Beware of Beckett!

[Exhibitman]

The way BK can be manipulated is ugly AF. For example, one of my landlord clients had a deadbeat tenant that kept filing BK without doing the supporting schedules. The court would toss it out after 60 days but it would derail the eviction case each time. My client finally had to get a court order prohibiting it, which took months and cost $10K. The tenant ultimately skated on a year of rent before filing BK for real. My client got $0 as an unsecured creditor.

[Michael B]

Originally Posted by Exhibitman

The way BK can be manipulated is ugly AF. For example, one of my landlord clients had a deadbeat tenant that kept filing BK without doing the supporting schedules. The court would toss it out after 60 days but it would derail the eviction case each time. My client finally had to get a court order prohibiting it, which took months and cost $10K. The tenant ultimately skated on a year of rent before filing BK for real. My client got $0 as an unsecured creditor.

Adam,

So true. I have run into people with multiple bankruptcies that keep getting dismissed. How I dread running PACER (Public Access to Court Electronic Records for those who do not know) for one of those people. They have learned to play the game using legal stall tactics. It takes a judge to say no and threaten criminal prosecution to stop it in some cases.

As to this Marx case, I suspect a smart DA could argue criminal charges under RICO. Interstate business activity to defraud investors. It does not matter what they intended to do it is what they did do. Additionally, if they used the USPS to send the items to PSA there could be possible mail fraud.

If PSA first came out and said that they would return the items to the individual owners at no charge and then issued a statement saying that they would return at no charge except for shipping they may run into problems. I suspect that the first statement would hold, especially if it was in writing (implied contract?), as an offer that each owner could accept. I would defer to you on contract law.

[BobC]

Originally Posted by Michael B

Adam,

So true. I have run into people with multiple bankruptcies that keep getting dismissed. How I dread running PACER (Public Access to Court Electronic Records for those who do not know) for one of those people. They have learned to play the game using legal stall tactics. It takes a judge to say no and threaten criminal prosecution to stop it in some cases.

As to this Marx case, I suspect a smart DA could argue criminal charges under RICO. Interstate business activity to defraud investors. It does not matter what they intended to do it is what they did do. Additionally, if they used the USPS to send the items to PSA there could be possible mail fraud.

If PSA first came out and said that they would return the items to the individual owners at no charge and then issued a statement saying that they would return at no charge except for shipping they may run into problems. I suspect that the first statement would hold, especially if it was in writing (implied contract?), as an offer that each owner could accept. I would defer to you on contract law.

Michael,

I'm with you in wondering if there isn't some mail fraud potential were the USPS or other carriers were used for inter-state deliveries. But in regards to what PSA was supposedly going to charge Marx submitters, the big difference to me wasn't whether they were going to charge them the postage to send their cards back, it was that in that Sports Collectors Daily article it said that PSA was going to grade their cards for free. That later post by Rich of the PSA official statement just said they'd return the cards. Based on that statement it sounded like they were just going to return the cards ungraded, exactly the opposite of what the article said. I'm waiting to get some clarification on exactly what PSA is going to do.

[Michael B]

Originally Posted by BobC

Michael,

I'm with you in wondering if there isn't some mail fraud potential were the USPS or other carriers were used for inter-state deliveries. But in regards to what PSA was supposedly going to charge Marx submitters, the big difference to me wasn't whether they were going to charge them the postage to send their cards back, it was that in that Sports Collectors Daily article it said that PSA was going to grade their cards for free. That later post by Rich of the PSA official statement just said they'd return the cards. Based on that statement it sounded like they were just going to return the cards ungraded, exactly the opposite of what the article said. I'm waiting to get some clarification on exactly what PSA is going to do.

Bob,

Yes, that is why I started that sentence with 'If'. No offense to Rich, but at this point most of it is hearsay. A direct statement of clarification in writing should clear up any questions.

[Exhibitman]

One problem: the cards may not be PSA's to return. Technically, the assets of the debtor, even if they are held for others, become part of the BK estate, unless the bailor filed a UCC-1 with the State of CA establishing that the items are theirs. PSA may hear from the BK Trustee demanding that it turn over all of the cards. They would then be sold and the proceeds used to pay creditors in order, with the bailors treated as unsecured (last in line) unless the UCC-1 was filed.

