Legal Question in Business Law in New Jersey

Re: Sold a business, buyer goes bankrupt, securities not there

So long as your UCC-1 was filed properly and was effective on the date of the equipment transfer then you could bring an action to avoid the conveyance to the party that accepted the trade-in from the new owner. A new lender that accepts collateral that is subject to a properly perfected UCC-1 lien takes that collateral subject to the lien. Thus, you could still enforce the lien against your collateral by also bringing an action for replevin against the third party demanding the return of your collateral.

Also, you have an action for fraud against your debtor for breaching your security agreement and violating the UCC-1. Presuming that your debtor has filed a Chapter 7 bankruptcy proceeding here in New Jersey, you have a very limited period of time to file an Adversary Proceeding - 60 days from the date of the creditors' meeting.

The pension issue is a bit more difficult to offer any suggestions without performing some legal research beforehand. Generally, creditors cannot attach or execute upon pension or retirement plans under New Jersey law. However, that answer might be different here, where your debtor actually pledged his pension as security. So long as New Jersey law does not probibit such a contractual provision as being unlawful, then you should be able to enforce the contract in bankruptcy court. The success of your case depends on whether you actually perfected your UCC-1 lien.

If you would like to speak with me about bringing a case against the relevant parties, please contact me at (201) 498-0400.

Re: Sold a business, buyer goes bankrupt, securities not there

It sounds as though the new owner has engaged in fraud. Fraud may be a basis to attack the bankruptcy. You may have to file an adversary proceeding in the bankruptcy court against the new owner. If you would like further info, please feel free to call me at 973-479-5814.