The relationship is over, but there are still lingering issues that hold you together. Perhaps it’s child support, health care, property distribution or other matters. If your ex files bankruptcy, it is very important you understand your rights and your responsibilities – as well as your options.
Posts Tagged ‘Automatic Stay’
When You Discover that You Are a Creditor in a Bankruptcy Case…
Monday, October 12th, 2009
Last week, I was in the clerk’s office and overheard two people ask the clerk which forms needed to be filed in a bankruptcy case. But this person was not a debtor – they were a creditor. Their landlord had filed bankruptcy. The former tenant was looking for their security deposit back, and was going to sue the debtor in small claims. I couldn’t help myself – and I butted in.
“You need relief from the automatic stay.”
“The stay applies even to me?” one asked.
“It applies to everyone.”
After that short exchange, I thought I would put together a short checklist of things to do when your landlord – or someone else you know who also happens to owe you money – files a petition seeking bankruptcy protection.
When Things Go Very Wrong
Monday, November 24th, 2008
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.
A Shakedown Backfires
Monday, July 21st, 2008
This week’s Newsweek has a great article on the abusive tactics debt collectors are increasingly using. The article is called “A New Shakedown” and it’s worth the read – especially in light of the shakedown a creditor recently pulled in a Nebraska bankruptcy case. The collector ended up violating the stay.
The debtors’ chapter 13 bankruptcy case was filed on February 13, 2008 and listed Geneva Roth Companies as a claim in the amount of $170. On May 21, a collector working on behalf of the creditor GRC (Sherman and Roman) called one of the debtors and started “to verbally abuse the debtor and coerced a payment from the debtor threatening criminal sanctions.”
According to a signed statement, despite being informed of the bankruptcy filing and the pending bankruptcy case the collector told the debtor that she “was a key element in an investigation of fraud and bank theft….that they will be forced to have me identified as a felon. [The debtor went on to tell her that [she] was not going to talk to her about this at work and that I would call her back. [It] was then I had to call her back within minutes or my husband and I would be identified at our work by cops if I didn’t and it would be embarrassing.” The debtor was ultimately compelled to use a debit card to pay $300. She was left shaken.
Massachusetts Debt Collector Gets Sanctioned by Florida Bankruptcy Court
Tuesday, June 10th, 2008
A Massachusetts debt collector along with the creditor has been sanctioned by the bankruptcy court in Florida for violating the discharge injunction. On April 4, 2007 Olson filed a Chapter 7 petition in the US Bankruptcy Court for the Southern District of Florida. On his schedules, he listed a debt owed to Wells Fargo Financial in the amount of $976. Two separate addresses for Wells Fargo appeared on the creditor matrix. His creditor’s meeting was held on May 3 and on July 3 he received his discharge.
In a letter dated March 10, 2008, Nelson, Watson & Associates, LLC in Haverill sent a letter to the debtor demanding payment in the principal amount of $976.71 and with interest, a total balance of $1,353.65. The debt was now purportedly held by North Star Capital Acquisitions. Payment was demanding by the close of business on March 31, 2008. On March 18, 2008, the Debtor moved to report his bankruptcy case, and that motion was allowed on March 31.
On that same date, the Bankruptcy Court issued an Order to Show Cause. The order directed Nelson, Watson & Associates, LLC and North Star Capital Acquisition LLC to appear before the court through counsel on April 21, 2008 to show cause why they should not be held in contempt for making a demand for payment on the debtor. The order was mailed to the CEO of North Star at its New York address and at its agent’s address in St. Paul, Minnesota. It was mailed to Nelson, Watson & Associates LLC at its Merrimack Street address in Haverhill (the order reflects the same address that appears on Nelson’s website).
April 21, 2008 came, and no one appeared. This is a problem for two reasons: (1) it’s a court order and when the court orders you to appear before it, you do so and (2) no one got to hear their side of the story. No even a written statement was field. It was as if they played possum.
You can imagine that this displeased the court. On April 28, the court held Nelson, Watson & Associates, LLC along with North Stat in contempt of court because they failed to attend the hearing and they violated the discharge injunction. Both were ordered to pay fines in the amount of $2,500. If they did not pay their fines by May 30, the court stated that it would issue a separate order directing the US Marshal to APPREHEND David Paris, CEO of North Star and George Nelson, III, Manager of Nelson, Watson & Associates,LLC for the purpose of “bringing [them] before the Court to explain [their] contemptuous conduct and why further sanctions should not imposed.” They were also ordered to obey the discharge injunction.