[BobC]

Originally Posted by Exhibitman

One problem: the cards may not be PSA's to return. Technically, the assets of the debtor, even if they are held for others, become part of the BK estate, unless the bailor filed a UCC-1 with the State of CA establishing that the items are theirs. PSA may hear from the BK Trustee demanding that it turn over all of the cards. They would then be sold and the proceeds used to pay creditors in order, with the bailors treated as unsecured (last in line) unless the UCC-1 was filed.

And Adam, this is exactly one of the reasons ordinary people often come to the point of despising and hating courts and attorneys. It is very clear to pretty much everyone with half a brain and any common sense that these cards are NOT PSA or Marx's property, yet the bankruptcy laws in seeking to protect and look out for the interests of creditors in such bankruptcy proceedings are basically stealing the cards from totally innocent submitters. I am aware of the UCC filings that may be required to show ownership of the cards, but most of these submitters have no clue as to what that means and why they may need to do such a filing in a timely manner. It is often too late for a submitter to do something before finding out their cards are taken. Instead of the courts working to protect the interests of ALL innocent parties in such cases. Instead, they can end up creating even more victims by legally stealing property that belongs to innocent card submitters.

What is ludicrous is that these submitters have to be proactive and go through the time and expense to file claims just to prove their property is actually theirs. Whatever happened to due process and the rights of the actual card owners? And the courts and attorneys involved usually know damn well who those cards really belong to, but don't give a $hit about those innocent people's property. If anything, it should be the bankruptcy court's burden to prove those cards do not belong to the submitters and true owners, and not the other way around. But that would make too much common sense, wouldn't it? And if any of you wonder why anyone would possibly have a reason to treat the innocent card submitter's property this way and just take it, that is simple, guess how the appointed bankruptcy/case trustee gets paid for overseeing what I assume in this Marx case is a Chapter 7 bankruptcy filing? Aside from a flat fee they get from the extremely nominal (probably less than $100) bankruptcy filing fee, they get paid on commission a percentage of the proceeds of funds or proceeds from asset sales they collect to pay off the creditor's debts. So, by keeping or grabbing an innocent submitter's cards in this particular Marx case, and selling them off to raise funds to pay off Marx creditors, the appointed Trustee is also putting more money into their own pocket. Now there's a big incentive for them to do the right thing by innocent card submitters, huh?

And it can even get worse than that in creating more innocent victims in a bankruptcy case. Most ordinary people don't know this, but there is actually a sort of look-back rule in place in regards to a bankruptcy. If a business files for bankruptcy, the case Trustee can actually go back to anyone they paid more than $600 to for up to 90 days before the bankruptcy filing, and declare that was a preferential payment and legally force the person/business to return the full amount they were paid (wages, tax payments and such are generally exempt). The only other requirement is that the now bankrupt company was insolvent (debts greater than assets) at the time the payment was made, which they probably were, or why else would they be filing bankruptcy? This is in place to stop the bankrupt company from being able to get funds out to parties that may be friendly, related, or even helping the bankrupt company owner(s) remove or hide assets from the bankruptcy trustee. But the 90-day cutoff is a completely arbitrary rule that allows the Trustee to take money back from totally innocent people and businesses that were honestly paid in the normal course of business, and who likely needed and used those monies to pay their own bills and employee wages, and probably weren't even aware of the pending bankruptcy filing in many cases. But now they have to find the money to pay back to the Trustee, and then they get added into the rest of the unsecured creditor pool to see if they ever get any of their money back from the court. No telling when, or even if, they'll ever get anything back. And to top it off, the Trustee likely gets a percentage of what they had to pay back, so they had the added privilege of being forced to literally pay for getting screwed, and most definitely not in a "happy ending" way.

Oh, and I'll give you three guesses as to what profession these Trustees usually belong to, and you probably don't need the first two! (And this is not to personally disparage our own resident legal minds as there are a vast majority of truly great attorneys out there, but as with most all professions, there will always be a fair share of dirtballs and scumbags mixed in as well.)

