Old builder is going through the bankruptcy process. As part of that, he had to have a "Creditors Meeting", last Friday. That's where people to whom he owes money get a chance to challenge his bankruptcy in front of the people who are in charge of approving it. If the creditors can make a good enough case against him, the people in charge (the "trustees") can deny bankruptcy protection.

From my limited experience with the justice system, the creditors meeting process reminded me of traffic court: a big room with a bunch of chairs, a panel of judges ("trustees" in this setting), a clerk and some lawyers. They hear cases from many different people during the session, and most of them are just formalities: claimant comes up front, gets sworn in (left hand on the Bible!), the trustees ask a few standard questions, all done. Sometimes one of the trustees would ask for clarification about this or that, but mostly not. Mostly it was a rubber stamp affair; each case over in a minute or less. Couples, elderly people, young people, etc.. Nobody had any creditors challenging them, so the first dozen cases flew by.

There were maybe 50 people in the room at the start. And cases were grouped by lawyer; so the lawyer could stand there while his/her clients came up one after another. That was the first hour.

The builder's case was different, and so they had moved it to the end of the list. Of all the people in the room, probably half of them were creditors there to challenge the builder's bankruptcy - all of them angry.

The trustees' questions in this case were much more involved. They wanted to know his business history, his experience, his process, etc.. Mostly, they wanted to know how he got into this trouble. The builder's explanation was basically that cash flow in the house building business waxes and wanes - the balance sheet for the construction of any one house is going to go back and forth from red to black over its lifetime, depending on when the work gets done and when the bank pays out money. Having multiple projects smooths this out a bit. His process was to put all of the incoming cash into a single account and pay the bills in order of urgency. So at any given time, the money coming in from project B is probably going to be paying for project A; and then when project C starts, it will pay for project B, and then they'll switch places and A will pay for C and B, etc.. But, for some unexplained reason, his debts got so big that incoming cash wasn't enough to keep him afloat. He became unable to pay sub-contractors, which stopped work on projects, which spooked the clients and their banks, who cut off incoming cash, which stopped him from paying other subs, who stopped working, etc.. And once that started, the business was doomed. Maybe project A and B were finished. But all of us with projects C - Z got screwed because he couldn't bring on any more suckers clients to pay for our projects.

This wasn't the first business bankruptcy case the trustees have handled, so they were skeptical of this explanation. They understand cash flow. They asked him multiple times how he could possibly get so far in debt in such a short time - he owes close to a million dollars, total. And the troubles appear to have started in the last couple of years. What happened that his debt got so much greater than income? He just repeated the 'cash flow' stuff. He never explained how he dug such a big hole that no amount of new business was going to be able to fill it.

After 20 minutes of trustees questions, they opened it up to the creditors. And, one by one, we got our chance at the microphone, using our allotted 5 minutes to ask questions of the builder.

After the first few creditors had spoken, the trustee cautioned us that asking "where did my money go?" was probably a waste of time since he was just going to say "it went into the business account and then was used to pay bills". So, when it got to me, instead of asking him "where's the $xx,xxx from check 1234?", I tried a different tack. I asked him if the skipped inspections and shitty construction work he did on our house was just a way to make it look like he was making progress so we would keep giving him cash, in order to keep the whole Ponzi scheme afloat. He said his work was good. I waved the inspection reports at him and said it wasn't, etc. for a while. And then I left. I was too angry to sit around and listen to him any longer. So, I didn't get to hear the end of the hearing.

People who did stay said the trustees remained skeptical and told us that there appeared to be grounds to deny his bankruptcy claim, if we want to jump through a few more hoops.

Thing is, there doesn't seem to be any money; we're not getting paid. The only result from denying him bankruptcy protection would be to cause him and his wife immense financial distress. I don't think this would help us in any way. The list of creditors is so long, dividing up his remaining assets would give us a very negligible amount of money.

This week, the bank has finally agreed to ignore the liens. But they are now refusing to pay out any more money from our loan until we've spent all of our own cash, first. We have the new builder's estimate to complete the house: $E, and we have the remainder of the bank's loan $L. The bank wants us to spend ($E - $L), before they'll give us $L. Thanks to family digging deep, we can probably scrape that much together. But it's going to be tough.