order for relief from automatic stay

[storybookjim]

State of Washington.

Here's a creditor story that may be entertaining.

I agreed to sell a house in 1999 on a zero-down real estate contract to couple with two previous bankruptcies on the pretense that they really wanted to turn things around and re-establish their credit reputation. So we agreed to a deal that put them in the house but required them to vacate the property if they fell behind on their payments by even one month. It was a fair price and the interest charged to them was the prime rate. I made a really fair deal with these folks. But now, I feel like an idiot because I was conned for sure.

Within two years, and after lots of warnings, they fell behind big-time (4 months). In 2003, I notified them that they needed to vacate by a certain date. They declared chapter 13 a few days before that deadline and asked the bk court not only to stop that procedure, but to force me to finance their $7000 arrearage @ 0%. That angered me some and I sought to get that plan dismissed. With some research, I found out that they declared a chapter 7 in 2001 (after they signed the contract with me) and concealed that bankruptcy from me. And they also concealed their real estate ownership from the bk court. They got their unsecured debts discharged in that 7 and then they returned to the same court, with the same attorney, to reap the benefit of that concealment: real estate equity.

And they got away with it. I notified the chapter 7 trustee of what they had done but the judge wouldn't consider her argument because the fraud wasn't discovered within a year after the 7 was discharged. I was pro se and personally witnessed this ruling, sitting right next to that trustee at the hearing. But the judge dismissed the case anyway because they weren't making their plan payments.

So what. Nine days after the judge dismissed this 13 (March, 2004), they filed another 13. But this time they excluded me from plan payments. Same court. Same judge. Different attorney. Dismissed as frivolous? Nope. Behind on their payments to me still? Yup. Ex parte motion for relief from automatic stay? Trying that now. Judge seems to be in no hurry to sign that order.

Apparently, at least from my experience, the United States Bankruptcy Court's pity for such unfortunate debtors, like these folks, is unshakable even if a creditor and former chapter 7 trustee are able to supply irrefutable proof of outright bankruptcy fraud.

Comments anyone?

 

[bigun]

Do not get involved in real estate financing if you lack the ability to manage your risk.
Had that happened to someone like Wells Fargo, they would have simply appealed the order. Money is no object {for a large lender}.
We see stories all the time about pro se debtors pushed around by the bk courts. We've also seen stories of pro se creditors suffering the same fate.
Nothing really new under the sun.

 

[storybookjim]

Thanks for that advice, bigun. But ability to manage risk is somewhat off-point. This has got more to do with ability to understand the realities of bk court proceedings, and I miscalculated somewhat.

From my perspective (and I guess from yours too), even if a pro se creditor can successfully outmaneuver opposing counsel, which I believe I did, the deck is still stacked in favor of the represented party. There's definitely an unspoken code of professional courtesy both inside and outside the courtroom. Pro se people are excluded from that club. I suspected that going in. Human nature does come into play here. But the deck seems more stacked than I originally thought.

The evidence of fraud is clear. And it's still a fluid situation. I know I'll eventually need to hand off to a "club member" to get a final resolution to this.

 

[edantes]

It's not pushed around...it's that the Govt did not do their job

State: CA
With all due respect to previous poster..I believe the original poster's point
was to highlight the 'infinite pity' of the court instead the creditor's ability
to manage risk...

Several of us went through this process when my previous employer
filed for Chap 11...Company was incorporated in Nevada...

We had rock solid evidence our pension contributions had not
been forwarded over to the financial institution...we were later
able to show to the Labor Dept that the money had been instead
used to pay personnal credit card bills...We had the entire paper trail and
filed complaint with the DOL...We figured that since we had evidence
of a fraud...if the Feds got involved, the Bankruptcy would be tossed..
and we could then try to get our money back...silly us..

We were introduced to the wonderful notion of 'Federal Guidelines' ( that's
the inside joke for..if it's not over 100K and does not advance the Govts
ends...we're not going to do anything...even if we're the only ones who
can..) . Try getting that kind of deal if you commit a violent crime...

It took us over 3 years...and the Feds finally settled with the owner
with a civil settlement of 25c on the dollar...and they got away clean
while most of the employees lost anywhere from 3-10 months of paychecks...