On May 6 Nelson paid its find and North Star paid on May 13. The case remains open.
As an aside, it takes less than 30 seconds to determine if someone has filed bankruptcy. Debtor’s attorneys routinely do it as part of their due diligence in preparing bankruptcy petitions. Since there is no response from Nelson, we’re all left wondering: did you check and send the letter anyway? or were you just negligent? Without an explanation, we’ll never really know the truth (but I encourage them to chime in and comment if they get wind of this blog post).
In re Olson, US Bankruptcy Court, Southern District of Florida at Fort Lauderdale, 07-12387.
Pro Se Perils: No Ticket and No Excuse
Monday, May 5th, 2008
There seem to be debtors everywhere who think they can file bankruptcy without an attorney. Of course, in many, many cases, debtors only end up causing themselves greater problems. A case out of the Eastern District of Pennsylvania proves my point.
The debtor in that case got his case dismissed because he did not received the requisite credit counseling. The case was filed on Valentines Day of this year, and along with his petition, the debtor filed a statement of “Exigent Circumstances” to excuse his failure to comply with the credit counseling requirement. The debtor represented that he was facing a foreclosure sale.
On February 20, the court ordered him to file by the 29th a Supplement to the Certification to enable the court to determine whether the requirements of Section 109(h)(3) had been satisfied. Debtor didn’t. Instead, the debtor filed his Certificate of Credit Counseling on the 28th. The case was dismissed. Debtor filed a motion for reconsideration.
Bankruptcy Code Section 109(h)(3) has at least requirements for establishing that there are Exigent Circumstances justifying a failure to obtain prepetition credit counseling. First, there must be some emergency compelling the filing before the counseling was obtained. Second, the debtor has to have tried to obtain credit counseling before filing the case but was unable to get it within the 5 day period prior to filing. The pro se debtor did not provide any information on this second requirement.
The case got dismissed. Hopefully, when the debtor again files bankruptcy (since he was facing foreclosure, I am assuming he did or will), he will have a lawyer. One of the first things he’ll have to do is seek an extension of the automatic stay because he will then be a repeat filer.
In re Kaufman, No. 08-11087 (Bankr.E.D.Pa.)
You might have missed:
Pro Se Perils: When a Case Gets Dismissed
No Ticket? No Bankruptcy
Poster Children for Bankruptcy Reform
Tuesday, April 8th, 2008
There has been so much written about BAPCPA and the creditors who practically wrote the law and got it passed. While I cannot doubt that creditors – such as the good folks at MBNA (which was bought out by Bank of America), paid their lobbyists millions of dollars for years to get the Bankruptcy Code changed, a recent case perhaps rightly suggested that lenders had good reason to seek a change in the law. The case, decided in February, came out of the Northern District of Alabama.
The husband and wife debtors filed their case in October 2006. It was the wife’s seventh bankruptcy case (no that’s not a typo….that’s 7) and the husband’s fifth (and again, not a typo….that’s 5). As the October filing was their second case within a year, they filed a motion to seek an extension of the automatic stay. Since 2005, if a debtor has had a case pending within the year prior to the case being filed, the stay expires 30 days unless the court orders otherwise. The hearing of the motion must be held within the 30 day period. The debtors needed the stay to prevent a foreclosure on their home.
Co-Debtor Stay in Chapter 13: The Debtor’s Business
Monday, March 24th, 2008
People own businesses: corporations, LLCs or other types of formal or informal business entities. When those people need to file bankruptcy, does the automatic stay that takes effect immediately upon filing also extend to those wholly-owned companies? The Bankruptcy Court in the Southern District of New York ruled on that issue on February 8, 2008.
That debtor filed for relief under Chapter 13 and was self-employed as a general contractor. He was the sole member of an LLC. Under Chapter 13, there exists a co-debtor stay, and this debtor wanted to ensure that the co-debtor stay extended to his LLC.