And worst of all, in many cases more often than not, the party(ies) truly responsible for the whole situation to begin with, which in this particular case is most likely the owner(s) of Marx, will end up walking away with no personal liability or any other serious consequences from the bankruptcy proceeding. As long as they were smart and incorporated the business filing for bankruptcy, or filed to set it up as an LLC type of entity, the owner(s) of a bankrupt business are generally pretty much absolved of any personal liability and walk away clean. In such cases, the only thing they stand to lose is what they invested/put into the business and hadn't taken/gotten back out by the time of the bankruptcy filing.

Can be a truly fair and just world we live in, huh? Just wait till one of you is driving to a show with a lot of your cards and such in the back, and you get pulled over by a criminal wearing a badge who claims and takes your entire collection/inventory (or your cash you were bringing to buy cards with) as an asset forfeiture! Good luck to you should that ever happen.

[Exhibitman]

Originally Posted by BobC

And Adam, this is exactly one of the reasons ordinary people often come to the point of despising and hating courts and attorneys. It is very clear to pretty much everyone with half a brain and any common sense that these cards are NOT PSA or Marx's property, yet the bankruptcy laws in seeking to protect and look out for the interests of creditors in such bankruptcy proceedings are basically stealing the cards from totally innocent submitters. I am aware of the UCC filings that may be required to show ownership of the cards, but most of these submitters have no clue as to what that means and why they may need to do such a filing in a timely manner. It is often too late for a submitter to do something before finding out their cards are taken. Instead of the courts working to protect the interests of ALL innocent parties in such cases. Instead, they can end up creating even more victims by legally stealing property that belongs to innocent card submitters.

What is ludicrous is that these submitters have to be proactive and go through the time and expense to file claims just to prove their property is actually theirs. Whatever happened to due process and the rights of the actual card owners? And the courts and attorneys involved usually know damn well who those cards really belong to, but don't give a $hit about those innocent people's property. If anything, it should be the bankruptcy court's burden to prove those cards do not belong to the submitters and true owners, and not the other way around. But that would make too much common sense, wouldn't it? And if any of you wonder why anyone would possibly have a reason to treat the innocent card submitter's property this way and just take it, that is simple, guess how the appointed bankruptcy/case trustee gets paid for overseeing what I assume in this Marx case is a Chapter 7 bankruptcy filing? Aside from a flat fee they get from the extremely nominal (probably less than $100) bankruptcy filing fee, they get paid on commission a percentage of the proceeds of funds or proceeds from asset sales they collect to pay off the creditor's debts. So, by keeping or grabbing an innocent submitter's cards in this particular Marx case, and selling them off to raise funds to pay off Marx creditors, the appointed Trustee is also putting more money into their own pocket. Now there's a big incentive for them to do the right thing by innocent card submitters, huh?

And it can even get worse than that in creating more innocent victims in a bankruptcy case. Most ordinary people don't know this, but there is actually a sort of look-back rule in place in regards to a bankruptcy. If a business files for bankruptcy, the case Trustee can actually go back to anyone they paid more than $600 to for up to 90 days before the bankruptcy filing, and declare that was a preferential payment and legally force the person/business to return the full amount they were paid (wages, tax payments and such are generally exempt). The only other requirement is that the now bankrupt company was insolvent (debts greater than assets) at the time the payment was made, which they probably were, or why else would they be filing bankruptcy? This is in place to stop the bankrupt company from being able to get funds out to parties that may be friendly, related, or even helping the bankrupt company owner(s) remove or hide assets from the bankruptcy trustee. But the 90-day cutoff is a completely arbitrary rule that allows the Trustee to take money back from totally innocent people and businesses that were honestly paid in the normal course of business, and who likely needed and used those monies to pay their own bills and employee wages, and probably weren't even aware of the pending bankruptcy filing in many cases. But now they have to find the money to pay back to the Trustee, and then they get added into the rest of the unsecured creditor pool to see if they ever get any of their money back from the court. No telling when, or even if, they'll ever get anything back. And to top it off, the Trustee likely gets a percentage of what they had to pay back, so they had the added privilege of being forced to literally pay for getting screwed, and most definitely not in a "happy ending" way.

