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Loan app listed collateral at Book Value rather than lower FMV. Dischargeable?
Mates:
PC has signed a $250K business loan agreement in 2006, giving the bank
security in his equipment. The balance sheet given as part of the loan
application stated the value of equipment as $800K. This was the book
value (what he paid for it) based on recent purchases in 2004-2006.
Auction value of the equipment was obviously lower than book value. This
is probably a common practice to put the book value into the loan
agreement. Every time I ask prospective clients for an equipment inventory,
they are listing for me the book value. Does this present
dischargeability/fraud problems?
The issue came up because now, six years later, the principal is down to
$230K, but the outdated equipment can fetch only $50K at an auction house,
and that's before costs of sale (20%), transport and storage. We submitted
an offer to reduce principal to from $230K to $50K (based on the current
auction value), as an alternative to BK. The bank recoiled saying that
they are surprised that the equipment listed on the loan app at $800K is
now only worth $50K.
Alik Segal
Alik.Segal@gmail.com
310-362-6157
California Central District
Mates:PC has signed a $250K business loan agreement in 2006, giving the bank security in his equipment. The balance sheet given as part of the loan application stated the value of equipment as $800K. in 2004-2006. Auction value of the equipment was obviously lower than book value.
This is probably a common practice to put the book value into the loan agreement.Every time I ask prospective clients for an equipment inventory, they are listing for me the book value. Does this present dischargeability/fraud problems?
The issue came up because now, six years later, the principal is down to $230K, but the outdated equipment can fetch only $50K at an auction house, and that's before costs of sale (20%), transport and storage. We submitted an offer to reduce principal to from $230K to $50K (based on the current auction value), as an alternative to BK. The bank recoiled saying that they are surprised that the equipment listed on the loan app at $800K is now only worth $50K.
-- Alik SegalAlik.Segal@gmail.com310-362-6157California Central District
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