 

[bigun]

The point I was trying to make is, bankruptcy is not the financial death sentence it was 15 or 20 years ago. It's pretty easy for people with a bk on their record to get FHA financing at conventional rates 2 years out of bk if, they've a clean credit history post bk. After 4 or 5 years, many conventional lenders will underwrite mortgages at conventional rates.
When you do owner financing for someone who is post bk, it's a pretty good bet they've not made the most of a fresh start. That's the point where you are assuming a risk you can't manage. Just don't do it period.
But, having said that you're correct. Once the bk court is involved it's not black and white anymore. Some real varying shades of gray.
We've a poster {can't recall he r name} that has a year or more battle ongoing with a trustee over an ex spouses bk and the attempt to evade court ordered support payments. Hopefully she'll see this and jump in with her adventures of going it pro se.

 

[Ladynred]

Anabanana will give you the low-down for sure !

Just in case you haven't read the scope of the new bankruptcy reform law, this kind of serial filing will be almost impossible after 10/17/05 when the new law goes into effect. The exact thing these people have done is part of what the new law will stop. Serial filers will not have the protection of the automatic stay or it will be severely limited. A new waiting period of 4 years will be in place between a previously discharged CH 7 and a "new" Ch 13. Currently there is NO waiting period, you can file CH 13 the day after your Ch 7 discharge.

I know it doesn't help you right now -- unless the current case is dismissed and they have to wait until they can file again.. then all kinds of nasty things will await them in the new law !

 

[edantes]

Maybe...but for that the court and the trustees have to act..

Maybe...

But in my boy's case...he first had the company file for Chap 11...
then he converted to a Chap 7 within 48hrs of the US Trustee
filing a motion to dismiss or convert for among other
amusing details...' Lack of veracity of the Debtor's principal at
his 341 hearing..'


Then less than a year later, when DOL finally came knocking at
his door...he filed for a personnal Chap 7...

We offered the personnal Chap 7 trustee evidence that he had
concealed the sale of an entire house within the 12 months
prior to the Chap 7 filing and they did absolutely nothing...zero ...nada...

By then..the corporate Chap 7 had figured what was going on...but
he could not do anything because of the automatic stay...
so from where I'm standing, the bankruptcy code became a license
to steal.. hopefully, that will change..

 

[storybookjim]

The jist of my original posting was to document classic bankruptcy fraud; and how the court dealt with it. Period. Not the downside of pro se representation. Not the pitfalls of entering into contracts with previously bankrupt people. Not the reduced stigma of bankruptcy compared to 20 years ago. Not serial bankruptcies or the new law that will prevent that. The issue of my posting is debtor fraud and the consistently flippant attitude toward debtor fraud shown by the bk court. Please, someone explain to me how unenforced new laws will be an improvement on unenforced old laws. Thank you.

 

[edantes]

It won't....

State; CA
I agree with last poster....in addition, the inside joke is that a lot
of the relevant bankruptcy relevant offences fall under the US Code..
and the primary investigating agency should normally be the FBI...

Well in my case, the San Francisco white collar crime folks ( who were very nice on the phone..) had all been pulled to go chase terrorists...there
was no one...and I mean no one investigating or even willing to
look at investigating the allegations we brought up...

And regrettably, they are one of the only two gates to the US Attorney..the US Trustee being the second one...and even if you clear that hurdle...
the US Attorney then takes a look at what you have, and if you don't
make the 100K cut-off, they will not even talk to you..and the
debtor gets away with ripping off the victims..while hiding behind the stay..
Nice is it not...

 

[Ladynred]

Please, someone explain to me how unenforced new laws will be an improvement on unenforced old laws

The 'old unenforced' laws left a LOT up to the court's discretion. The NEW laws take away most of that 'discretion' and leave little, if any, leeway for the kind of thing you are dealing with. While I firmly believe (along with a lot of bK professionals) that the reform, as is, is going to hurt a lot more people than it will help, there are a few things that it does address, like serial filings, that needed to be tightened up. Rather than a presumption of innocence, the basis of the new law is a presumption of abuse right out of the gate. You are now, basically, guilty of bankruptcy abuse, until you can prove you are innocent.

 

[storybookjim]

Thanks for your insight on the meaning of the new bk laws, Ladynred. Dealing in the here and now however, I am quite curious as to how the judge in this particular case might rule on my ex parte motion for relief from automatic stay. My argument was succinct: Since I'm excluded from plan payments, I should be excluded from stay as well. The Judge has had this motion in hand since April 29. No objection from debtors' "replacement" counsel which is probably a wise decision for someone who does business regularly in that courtroom.

I get the feeling the Judge might be weighing the history of these serial filings this time around. Or it's just false hope on my part. We'll see...

