Chapter 7 Construction suppliers recourse?

[mattrach3]

I am filing Chapter 7 and have a small plumbing service company that is a sole propriotership. My bussiness debt is all from plumbing supplies used to perform my work. What recourse do my supply houses have against me? Can they harass my customers where I installed some of the materials? Is this considered secured or unsecured debt? Does anyone have experience with this type of thing? Thanks

[nerves]

Secured or unsecured depends on the purchasing agreements you signed for their extended credit. Most likely it is unsecured but you will want to reveiw your credit agreement/terms.

[justbroke]

If they extended you credit, they may have done so with a "purchase-money security interest" (PMSI) in your actual supplies. That means, that they own the supplies, not you. However, since you're a small business, you may not be dealing with inventory loans, so I don't know what your specific issue would be.

If you just purchased the supplies on unsecured credit -- or using a major credit card -- there would probably not be any recourse.

So, you seem to be asking if it's secured or unsecured debt. This tells me that you don't know. How did you purchase these items? On credit? Was it supplier credit (the supplier supplied the line)?

[mattrach3]

It was supplier credit.

[justbroke]

You would need to read the terms of your supplier credit agreement. I am thinking that you granted them a consensual purchase-money security interest (PMSI) in your inventory. However, once you affix it to your client's home, I don't think they can come and get it... but I don't know the specific in this area.

[frogger]

However, once you affix it to your client's home, I don't think they can come and get it... but I don't know the specific in this area.

Once it is affixed, I don't think they can come and get it either. They may however, be able to place a mechanics or materials lien against the property.

[HHM]

This will come down to state law.

If these are just plain-ol'e vendors, not really an issue. However, you need to determine if they have Meachnics Lien rights? Probably not, but still. If they have mechanics liens rights then you have a couple issues.
1. The vendors may have the right to lien your customers home (very bad)
2. Many states have a Mechanic Lien Trust Fund type statute. These statutes basically say that if you receive money for a job, and do not pay your labor or suppliers, then you have committed fraud (which you have) and are liable for the debt. These statutes create both civil and criminal liability (that is, non-dischargeable in bankruptcy).