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Full Recovery of Open Account Amount Due- From Contractor’s Principal in Bankruptcy

    In 2001 a client supplier notified our firm to take action on an open account contractor for a principal amount of approximately $25,000 due.  The client had a personal guarantee of the principal and spouse of the contractor.  Our office went to Court to obtain a judgment for the full amount due, service charges, fees and costs against the contractor and guarantors.  At the judgment hearing the defendants interposed with an attorney to return material and give them time to conclude an action by them against a third party.  Our office gave several months to the contractor to accomplish these actions.  After credit for the returned material our client computed a principal balance of approximately $11,000 due.

    When no further payment was forthcoming our office investigated filing a federal Miller Act action as it was determined the materials were used in several overseas jobs.  The debtor contractor could not supply sufficient bond information to pursue Miller Act claims.  We then obtained a state court judgment for the $11,000 principal amount plus service charges, fees and costs.  That judgment was promptly docketed on the guarantors’ house in another jurisdiction.  

    Investigation of public records revealed that our client’s judgment was a first lien on the guarantors’ residence, due apparently to the timing of recording a refinance deed of trust.  Some time after obtaining judgment the guarantors filed Chapter 11 Bankruptcy.  Our office filed a proof of claim as a secured creditor.  Over three years passed with bankruptcy proceedings before the guarantors’ plan was accepted and our client paid in full.  With the credit for the return of materials our client was paid almost $45,000 on the original $25,000 including full payment of six years interest and attorney’s fees because of the bankruptcy labyrinth. 

© 2022 Eugene W. Shannon, PLC

Eugene W. Shannon, PLC

Suite 200
426 East Freemason Street
Norfolk, Virginia 23510

Phone: 757-625-1771
Fax: 757-622-1703

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