You Lose Privacy In Bankruptcy
I am not an attorney, I am a judgment expert
I am not an attorney, I am a judgment expert. This article is my opinion, and not legal advice. If you ever need legal advice or a strategy to use, you should contact a lawyer.
What if you have a judgment against your "rich" judgment debtor with a history of moving from rental property to rental property, paying the minimum to obtain residence, and then staying rent free until they are forced out by evictions? (This does not happen much these days, in the era of landlord associations and credit reports, but a wad of cash up-front, can blind many landlords.)
What if you discovered where your debtor worked, garnished their paycheck, and then you received a notice from the US Bankruptcy Court, that your debtor has filed for Chapter seven bankruptcy?
When you got that bankruptcy notice, you must quickly tell the Sheriff to cancel the wage garnishment. After a debtor files for bankruptcy, you should not try to recover money from them without first written permission from a bankruptcy court.
When a judgment debtor files for bankruptcy protection, does that mean that its game over, and your judgment is now history? When the judgment debtor is actually broke, yes. When the debtor is not poor, a crook, and hiding their assets; and you have the time to spend many hours in and out of bankruptcy court, perhaps not.
When you have nothing more important to do, you can scrutinize crooked judgment debtors in bankruptcy court, even for small judgments. When you are busy, it makes sense only with judgments of $16,000 or more. When your judgment debtor is actually broke, let it go, do not waste time trying to squeeze juice from stones.
To expose a judgment debtor's perjury and fraud to the attention of a bankruptcy court, requires starting an adversarial claim. When you are not an attorney, you better know what you are doing, or better yet, retain a bankruptcy attorney. If you retain a lawyer, don't stop thinking, keep thinking about what will help win your motion, and give your ideas to your attorney. Do not assume your attorney knows what you know.
You might expect that a judgment debtor's pattern of defrauding landlords could be the reason of a complaint for fraud in a bankruptcy court. I am not a lawyer, and my opinion is if the judgment debtor did not defraud you, you will have a hard time claiming fraud at a bankruptcy court; because you weren't a party to the cause of action, and not defrauded personally by the debtor.
However, if you were their landlord, you may have a potential cause of action for rental fraud, stemming from the original debt under USC 523(a)(2)(b). To win such a motion, you'll need to document proof in the court.
To prevail on your motion under USC 523(a)(2)(b), you'd have to prove that the debtor's fraud was intentional, and that your debtor willfully and knowingly provided you with false information. Your items of evidence might be a rental agreement signed by your debtor, with false statements concerning the debtor's financials.
If the misrepresentations were oral, perhaps you could prove fraud under USC 523(a)(2)(a), however proving this is usually much harder.
The first task in proving fraud at court is investigation. There are several paths available for the creditors with bankrupt debtors. When debtors file for bankruptcy protection, their financial privacy vanishes.
The way to win a fraud complaint in bankruptcy court, is ample discovery and hard evidence proving fraud. The start of discovery is to request from the lawyer representing the bankrupt debtor for the debtor's filing information and disclosures, liability and asset statements, and itemized listings of their monthly living expenses.
One way to go, is to request copies of your debtor's tax returns at least two weeks before the first scheduled meeting of the creditors. One could ask for 5 years of state and federal tax returns, or tax returns from a few years before and after their fraud happened.
Depending on the response you get, you might decide to motion the court for a rule 2004 examination of your debtor and possibly some other third parties, perhaps immediately following, or before the first meeting.
When you have a dishonest debtor, they commonly attempt to stonewall and hide information from creditors. When the judgment debtor files for bankruptcy, you are entitled to access all their financial information, so that you may comprehensively analyze the debtor's real condition.
If one is deprived from performing your discovery in bankruptcy court due to actions fromthe debtor, then you may be able to claim a cause of action in an adversary proceeding under USC 727, that costs about 300 dollars to file.
Bankruptcy court could be like "heaven" for creditors with time, knowledge, and patience. Bankruptcy courts are not perfect, and many will not allow mortals (non-attorneys) pay by check.
Bankruptcy courts are often more comfortable and spacious than state courts. Most filings and motions (except adversarial proceedings and motions for relief) have no filing fees. Cafeterias at bankruptcy courts are often good and reasonably priced.
You may be able to get your debtor kicked out of bankruptcy court for either not providing you with the income tax returns you asked for, or perhaps for a bad faith filing because of not complying with the court's order to produce documents under a rule 2004 exam.
Depending on the amount of the judgment, you may decide it's just not worth filing an adversary proceeding. You might also discover that the debtor actually does deserve to file for bankruptcy protection as they provided you all the documents you asked for, and you found no evidence of deceit or fraud.
by: Mark Shapiro
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