Last week I received a phone call from someone who wanted to know about the status of a bankruptcy case. It was not their bankruptcy, rather the case of another person. Apparently, the caller was a creditor of the bankruptcy debtor. The caller had a case pending in state court and wanted to know if the claim was discharged in the bankruptcy. While we were chatting, I pulled up the case on PACER. As I started to get more information and I was reviewing the documents, I came to realize that not only was the claim discharged, but the attorney representing the caller in the state court matter committed malpractice. What happened here is a lesson for anyone finding themselves brought into a bankruptcy case.
In May of 2007, the debtor filed bankruptcy which put the automatic stay into effect. In August, the caller’s attorneys filed a Motion for Relief from Stay. By a look at the document, the attorneys did not have experience in bankruptcy matters: the motion was barely two pages long and presented nothing substantive for the court to consider. Their lack of experience was also evident by the fact that they did not file electronically (Bankruptcy Courts – like all federal courts – use electronic case filing). And finally, they also did not pay the requisite filing fee (a fact which is readily available from a number of sources, including the court’s website).
The Clerk issued a Notice of Filing Fee due, and ordered that the payment be made by 8-27-07. The Certificate of Service from the Clerk stated the Notice was mailed on August 19, 2007 to the local attorney. However, payment was not made until 9-5-07. As a result, the motion was denied.
Then, things got worse.
The attorney filed a Motion for Reconsideration. The motion stated that the payment was mailed to the court on or about 8-30-2007. The attorney stated that notice of the payment deadline was not received, and made the payment based on a phone conversation with the clerk’s office (although no name of the person is mentioned). There is no mention of the fact that the Clerk issued a notice that should have been received (a fact I have no doubt would have been communicated to the attorney in the phone call). There is also no mention as to why the fee was not sent overnight mail. There was also no mention as to why the fee had not been filed in the first place. There was also a deficient Certificate of Service.
Certificates of Service tell the court – and everyone else involved – who received notice of a document. The Local Rules of the US Bankruptcy Court for the District of Massachusetts have clear and specific requirements for what information should be included in the certificate of service. Neither the original motion, nor the Motion for Reconsideration complied with those requirements. Because of the failure of the attorney to articulate how the documents were served in compliance with the rules, the Court denied the Motion for Reconsideration.
No further action was ever taken on behalf of the creditor and the discharge was ultimately entered a few months later. But there was another big mistake.
The creditor’s state court claims arose from circumstances that might have lead to a determination of nondischargeability. However, the attorney never filed any complaint to determine dischargeability by the deadline, so the creditor may have lost rights.
Law students and recent graduates might view this fact pattern as something resembling a bar examination question. But the facts demonstrate something important for both lay-people, and attorneys who do not practice bankruptcy law: if you do not know bankruptcy law and procedure, or do not practice bankruptcy law and procedure, find someone who actually does or you may end up like this creditor – or worse.
Bankruptcy is a specialized area of law. There’s a Bankruptcy Code. There are Rules of Bankruptcy Procedure. There are Local Rules. There are Official Forms. There are requirements – both substantively and procedural – for motions seeking relief from stay. There is bankruptcy case law from all federal districts, including the United States and her territories. The case law evolves frequently. Sometimes, it completely changes. Bankruptcy is real law, practiced by real lawyers, presided over by real judges. Anyone who thinks they can flail around the bankruptcy process by the seat of their pants is kidding themselves. And in this case, the joke is on the attorney and his malpractice insurer. Remember this the next time you find yourself pulled into a bankruptcy proceeding.
Related posts:
- When You Discover that You Are a Creditor in a Bankruptcy Case…
- Late Filing of Documents = Dismissal
- Cutting Corners in Chapter 13
- Debtor Can’t Reopen Case to Enforce Discharge. Yet.
- Poster Children for Bankruptcy Reform
Tags: attorneys, Automatic Stay, Bankruptcy, Discharge of Debts
