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How to handle a Bankruptcy court motion to stay enforcement

San Marcos, CA |

Client ran up a bill of $2,400. Client filed Bankruptcy but only listed $1,200 on the BK schedule. Client sent me an email asking for continued representation and so I finished his case for $600 more. Client failed to pay me and I sued him in small claims for $1,800 (2,400 - $1,200 discharged + $600). Client hired a debt defense atty and filed a motion to reopen the Bankruptcy which was granted. Now client is filing a motion to stay enforcement of the Judgment and $5,000 in sanctions claiming:1) the $600 is no good because there was no formal reaffirmation agreement just the email, and 2) the amount owed was only $1,200 not $2,400 but I have the invoices. Do I just filed my response to the BK motion with my own request for $5,000 in sanction for filing a bogus motion?

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Attorney answers 4

Posted

You violated the automatic stay, and did it with knowledge of the Chapter 7. That means you are subject to possible sanctions from the Bankruptcy judge. Are you a lawyer? If so, the Judge might be more willing to impose sanctions. Your best option is to see if the debtor's lawyer will agree on a settlement whereby you both walk away. If not, hire a Bankruptcy lawyer to try to make sure you don't end up writing a bigger check. Sure, you might have a claim for $600 in post-petition work, but I would not want to test the Judge on that, or a request for your fees for a "bogus motion (because it is not a bogus motion). That said, I am telling you what Judges might do in my district, based only on what you posted. CA lawyers may post information on what they believe judges in your district might do.

Scott Benjamin Riddle

Scott Benjamin Riddle

Posted

Sorry - I immediately realized I omitted something. Your belief that only $1200 was discharged, or the automatic stay only applied to the extent of $1200, is wrong.

David Taylor Kaye

David Taylor Kaye

Posted

I don't understand. The same information was given to the small claims judge and he agreed that $1,200 was NOT discharged and gave me the $600 for the extra work requested. The Judge told the client that he should have given his BK attorney the correct amount owed and that only $1,200 was discharged. The BK was over when I sued him and only $1,200 was listed on the schedule which is why client had to file a motion to reopen the BK before filing his next motion to stay enforcement. Can you explain it to me? Thanks.

Matthew Scott Berkus

Matthew Scott Berkus

Posted

Doesn't matter what the small claims judge says, thinks, or rules. The bankruptcy court will preempt. You can try and argue the point to the judge, but has Brian correctly points out, the amount listed on the petition is generally not set in stone. The BK estate is made up of all claims existing at the time the case was filed. It works like this 1. You have a claim against debtor. 2. Debtor files bankruptcy. 3. Your receive notice of the BK, which among other things, informs you of the filing date. 4. You, the creditors, are presumed to KNOW how much is owed on that date. As such, it really doesn't matter what the debtor lists as the amount. The "claim" is discharged.

Posted

If the work requested by the client for $600 is post-petition you might be entitled to recover that, but filing a lawsuit against a client which includes pre-petition debt component exposes you to liability for a violation of the automatic stay. At this point, you should seek to avoid further damages by negotiating a settlement and even voluntarily dismissing your state court case and vacating that judgment. If you are a lawyer, this is something that might be reported to the state bar.

David Taylor Kaye

David Taylor Kaye

Posted

The amount I sued for was limited to the non-discharged amount. What liability? He owed $2,400 but mistakenly put $1.200 on the schedules which was discharged. I sued for the $1.200 plus $600. Isn't this appropriate in Bankruptcy Court? I only do family and criminal law. Thanks for the help.

Brian Crozier Whitaker

Brian Crozier Whitaker

Posted

The amount discharged was whatever was owed on the date of filing ... the amount scheduled is irrelevant. Cut your losses.

Stuart Gregory Steingraber

Stuart Gregory Steingraber

Posted

A mistake by the debtor does not translate into a windfall for a creditor. I agree with atty Whitaker' s comments. Good luck.

Carl H Starrett II

Carl H Starrett II

Posted

I am a naturally curious person and I practice in San Diego just like Mr. Whitaker. So, I found the bankruptcy case and read the pleadings in connection with the debtor's motion to reopen and your reply brief. In a contempt proceeding, the debtor bears the burden of proving by clear and convincing evidence that you willfully violated the discharge order. In your pleadings, you've admitted knowing about the bankruptcy and the discharge and there is no question that you violated the discharge order. The only real question in my mind is whether the misrepresentations that you alleged the debtor made would mitigate the willfulness of the violation. The debtor's attorney in this matter has been to more than a few rodeos and I don't see the judge being particularly sympathetic to you in this matter. You need to work out a settlement soon.

Posted

The mistake you are making is thinking that he only discharged 1,200. The specific amounts listed on Schedule F are somewhat irrelevant. Whatever he owed you on the date of filing has been discharged ... even, in fact, if he had not listed you at all. The only amount you could have sued for is the post-petition 600; but, since you have now exposed yourself to sanctions for violating the discharge injunction, you would be better served to withdraw your pleadings and try to get out of this mess unscathed.

Posted

As the other attorneys pointed out, you goofed in a big way. The only amount you are legally entitled to collect for the work that you did after the debtor filed for bankruptcy. Everything else was wiped out. If you are lucky, you might be able negotiate a "walk away" agreement and not have to pay anything to the debtor and his/her attorney.

First, the firm is a debt relief agency according to the U.S. Bankruptcy Code. We help people file for bankruptcy. We also do other stuff and we do it well, but Congress wants me to post this notice. Second, nothing on this site is legal advice. You are not my client unless you enter into a written agreement signed by you and me.