In the bankruptcy case of Morrison, F. Joseph; In re (Morrison v. Amway Corp, a Chapter 7 bankruptcy debtor is allowed to file compliant against Amway during his case despite Amway's motion to dismiss the complaint.
The details of the bankruptcy case:
"The Chapter 7 debtor was a former dis¬tributor for the Amway Corporation. In 1998, he sued Amway alleging that it was improperly calculating dis¬tributions...the matter was sent to arbitration over the debtor's objection. The arbitrator ruled for Amway and entered a judgment against the debtor for $6 million in attorney's fees. In 2008, after the debtor had filed for bankruptcy, the 5th U.S. Circuit Court of Appeals ruled that the arbitration provision was unen¬forceable and remanded the lawsuit back to the trial court. The debtor then filed this adversary proceeding alleging that Amway and the other defendants conspired to insulate themselves from liability through a sham arbitration process and that that scheme caused the debtor's financial ruin. The bankruptcy court found that it had jurisdiction to hear the debtor's claim and that the debtor had standing to raise it."
This may be good news for other debtors who are faced with large amounts of debt due to arbitration proceedings that the debtor believes is somehow fraudulent. However, the debtor will need sufficient evidence to prove his case.
(Consumer Bankruptcy News, Volume 19, Issue 17 page 14)
Claim For A "Loan" To Significant Other Dismissed By Bankruptcy Court
In the bankruptcy case of Nguyen-Gassaway, Ha T, the bankruptcy court ruled that debt that lacks "terms" or "conditions" may not be enforceable.
The details of the case:
Before filing bankruptcy, the debtor was romantically involved with the Hank Nguyen who wrote her checks totaling $337,025. After the debtor filed Chapter 13 bankruptcy Nguyen, attempted to collect on the $337,025 which he said was a loan. The debtor denied that the money was a loan and insisted it was a gift. Although, Nguyen reduced his claim against the debtor and provided copies of the checks, the bankruptcy court found that since the documents did not note that the money was a loan, it was most likely a gift. The bankruptcy court also said that the lack of documentation regarding the loan and other compelling evidence indicated the money was a gift and therefore dismissed Nguyen's claim.
This bankruptcy case is important for two major reasons: 1) Debtors who have received money (as a gift) from an ex-significant other may find that the gift is magically transformed into a loan once bankruptcy is filed. Fortunately, if the "lender" has not documented that the money is a gift he/she will be unlikely to collect on the "loan." 2) Debtors who are planning to loan money to others must clearly document that the money being given to someone is a loan and not a gift. If they fail to do so, they may be unable to collect on the loan, even during bankruptcy.