You don't own me - or do you?

Well, it appears my fears with regard to my intellectual property were well-founded.

If you are considering bankruptcy, or are already bankrupt, you need to understand the implications this may have on any intellectual property you created prior to becoming bankrupt. This includes any ideas you have put into form such as a piece of writing, songs and other artistic works, as well as technical drawings or business plans.

Back in 2006, I entered into a partnership with a woman who was developing some educational resources. I won’t go into the details because I may end up exposing myself to a confidentiality breach and, lord knows, I am well over lawyers… However, the premise of setting up the partnership was that this woman required my professional services but was unable to pay, therefore we agreed to develop the products together (she is a teacher assistant, I am a professional designer) and we would share the intellectual property and any subsequent profits. Over the past 4 years, we also became close friends.

In the first three years, I focused a lot of my time on this business, all weekends, evenings and hours that I perhaps should have been focusing on my existing business. I also used the resources available in my existing business to develop the new business. The new business flourished, the products were received favourably in the market and my partner was able to give up her job and work full-time for the same salary plus expenses. I continued to work in my business and my second job as well as put in up to 20 hours per week in the partnership. I received no income from the business but, throughout my own troubles, it was a ray of hope to me. No matter what happened, I knew I could eventually work in this business and it was something I was passionate about and truly enjoyed.

My business partner was aware of my financial problems and had even taken me in as a boarder on two occasions. I always paid rent and my own expenses, as well as cared for her dog and garden while she travelled all over Australia, to the UK and Asia, for the business, all expenses paid.

In December 2009, we were preparing to launch the entire product range through a national distributor for the beginning of the following school year, an event that would potentially take the business from a turnover of just under $100,000 to possible 5 or 6 times that amount. My business partner had mortgaged her house to pay for the stock and we only needed to sell a portion of the first shipment to recover costs and repay the loan. This was the performance indicator I was led to believe would allow me to receive an income from the business and perhaps provide the relief I needed to reduce my personal debt and possibly avoid bankruptcy. For some reason, this was the point at which my business partner decided she didn’t want me as a partner any more.

Initially my partner offered to pay me “anything I want” to release her from the partnership, we would part amicably and go our merry way. Although I was disgruntled, it was an opportunity for me to avoid bankruptcy and perhaps salvage something from all my hard work. However, as time progressed, and she had rejected three proposals I had put forward for the dissolution of the partnership, it became clear that she would not be paying me anything and intended to keep using the intellectual property. Finally, she made an offer of $20,000 for everything. I declined and the process stalled.

As a matter of process her accountant was informed of my bankruptcy this week.

Today, my ex business partner’s (and former so-called friend’s) lawyer sent me a letter offering to pay $17,500 for my share of all the intellectual property included in our partnership agreement. This represents three years and hundreds of hours of professional design work.

Legally, I have no power to decline the offer. The minute someone makes an offer for anything you own, it is considered to have value and immediately falls in to the power of the Trustee as part of your estate. Even if I had given away my share of the copyright to someone else, if anyone wanted to buy it, the Trustee could claim it back and sell it to her.

What I didn’t know: This rule applies to other items of value as well. Most houselhold items are exempt and you can apply to make items of sentimental value exempt (such as awards or medals you have received) but the creditors will have a vote as to whether the items should be exempted or not. If anyone makes an offer on it, the Trustee takes control of the item and decides whether it is worth selling for the benefit of the creditors.

For the first time, I really feel the effects of bankruptcy as I have no power and no credibility, even if I tried to expose this woman. She didn’t cause my bankruptcy and she did not do anything illegal, just morally questionable. I should have asserted myself from the beginning of our relationship because I suspect her intentions were dishonourable from the start.

Maybe I am an idiot after all, but at least I’m not a liar.