off scot-free.

Adrian MM.: My client says that her company is filing for chapter 7. Personal bankruptcy is a rather extreme measure as she would have to give up all assets.

Calling an attorney in her jurisdiction is a good idea. Just a few minutes of advice probably will give me more reliable information than hours of web research.

[Edited at 2016-01-20 10:23 GMT]

[Edited at 2016-01-20 15:52 GMT]


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JL01  Identity Verified
United States
Local time: 17:15
English to French
+ ...
The Misha is perfectly right Jan 20, 2016

Of course, The Misha is absolutely, 100%, right, notwithstanding what I wrote before and your research, which appears to have been thorough.

Beware of attempts at "ruining a reputation," though; US laws about defamation are quite strong, and you may find yourself turned from a victim into a defendant, and this requiring a lawyer.

If it were me, I would heed advice given by the two people who actually LIVE and do business in the USA...

Remember: there is not much for free in the USA (Small Claims Court being one of the rare exceptions).

But, given the restrictions spelled out by several responses here, you have anything to lose.


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Arianne Farah  Identity Verified
Canada
Local time: 17:15
Member (2008)
English to French
Start with a local collections agency... Jan 20, 2016

It won't cost you a cent - if they collect they'll cut you a check themselves (my experience was 15% them, 85% me); if they don't you haven't lost anything.

Collections agencies are professional pesterers - if you're looking to cause a little grief to the agency that you've already written off as lost cause, there's no better way - they'll call daily, they'll email, they'll show up on their doorstep, etc. Also if there is as chapter 7 filing, they'll know right away, and if there isn't then having something in collections can ruin their credit much better/faster than a court case.

If after 3-4 months it's not going anywhere, you can cancel the contract with the collections agency and take it to court as you're now contemplating, having lost a little time, but given a lot of aggravation, which seems to be where your heart is now.


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Ulrich Leininger  Identity Verified
Germany
Local time: 23:15
English to German
+ ...
TOPIC STARTER
And so it begins... Jan 21, 2016

Thanks, Arianne, for the "minority vote". In case she is not really filing for Chapter 7, as suspected, this appears to be the most convenient option and the very least I will do.

Thanks everyone again, I will keep you guys updated how this plays out.


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Miguel Carmona  Identity Verified
United States
Local time: 14:15
English to Spanish
... Jan 21, 2016

Ulrich Leininger wrote:

... In case she is not really filing for Chapter 7, as suspected, this appears to be the most convenient option and the very least I will do.


But, if she actually files for bankruptcy, your hired collection agency will have their hands tied up, unable to do anything for your case and probably will even be forbidden from contacting the offending party at all.

Your other option is what John Fossey suggested, but you do not seem to like the idea.

At any rate, unfortunately, if she or her company, whichever is the case, does not have any money or other assets, probably you will not see any of the money owed to you, regardless of your collection efforts, even if you won the lawsuit if you took that route, which apparently you will not.

[Edited at 2016-01-21 23:48 GMT]


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LegalTransform  Identity Verified
United States
Local time: 17:15
Member (2002)
Spanish to English
+ ...
What city is the client located in? Jan 21, 2016

If a translator were having collection problems with an agency located in or near my home town, I would be more than happy to personally hand deliver an invoice each and every week until it is paid. Sometimes it's easy to ignore people via email or phone, but a little harder in person. Usually these kinds of people are involved in a lot of other unethical activities and would rather not have any more attention brought upon themselves. Perhaps someone here would be willing to do the same

In fact, I've offered to do this before. You can read about it here: http://translationtimes.blogspot.com/2009/04/collections-silver-lining.html

Your problem is exactly why I have never accepted work from a company outside the U.S.

While filing bankruptcy in the U.S. does relieve you of some of your debts, it is by far no easy process and there are implications for the filer.


[Edited at 2016-01-21 23:28 GMT]


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Ulrich Leininger  Identity Verified
Germany
Local time: 23:15
English to German
+ ...
TOPIC STARTER
Still considering Jan 25, 2016

Thanks for your input, Miguel.

I do in principle like John's idea, however, I suspect my client only tries to use the threat of filing for chapter 7 to get me to agree to consider the account settled in exchange for a 50% payment. Also, if she's really bankrupt, it is unlikely that I will ever be compensated in full, as you have pointed out. So the potential loss of first letting a collections agency have a try is limited. However, I am still considering the option of filing a suit and I will try to reach the responsible Small Claims Court this week for an enquiry.


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Ulrich Leininger  Identity Verified
Germany
Local time: 23:15
English to German
+ ...
TOPIC STARTER
California/Nevada Jan 25, 2016

Hi LegalTransform - thank you, that's a really great offer. I agree that having someone show up in person would make a huge difference.

My client is located in central California close to the border with Nevada. The USA being somewhat large-ish, statistics are against us - but who knows! (I don't want to be too specific here because Proz deleted another posting of mine for that reason.)


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