Information on Class Action Suit and Bankruptcy from a Lawyer

At this point (pre bankruptcy filing) there isn't much we can do. Someone will consult a lawyer and post the information, the lawyer will want the names/addresses/information from any person who may want to join in the action against the company and/or the owner.

In this type of fraud situation there is usually some money still in the company of value, the question is how long it takes to get out to claimants, and how much money there is for distribution. Generally speaking, when the company/owner file for bankruptcy, they have to file a list of creditors. This will include all employees who are owed money, and presumably all parents who feel they are owed a refund.

The bankruptcy court will mail a notice to all potential claimants. You can then choose to file a claim, describing what you are owed. You should create a file containing your salary and employment information, and calculate now as closely as possible how much you are owed. The bankruptcy court will also name a trustee for the bankrupt person's property. Bankruptcy is very powerful because it automatically stops any claims against the company -- you can't prosecute a law suit, attempt to collect a judgment or seize assets. The trustee will locate assets, sell assets if necessary, identify claims against the bankrupt party (the "debtor"), notify potential claimants, evaluate their claims, and ultimately, after court approval, distribute any assets.

The trustee can also seek to void and reverse any payment made by the debtor in the 90 days prior to the filing as preferential transfers -- this could be a big part of the recovery. The debtors assets are distributed to claimants in a very specific order -- the lawyers eat first, then priority and secured creditors (priority creditors include employees, tax liens, child support, secured creditors loaned the debtor money secured by a promise to some assets), then unsecured creditors (generally people like me who have a potential legal action against the company).

In some business bankruptcies there are no assets to distribute, in others there is enough to pay only priority claims, in others the unsecured creditors get a little bit. We don't know anything in this case other than (1) the company got a lot of a cash, (2) it probably has little in the way of fixed assets to sell to pay creditors (used office furniture has little value -- it doesn't have any factories with real equipment to sell); (3) it probably has little in the way of intangible assets of interest to anyone (trade names, client lists, good will).

One thing in our favor is that there are enough parents, presumably some with a little money, to pay some lawyers to take a look at a lawsuit. That is where it gets interesting. If there is a legitimate fraud claim against the owner, the claimants can ask the bankruptcy court to let them file a separate action against the owner, and any recovery will go to the claimants. In that case a suit against the owner may go after his house, cars, boats, etc (depending on the state) so that there are a few more dollars at the end of the day.

Remember that I said that lawyers eat first. They have the highest priority, and their fees will come off the top of any recovery and distribution of assets -- they did the work to get it, and without them there would be nothing. This entire process will take not less than a year, probably two, before money is distributed. If there are lawsuits to recover preferential transfers, or actions exempted from the bankruptcy proceeding, it could take longer.

Because of this I recommend that you, and everyone else, make a file that includes (1) evidence of what you paid/are owed; (2) any documents supporting that claim; (3) any documents reflecting the services provided by PMAA, and any written representations by them; (4) write down any oral promises and what happened; (5) print any emails related to this and preserve any written records. A class action lawyer and a bankruptcy lawyer need to be consulted.

(Note from blogspot: Law Enforcement will most likely need the above-referenced records as well, so it is best to have a copy of your contract, a copy of the check you used to pay, a copy of the credit card transaction on your statement, any information about fraud claims that were submitted to your credit card company, printed copies of e-mails sent to parents, any contact information of who you spoke to at PMAA and why; and any other pertinent information.)