warren@ihnss.UUCP (Warren Montgomery) (12/09/83)
Twice now we have become unintentional and unwilling participants in a business bankrupcy. Once years ago when our landlord (a giant real estate company) declared bankrupcy and tied up our security deposit, and more recently when a mail order company declared bankrupcy after cashing a check but before sending the merchandise. In both cases we wound up as creditors, which was a surprise since we extended no credit to either of these companies. What happened strikes me as theft or fraud, but apparently is perfectly legal and can happen to anyone. I gather that in many areas, more recent laws now protect security deposits from such actions, but the mail order problem remains. In our case the money involved is minimal, however people who order expensive items by mail should be aware of the danger that if the supplier goes bankrupt, apparently they can take your money to pay other debts and leave you with nothing but paperwork. Since I do not intend to give up all mail order business, I would like to know what, if anything, can be done to prevent this from happening. If I walk into a store, pick out merchandise, pay for it, and leave, I am in no danger if the store goes bankrupt. I don't see why conducting the transaction by mail makes it any different. -- Warren Montgomery ihnss!warren IH x2494
kenr@aat.UUCP (12/12/83)
I was always under the impression that using a MasterCard or Visa or American Express card was fairly effective protection against most all mail order mishaps, such as business bankrupcy. Am I mistaken? Later, Ken Rhodes
robison@eosp1.UUCP (12/13/83)
If you go into a store, pay for merchandise to be delivered, and the store goes bankrupt before delivery, you are in the same fix that you are in if a mail order company goes bankrupt. You are a creditor hoping to get your merchandise or your money back. Your only edge is that you had a better chance to check out the store, since you could see it. I'm not sure why this situation seems "unfair". It is certainly unfortunate. Here is the basic problem: Almost all companies do not keep enough cash on hand to pay off all their current debts. It is a silly use of all that money to keep it just sitting (in a bank, say) when it can be used in the business, e.g., to purchase the materials that will be made into saleable items. Not even a bank keeps enough cash on hand to pay off all of its accounts, should its customers wish to close them all. Most businesses fail. When they do, they do often not have enough assets to pay off everyone. If they pay you, they will have to fail to pay someone else. - Keremath, care of: Robison decvax!ittvax!eosp1 or: allegra!eosp1
rh@mit-eddie.UUCP (Randy Haskins) (12/14/83)
Well, there is one way to sort of protect yourself from a company going bankrupt on you: you can pay for it with MASTERCARD or VISA. There is a problem with this, however: you should be careful because telephone orders don't need to have your signature. This isn't too bad a problem, because the card companies almost always take care of it. The card companies, in general, are pretty moby, because they make lot of money in this business. If someone tries to screw with them, they usually end up losing big. The best thing to do is get in touch with a card-company rep and ask him what your rights and protections are. -- Randwulf (Randy Haskins); Path= genrad!mit-eddie!rh
tackett@wivax.UUCP (Raymond Tackett) (12/16/83)
I once did business with a firm that not only went out of business, but was under investigation by the fraud division of the U.S. Postal Service. One phone call to American Express to ask about their policy in such cases led to removing the charge from my account. (They checked my story promptly and removed the charge without further comment.) I have never had the situation occur with MasterCard or Visa, but their performance varies quite a bit depending on the underlying banking institution. My relations with those companies were often less than cordial.
ark@rabbit.UUCP (12/17/83)
You aren't immune even if you take delivery on the merchandise! I heard a story recently about someone who bought a new airplane from a dealer, paying cash for it. After he took delivery, the dealer went bankrupt. The dealer's bank came by and repossessed the airplane! Apparently, the dealer had financed his inventory by using it as collateral. He did not have enough money, for whatever reason, to pay off the loan that was collateralized by that particular airplane. The customer never dreamed that he was not getting clear title to the airplane. For this reason, many people who buy airplanes have title searches done (after all, they cost as much as houses...) I don't see, though, why this anecdote would be any different if "airplane" were replaced by "television set" in the story.
dave@utcsrgv.UUCP (Dave Sherman) (12/18/83)
The airplane example comes up in the case of lots of other chattels,
particularly cars. In Ontario, it is easy to search for registrations
under the Personal Property Security Act if you are buying a motor
vehicle, since registrations include the vehicle serial number. I
don't know about other jurisdictions. And even with other items,
you can always search under the vendor's name. Some jurisdictions
offer preferential protection to a purchaser from a dealer who was
selling in the ordinary course of business; thus, you might be protected
when buying a car from a car dealer, where you wouldn't get the same
protection when buying it privately.
Dave Sherman
The Law Society of Upper Canada
Toronto
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{allegra,cornell,decvax,ihnp4,linus,utzoo}!utcsrgv!davefmc@eagle.UUCP (F.M.Carlson) (12/27/83)
Re: The story about a bank repossessing an airplane bought with cash. Don't airplanes come with title papers listing creditors? I believe that is the case with autos - I believe the creditor is shown on the title when you buy an auto. How would one protect oneself from the following: Joe buys a TV from a dealer on credit. Joe sells unsuspecting victim TV for cash. Joe goes bankrupt. TV dealer wants TV back. What rights does unsuspecting victim have in this case?
dave@utcsrgv.UUCP (Dave Sherman) (12/29/83)
-- From: fmc@eagle.UUCP (F.M.Carlson):
-- How would one protect oneself from the following:
-- Joe buys a TV from a dealer on credit.
-- Joe sells unsuspecting victim TV for cash.
-- Joe goes bankrupt.
-- TV dealer wants TV back.
-- What rights does unsuspecting victim have in this case?
In Ontario and probably many states, Unsuspecting Victim would be
a little more suspecting and would spend the $2 for a Personal
Property Security Act check on Joe. He would find a record of
the dealer's security interest registered, and would stay away
from the TV.
Dave Sherman
The Law Society of Upper Canada
Toronto
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{allegra,cornell,decvax,ihnp4,linus,utzoo}!utcsrgv!dave