Oh, and I'll give you three guesses as to what profession these Trustees usually belong to, and you probably don't need the first two! (And this is not to personally disparage our own resident legal minds as there are a vast majority of truly great attorneys out there, but as with most all professions, there will always be a fair share of dirtballs and scumbags mixed in as well.)

And worst of all, in many cases more often than not, the party(ies) truly responsible for the whole situation to begin with, which in this particular case is most likely the owner(s) of Marx, will end up walking away with no personal liability or any other serious consequences from the bankruptcy proceeding. As long as they were smart and incorporated the business filing for bankruptcy, or filed to set it up as an LLC type of entity, the owner(s) of a bankrupt business are generally pretty much absolved of any personal liability and walk away clean. In such cases, the only thing they stand to lose is what they invested/put into the business and hadn't taken/gotten back out by the time of the bankruptcy filing.

Can be a truly fair and just world we live in, huh? Just wait till one of you is driving to a show with a lot of your cards and such in the back, and you get pulled over by a criminal wearing a badge who claims and takes your entire collection/inventory (or your cash you were bringing to buy cards with) as an asset forfeiture! Good luck to you should that ever happen.

Bob, there are a lot of problems with your analysis and lots of misinformation:

1. Let's start with the clearest one: hating the players instead of hating the game. The rules for bankruptcy were made by Congress, not the lawyers who represent the parties, which means they were written by lobbyists for creditors for their benefit, not ours. You wanna cast aspersions, start right there with the unholy alliance of money and politics that gives us the best government money can buy.

2. The law has a cheap and easy mechanism to protect your property if you hand it over to someone, a UCC-1 filing. I do not have a lot of sympathy for people who blithely hand strangers thousands of dollars of property without any effort to safeguard their property.

3. Corporate shells are BS; we punch through them all the time via alter ego claims. Also, and you may not know this, entities do not get discharges in bankruptcy like humans. If you really want to get rid of a debt, you need to file a personal bankruptcy. Also, the people who 'get away with it' are usually doing so because there is no personal basis for liability, typically because the creditor had a contract with the entity and not the beneficial owner(s), and had no personal guaranty.

4. The trustees are paid hourly under court supervision, not contingent and not at will.

5. The 90-day rule you reference, the preference period, allows the trustee to ask the court to void any debt payment made in the 90 days before a bankruptcy is filed. It is meant to prevent debtors from favoring friends and family creditors at the expense of everyone else. There are many exceptions such as payment for contemporaneously-delivered services and goods.

6. I've fought asset forfeiture cases. The law was changed quite some time ago to allow claimants to sue to recover their assets and to get their attorneys' fees and costs awarded if they win. Also, people do not just have assets taken willy-nilly in traffic stops. There has to be more to it. If not, there is a great civil rights case.

[Michael B]

Originally Posted by Exhibitman

One problem: the cards may not be PSA's to return. Technically, the assets of the debtor, even if they are held for others, become part of the BK estate, unless the bailor filed a UCC-1 with the State of CA establishing that the items are theirs. PSA may hear from the BK Trustee demanding that it turn over all of the cards. They would then be sold and the proceeds used to pay creditors in order, with the bailors treated as unsecured (last in line) unless the UCC-1 was filed.

Adam,

You have looked at a lot more bankruptcies than I have and defer to your expertise. I do have a thought. For purposes of this Marx was an agent. They took payment to deliver a service. As part of that service they acted as an intermediary between two parties, taking possession of an asset to deliver to one party and do the reverse at a later time. Taking possession was not taking ownership which is completely different. Thus if the agent filed for bankruptcy prior to completing the transaction they defaulted on the agency. I would equate this to UPS, Fed Ex, DHL. They are agents who are paid for a service to deliver a product they do not own. If they filed for bankruptcy I believe it would be hard to argue that packages they still had not delivered nor packages they had delivered within a short period of the filing would be considered property of the said entity. I do not believe the bankruptcy trustee can just start opening packages and selling the items contained therein to satisfy the debt of the agent. Just a thought. Your opinion/perspective would be appreciated.

