Financial alert for lumber supplier

In response to a bankruptcy filing from the president of a New Jersey construction firm, a material supplier has filed suit to prevent the loss of more than $1 million in outstanding debt. 

On March 29, Builders’ General Supply Company filed an adversary proceeding in the bankruptcy of Alicia Marie Gallo, president of Xtreme Building Makeovers, requesting that the court prevent the discharge of $1.1 million because the debt was allegedly incurred as a result of “false pretenses, false representation, [and] actual fraud” by Gallo.

The original dispute began in February 2010, when Builders’ General supplied materials on credit to Xtreme — materials that were allegedly never paid for (at least, not legally). In the ensuing lawsuit against Gallo and her parents, John and Donna Colatrella — both officers of Xtreme — Builders’ General alleged that Gallo fraudulently used a customer’s credit card to pay outstanding debts to Builders’ General. 

According to the plaintiff, a total of 21 charges were made on the customer’s card between 2017 and 2018 for amounts ranging from $5,000 to $50,000. However, Gallo allegedly used a customer’s credit card without their knowledge to pay down debt the company had previously incurred with Builders’ General. 

Because the debts were unrelated to the customer’s project, Builders’ General was “caused to issue a refund to said customer,” according to court documents. Builders’ General claims that they issued a refund to the customer for the sum of $259,000.

In November 2018 Builders’ General won a $1.1 million consent judgment after a settlement with Xtreme. The judgment included a writ of execution, putting a judgment of possession in force and allowing law enforcement to begin transferring property, including money and assets, to satisfy the debt.

On New Year’s Eve of 2020, Gallo filed for Chapter 7 bankruptcy, which provides for the liquidation of the debtor’s non-exempt property, the proceeds of which are used to satisfy creditors’ debts. 

However, during bankruptcy, the court can rule to discharge some or all of the petitioner’s debt — an option in Chapter 7 only available to individual debtors. Because Gallo filed for bankruptcy protection as an individual, rather than under her company’s name, creditors’ debts were subject to discharge.

Gallo’s Chapter 7 bankruptcy filing estimated that she owed over $2.2 million to more than 50 creditors, half of which was comprised of her $1.1 million debt to Builders’ General Supply Company. 

Gallo’s bankruptcy petition also included other construction-related debt, including $119K to New Jersey Manufacturers Insurance Co., $150K to Kings Cash Group, $158K to Altus GTS inc., and $110K to Universal Supply Company.