If a company dissolved right after they bought a product from me for which it didn’t pay, do I have a case?

UPDATED: Jan 4, 2011

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If a company dissolved right after they bought a product from me for which it didn’t pay, do I have a case?

A company bought a garage door as a product on their tenants home and didn’t pay. After waiting net 30 (per contract) for payment and several emails from person saying that check was on the way, I contacted them again and they said they had mailed the check. 2 weeks later they said they were waiting on insurance to pay. Another 2 weeks later they said they filed bankruptcy. 1 week later they said trustee was holding the check. This week they said we’d have to sue. I just found out that 3 months ago they dissolved and started new company right after and never filed bankruptcy. What can I do?

Asked on January 4, 2011 under Bankruptcy Law, Indiana


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

It depends on what structure the old company was and whether you can show that effectively the new company is the old one, just reorganized under a new name to avoid paying creditors.

First, if the company was not an LLC or a corporation, but was a regular partnership or a sole proprietorship, you could sue the owner(s) directly--but not if it's an LLC or corp.

Second, if it was an LLC or corp., if you could show that the alleged dissolution and formation of a new company was pretextual--i.e. it's the same business in all the ways that count (personnel, location, ownership, what it does, etc.)--then you *may* be able to sue the new business on the grounds it's effectively a continuation of the old and the dissolution was to defraud creditors. This would not be an easy case  to make, however, and it may not be worth the cost or effort of doing so.

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