Posts Tagged With: litigation

Can I Get Sued in a Bankruptcy?

Most people think of filing for bankruptcy to stop lawsuits, but it is possible to get sued in a bankruptcy – or to do the suing. I’ve written recently about people who have been sued in the GMX Resources bankruptcy for fraudulent transfers for receiving dividends on preferred stock and people who have been sued for the recovery of what are called preferential transfers; but there is a lot more litigation than just this going on at the bankruptcy court.

For most people who file for bankruptcy the process looks a lot more administrative than it does judicial. Most people who file never see their Judge, for instance. No, the person who presides over the First Meeting of Creditors is NOT a Judge. Some standard rules of thumb – if there is no court room, no black robe and no standing when the person enters and leaves the room – you are probably not dealing with a Federal Bankruptcy Judge.

Just because most debtors never see them, doesn’t mean that the Judges aren’t staying busy. Bankruptcy litigation comes in two flavors: Adversary Proceedings and Contested Matters. An Adversary Proceeding is essentially a full-scale lawsuit filed within the context of a Bankruptcy case. It begins with a Complaint and a Summons, followed by an Answer, discovery, motions, evidentiary hearings and finally concludes with a trial.

Adversary Proceedings are required to determine the nature or extent of a lien, revoke a discharge or plan confirmation, object to a discharge, recover property of the estate, provide injunctive relief, declaratory relief or subrogation; and certain sales of property must be approved by an Adversary. Essentially anything else in the Bankruptcy Court where two people are arguing or disagreeing qualifies as a Contested Matter, which is quite useful; because in a contested matter you have full access to discovery and other litigation tools that are generally considered part of a lawsuit rather than just a motion hearing.

Some things can be the subject of either an Adversary Proceeding or a Contested Matter. A violation of the automatic stay, for instance, may be brought by either procedure. A violation of the discharge, however, generally is brought by a Contempt Citation, which is a Contested Matter.

So, what is the difference? Adversary Proceedings have greater procedural and due process protections built into them. They must be served like a lawsuit. They have a longer answer time. They have more structure to them which helps to manage greater complexity, a larger number of parties, more witnesses, more complicated issues. Contested Matters are procedurally more flexible. A Contested Matter may be a simple motion – motion with brief filed, fourteen days later a response with brief is filed, hearing set and heard generally in an hour or less. Of course, a Contested Matter may also have a long period of discovery, with related motions filed and culminate in a day or multi-day trial with lots of witnesses and exhibits. So, Contested Matters are inherently more flexible. The Court is expected to adapt procedures to fit the matter at hand. Adversaries are expected to be complex issues and so are treated that way automatically.

For something like a violation of the automatic stay, which may be brought in either form, I consider the following in making my choice: has the defendant appeared in the case, otherwise, the formal service procedures of the Adversary Proceeding will afford greater due process protections. How many facts will be in dispute? What is the nature of my client’s damages? How much post petition discovery will I want? How much time will I want to prepare the case? Even after considering all of these things, I may still file a case and have the Judge adapt the procedures for it as if it were the other. Judges can do that, and they will if they think it is necessary either for due process considerations, to protect the rights of a party or to make the case easier to manage.

So, there you have it. Bankruptcy lawyers may not empanel a jury too often (or ever), but they are still litigators.

Elaine

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Categories: Bankruptcy, Business Bankruptcy, Litigation | Tags: , , , , , , , , , , , , , , , , | Leave a comment

Don’t Be Afraid to Sue Somebody

A friend of mine, Louis Green, and I were talking last week about talking to clients about being a plaintiff, i.e., suing somebody.  Louis is a consumer law attorney.  He handles many of the same kinds of issues that I deal with, but he practices in District Court rather than the Bankruptcy Court.

A while ago Louis had a man come to see him – who was seriously embarrassed.  He was an older man, who felt like he should have known better; but — to be blunt — he was suckered by a car dealership.

The first thing he needed to understand is that he was taken advantage of by professionals.  This can be hard for a lot of us to grasp (umm, that would include me), but people who are truly professionals at things tend to be better at them than those of us who are really just amateurs.  I hate this.  There are all kinds of things that I think I ought to be just as good at as anybody else — but I’m not, and my kidding myself is hurting no one but myself.  (Why, yes, I do self-manage my IRA — your point?  Sigh.)

This man was old enough to know better.  He had bought cars before.  He knew better than to sign things without reading them, but the print was small; and his eyesight isn’t what it used to be; and the pros made him feel rushed and uncomfortable.  Well, even though he should have known better, that wasn’t his fault.  He was damaged by it, and he stuck to his guns.  He hired a good lawyer; and he won — an award large enough the car dealership required that it be kept confidential for fear anyone might find out how much they were having to pay.

Was all of this embarrassing?  Yes.  Did his adult children find out he had been scammed?  Yes.  Did he have to take the time to go to court and participate in discovery and deal with lawyers?  Yes.  Was it worth it?  That is a question that only he can answer, but I can say it was the right thing to do.

When people come to see me, they are tired of dealing with it all; and they just want it over.  Bankruptcy is good at that, but sometimes, they really do need to step up and be a plaintiff.  Sometimes, you just need to say — No, what you’ve done is wrong; and I am going to put up with the embarrassment and the inconvenience to make you pay for it.  Is it worth it?  More often than not, yes.  Is it the right thing to do?  Yes.

So, think about it.  Sure, you can file a bankruptcy and discharge the underlying debt, but if someone has been incorrectly reporting on your credit report or illegally harassing you about a debt, if a car is a lemon (for information on Oklahoma’s lemon law) or you were scammed by the dealer, at least consider whether or not you should be a plaintiff, as well as, a debtor.

Elaine

Categories: Bankruptcy, Consumer Credit, consumer law, Credit Reports, Litigation | Tags: , , , , , | Leave a comment

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