While sitting in US Bankruptcy Court yesterday waiting for my client’s case to be called, I observed a hearing that I think is worth sharing. The chapter 13 bankruptcy debtor was represented by an attorney, but the attorney wasn’t there. The debtor was there, and was prepared to present and argue a motion to sell real estate. But for a variety of reasons, the motion, and the hearing, did not go quite the way the debtor hoped.
First, the bankruptcy court noted from the docket that the debtor had an attorney. The attorney should have been there. The debtor assured the court that it was agreed that the attorney would not attend because the debtor had not paid the attorney to be there, and repeatedly reminded the court that he told the attorney not to appear. As an aside, whether the attorney has actually gotten paid or not does not excuse an attorney of record from appearing at a hearing. Even when directed by the client not to appear, I’m not entirely convinced that an attorney of record may opt to not attend a court hearing. Then, the court’s attention turned to the motion.
The debtor presented a motion to sell property – specifically a “short sale” on property. I’ve written about short sales and find them to be little more than over-hyped foreclosures…many times leaving a homeowner in the same mess as if the property had gone to final auction. But in this case, the debtor was seeking to “short sale” the principal residence. They also had a broker, and no approved application to employ the broker. They also had an offer – but that’s all they had.
There was no purchase and sale agreement signed. There was even some doubt as to whether the mortgagee had actually been served since it was unclear who was preparing the documents and serving them. Without a signed purchase and sale agreement, the court cannot entertain a motion to sell the property. Even with the purchase and sale agreement, the court cannot entertain a motion to sell the property unless it can be demonstrated that all appropriate parties have received notice of the motion and the hearing. The debtor repeatedly said, “I didn’t know.” The court was required to deny the motions, and then stated “this is what happens when you try and cut corners.”
The court was right. Rarely do people get into oppressive debt overnight, and even though it may appear to be an easy process, bankruptcy is complicated. It has rules and unintended consequences will arise when those rules are not followed. In this case I observed, it seems that not only was the attorney of record not abiding by the rules, but the debtor was hoping to cut corners, get the process done, and move on quickly. And the purchase and sale, and the delays that will likely result because this was not done correctly, may only further complicate this debtor’s situation. While I understand the desire to get through the bankruptcy process as fast as one can, it does not change the fact law and the rules must be followed. If you’re facing bankruptcy and you’re hoping to cut corners, take a lesson from my observations.
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