[Exhibitman]

Originally Posted by Michael B

Adam,

You have looked at a lot more bankruptcies than I have and defer to your expertise. I do have a thought. For purposes of this Marx was an agent. They took payment to deliver a service. As part of that service they acted as an intermediary between two parties, taking possession of an asset to deliver to one party and do the reverse at a later time. Taking possession was not taking ownership which is completely different. Thus if the agent filed for bankruptcy prior to completing the transaction they defaulted on the agency. I would equate this to UPS, Fed Ex, DHL. They are agents who are paid for a service to deliver a product they do not own. If they filed for bankruptcy I believe it would be hard to argue that packages they still had not delivered nor packages they had delivered within a short period of the filing would be considered property of the said entity. I do not believe the bankruptcy trustee can just start opening packages and selling the items contained therein to satisfy the debt of the agent. Just a thought. Your opinion/perspective would be appreciated.

Actually, with a court order that is exactly what they can do. When the whole Mastro-Legendary thing was under way, we discussed that subject extensively, and the consensus of the attorneys on the board was that a UCC system filing was the only thing that would prevent the cards on consignment from going into the general estate of the debtor. Makes sense, really, since there is no way to differentiate bailment from ownership without a perfected security interest. Think of it this way and it may make more practical sense: when I give you a card to sell for me, you owe me the value of the card. I am your creditor for the value of the card. Now, you put it in your case. How does anyone objectively know who owns the card? This isn't a blockchain, it is simple possession. So, if you file for BK and the card is sitting there, how is anyone going to know that the 1952 Mantle in your case is really someone else's card? Take your word? A deadbeat claiming that the best stuff is really someone else's? That the Baltimore News Ruth belongs to Uncle Adam? Yeah, right. That would allow the debtor to favor one creditor over the others at will, which is anathema to the whole BK purpose, namely, to cut up the debtor's property in a way that is most fair to all the creditors. The creditors with security interests get their secured items' value (well, proceeds at sale actually) because they perfected their security interests. They get 'fed' before everyone else because the whole world was on notice that they had rights in the property the debtor was holding. The law is not perfect but it does create a clear mechanism to alert the world to actual ownership. It is a mechanism that favors the commercial creditors whose lobbyists wrote the law and bribed, er, donated to the legislators who voted it into place, because they know how to use it. But the mechanism itself is there for all of us to use. That's one reason why these discussions are good, so we can share information and experience. I consign a 52 Mantle to an AH, you bet I spend the few minutes online and the few bucks it costs to file a UCC-1 in the AH's state.

[BobC]

Originally Posted by Michael B

Bob,

Yes, that is why I started that sentence with 'If'. No offense to Rich, but at this point most of it is hearsay. A direct statement of clarification in writing should clear up any questions.

So true. This whole thing is confusing, and not pleasant for those involved.

As for your comment, saw the "if", but wasn't sure if that was your intent/meaning. Sounds like we're on the same page. LOL

[BobC]

Originally Posted by Exhibitman

The way BK can be manipulated is ugly AF. For example, one of my landlord clients had a deadbeat tenant that kept filing BK without doing the supporting schedules. The court would toss it out after 60 days but it would derail the eviction case each time. My client finally had to get a court order prohibiting it, which took months and cost $10K. The tenant ultimately skated on a year of rent before filing BK for real. My client got $0 as an unsecured creditor.

True dat!

Heck, our former President who touts his business acumen and the "art of the deal" has successfully filed bankruptcy SIX times in the 90s and 00s. Never personally though, so he always walks away free and clear. Can only imagine the number of people and businesses hurt.

I fully understand the need and purpose for bankruptcy laws, but like as in your case, very smart attorneys can take advantage of those laws in some seemingly very unethical ways. And they are perfectly legal and able to do so. Nothing personal towards you, but that is a perfect example of why many people absolutely hate attorneys.

Judges and courts have to abide by the laws in place, and though even they may agree the actions were egregious and morally/ethically wrong, they can't really do anything about it till the relevant legislative authority changes the current laws, and the relevant executive authority signs off on the changes.

I'll have to share some of my bankruptcy horror stories with you. Just a little late in the evening right now.