 

[storybookjim]

I had to pay the court $150 to have this ex parte relief of stay motion considered. Three weeks later... no objections from anyone, but no ruling either. Is the court obligated to rule on this? Is there any timeframe mandated by law? Or can the judge just file it in the wastepaper basket? As I read sec. 362 (e) of the bankruptcy code, if the relief request is not addressed by the judge, or if no objections (or requests for a hearing) are filed within 30 days after a motion for relief is filed, then the automatic stay is automatically terminated. Or am I somehow misreading that... Thanks.

 

[anabanana]

Oy, oy, oy....

Yep, Jim, the long and the short of the fraud issue is that if you don't have all the documentation AND a big, big fish on the line, nobody will do anything. You're lucky you even had a trustee who was interested. I brought all the data to the table, did all the legwork and the Trustee down here just basically used the information to extort a higher percentage out of the fraudulent debtor. NOT to try to get a dismissal of the fraudulent bankruptcy, mind you, but just to get the crook to agree to pay more of what was owed. But not to me, of course, because this idiot of a judge determined that since my child support was not ever ordered pursuant to a "divorce decree" that it wasn't really child support. What a nut. And if you think going pro se in the BK court is mind-blowing, take a look at the fun of the appeals venue. So I got zeroed out and the other creditors will get 50 percent of their due, instead of 20.

The trustee's ostensible role is to "protect the creditors' interest" but, like every other aspect of this system, they are overloaded. They'll only pursue the most egregious and obvious cases of fraud, and then only the ones where they can make a big media splash. The U.S. Attorney's office is the same, and the FBI is the same. The courts are for the wealthy, and only the verrry wealthy. I would have thought that $30K, $50K, $100K is worth pursuing, but it's not. They can't be bothered. They can't even be bothered to make a phone call to the cheat suggesting they clean up their act or else. I mean, even the threat of being prosecuted for fraud --when so many get away with it-- would be enough to make some of these crooks straighten up and fly right.

If you've got a motion on the table for relief of stay, he's got to respond to it. But don't assume that the law really means anything in the bankruptcy court. My experience is that they can make it up as they go along. The judge just told me that I have the burden of proof in showing that I have NOT violated the automatic stay. So basically, the lyin-ass debtor can say pretty much anything and I have to prove that these claims are NOT true. Uh... wtf??

I sure wish we could get a critical mass of small-time creditors together for a class-action suit against the tax-supported agencies that were supposed to be looking out for us. I'm considering suing the Trustee for dereliction of duty, and maybe a few others. My life was ruined, my heart was broken, my faith in the system was trashed.

And every day, I hear really compelling stories of people who desperately need the protections of the BK court, and they're the ones who are going to be screwed after October. Not the cheats. It won't be any better for small creditors, and the big-time institutional lenders are laughing all the way to the banks they already own...

 

[storybookjim]

Thanks for that, anabanana. Ya know, I figured out that the judges and trustees are so overloaded that justice is not well-served in bk court. Trying to get them to do something in the interest of fairness can lead to a frustrating dead-end, as it did when I got the one 13 dismissed and then had to deal with another 9 days later.

But what I did here, or at least I'm trying to do, is turn the tables. Turn their overload and inaction into an advantage. If the court won't address the fraud, fine. If I can get relieved from stay by the court's inaction, fine. In fact better than fine. Better than an outright dismissal from my perspective. They could refile another 13 tomorrow following a dismissal today. But if the automatic stay is terminated by the court's ambivilence, and inaction by the debtor's attorney, perhaps continuation of the current the 13, together with a stay termination, is better than a dismissal. That way, the would have to terminate the current 13 themselves, then refile, to get another automatic stay imposed. Or am I just nuts?

If I proceed under the reasonable assumption that stay has been terminated, and the debtor then protests to the court, the history of serial bankruptcies will be highlighted. Then the court, if it does anything of substance, will have to make a call either in favor of a serial filer or a battered individual who is not a professional debt collector .

Personally, I've gotten to the point where I may be willing to take the chance that the call won't go my way. But I'm not quite there yet.

Right now, I really need some input on 362(e) to evaluate my chance of success with this strategy. Thanks again.

 

[edantes]

This may help... good luck

If you've not found already...here's a link to 362 and the rest
of Title 11
I used that site when I was going after my ex-boss since he'd been
able to scam us out of our paychecks and we could not afford counsel
all the while he was fighting us with our own money while DOL
stood watching...

http://straylight.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000362----000-.html

good luck