The Court noted that the LLC was not eligible to be a Chapter 13 debtor since it was a business entity, and not an individual. Chapter 13 is limited to individuals only. In addition, the co-debtor stay applies specifically to consumer debts, not commercial or business debtors. On his petition, the debtor noted that the debts were primarily consumer debts. And finally, there was nothing in the Bankruptcy Code allowing an individual and a business to be joint debtors. The request to extend the stay to the LLC was denied.
It is important to note that this is the bright line rule. There are circumstances that might permit a court to extend the stay to a non-debtor business entity in Chapter 13, but whether that can occur is really determined on a case by case basis. For example, if there is a claim against a non-debtor, and the debtor is a guarantor, not extending the stay could have an adverse economic consequence on the debtor’s ability to reorganize. The extension of the stay to non-debtors has been limited to those claims that “threaten serious risk to a reorganization of debtor’s estate in the form of immediate adverse consequences.”
The case is In re McCormick, 381 BR 594 (Bankr.S.D.N.Y. 2008).
Bankruptcy Court Teaches Boston University a Lesson
Monday, November 28th, 2005
In a November 17, 2005 decision, the US Bankruptcy Court in Boston found that Boston University violated the automatic stay of the Bankruptcy Code when it refused to permit a bankruptcy debtor to register for classes because the debtor owed money to BU.
The case involved a debtor who enrolled at BU in the autumn of 1999. While she received substantial financial aid during her first three years, she did not receive any aid for her senior year which was spent entirety in the African country of Niger. The costs of tuition and her air fare to Niger were paid for by BU. During that fall semester, BU sent three notices to debtor and her family but was nevertheless allowed to return to Niger in the spring because the tuition and costs had already been paid in full.
Upon her return, the debtor had one class to complete but as this class was offered only during the spring semester, she applied for and was permitted a leave of absence for the fall 2003 semester. When she attempted to register for the spring 2004 class, she was told she had to pay $38,195 then owing for her tuition and costs for the 2002-2003 academic year. Unable to come up with such a large amount of money, she applied for another leave of absence to the spring of 2005 when the course would be taught again. In the meantime, she tried to resolve the tuition issue with BU but was unsuccessful. On December 14, 2004, she filed bankruptcy under Chapter 7, listing the obligation to BU as an unsecured claim.
After filing the bankruptcy petition, she attempted to register again for her final course. BU refused. Even though she was refused, she made arrangements with the professor to attend classes, and complete tests and assignments during that Spring 2005 semester, with the hope of being allowed to register once she received her bankruptcy discharge. The discharge was received on March 28, 2005.
On March 30, 2005, the debtor filed a complaint seeking (1) a determination of whether the debt to BU was in fact dischargeable; (2) an injunction barring BU from taking any action to enforce the debt; and (3) damages, attorney’s fees and punitive damages for violating the Automatic Stay.
Reactive vs. Proactive
I’ve mentioned that sometimes it’s better to proactive than reactive. Being proactive is calling a bankruptcy attorney when you sense that the barn out back may be a fire hazard. Being reactive is calling a bankruptcy attorney when the barn is burning, you can’t remember where you put the garden hose while you wonder if water bill has been paid.
When clients do nothing until faced with a foreclosure notice, they are being reactive… which unfortunately places me in a reactive posture. After years of doing both, I’m certain that being reactive makes an otherwise average case more difficult and more expensive, because but for a scheduled auction some people would just hope that the finances will get better. But it’s that auction that pushes some people into finally getting their ‘house in order’, albeit quickly… and hopefully not too late. And for one of my clients, getting his house in order was what he wanted me to help them with.
After being retained by a reactive client, one of the first things I did was send a letter off to an attorney representing a lender. I let them know that I was representing the client for a bankruptcy case, and I asked that he please send copies of notices to me so that I may ensure everyone is properly listed on the petition and creditor matrix. A few weeks later, I received a copy of a notice of scheduled auction which I sent off to my client with note reminding him that his petition needed to be filed before the scheduled auction. The letter also reminded my client of the documents and information I needed to ensure that the paperwork was properly completed when filed.
About 10 days later, and about 2 weeks before the auction, the lender’s attorney calls me and leaves me a message. He wants to know if I still plan on filing a petition, since he has to hire an auctioneer, and go through the costs of publishing. He tells me he wants to avoid all of those costs if my client is going to file bankruptcy. defih8q45j
That put me into a bit of a predicament. (more…)
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