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Tuesday, February 26, 2013

Alcohol Beverage Licenses as Assets in Debt Collection

A recent US Bankruptcy Court case from the Middle District of Florida highlights the pitfalls of attempting to value certain assets, including a bar and liquor license, without expert assistance (Zaslavsky v. Smith (In re Smith) January 31, 2013, 2013 Bankr. LEXIS 434). In this matter, plaintiff creditor brought an adversary proceeding against defendant bankruptcy debtor alleging intentional concealment of assets based on debtor’s self-estimated value of his interest in a bar, the real property it was located on and its liquor license, as being “zero” in what appears to have been a pro per bankruptcy filing (i.e., the debtor representing himself without a lawyer). 

Plaintiff creditor had sold his interest in the bar, the real property it was located on and its liquor license to the debtor and carried back a note, which was alleged to have been secured by the real property and the liquor license. Debtor’s self-valuation of the bar, the real property and liquor license improperly deducted the value of various liens and other encumbrances, which plaintiff claimed established fraudulent intent barring discharge. The Bankruptcy Court disagreed, finding that while debtor’s self-valuation was incorrect, it resulted from an honest mistake and thus fraudulent intent was not present. The debtor’s discharge was ultimately approved, likely after amended bankruptcy schedules were filed. Apparently, given the lack of bankruptcy court objection, a liquor license can properly be used as collateral for a secured transaction in Florida, as opposed to California where such use is statutorily prohibited.

For further assistance or questions on debt collection matters contact David Balter at dbalter@dpf-law.com 

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