Virginia  |  Business Law

Legal Question

Asked on: 11/20/06, 2:33 pm

Assignment

If I am owed 20,000 by (b) in payment for a yacht, I signed the right to receive the 20,000 to (c). (c) did not notify (b) of the assignment. Can (b) enforce the assignment and receive the 20,000?? Why?

What if I went Bankrupt? will (b) get the money?

1 Answer


Answered on: 11/23/06, 11:22 pm by Jonathon Moseley

Re: Assignment

Well, you must mean can (c) enforce the agreement. (b) owes you $20,000 if I understand you. So (b) has nothing to enforce. (b) owes you money, so you can enforce the obligation to pay you.

If you assign the $20,000 owed from (b) to (c) in exchange for a (very tiny) yacht, (c) CAN enforce the assignment whether or not (b) has been previously notified.

The problem arises if (b) pays YOU the $20,000 instead of paying (c) because (b) didnot know about the assignment to (c). In that case, you would have an obligation to forward that money to (c) and (c) could enforce the obligation.

all of this assumes that your assignment to (c) is in writing or otherwise provable.

If so (c) can present the written assignment or other proof to (b) and demand payment. (b)'s only real concern is making sure that by paying (c), (b) is off te hook for paying you.

Note that if (b) never pays (c) you might not be off the hook to pay for the yacht. Depends on how the assignment is worded.

If you go bankrupt, the bankruptcy trustee will take control of everything that is in your possession, including the yacht and (b)'s obligation to pay you $20,000. The trustee will then apply fairly complicated bankruptcy laws. The trustee might decide that the assignment of (b)'s obligation to pay means that you no longer "own" the account receivable from (b) and (c) owns it. However, the trustee could take owernship of the $20,000 and distribute it among your creditors. The trustee could also sell the yacht, and probably would, and use the money to pay off your creditors as much as possible.

It is possible that (c) might have a superior claim on the yacht IF (c) has properly filled out relvant paperwork, including filing a UCC claimon the yacht or otherise registering (c)'s claim BEFORE you file for bankruptcy.

NOTE that in your hypothetical I assume you are trying to understand the law and NOT intending to file for bankruptcy.

PLEASE NOTE that transactions undertaken a short time before filing for bankruptcy COULD be overturned by the trustee, and if considered fraudulent might even be considered riminal.


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