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Creditor potentially alleging 727 issues -- any advice please esp from mod

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  • Creditor potentially alleging 727 issues -- any advice please esp from mod

    I will try to be as brief as possible. I am in California. I had a hearing today by an unsecured creditor asking for motion from relief of stay which was denied. My 341 hearing was on April 1st. My trustee has listed a no asset case at this point. Some of these issues were fleshed out at my 341 hearing but apparently not to this creditor's satisfaction. BUT the judge informed the creditor that he could file a potential 727 issue objection on my BK filing. This creditor says that what is owed is community debt, although I have been separated and living in separate homes for almost 4 years now. They do have a signed declaration from me from almost 6 months ago stating that I was in my estranged husband's home 3 to 4 days a week BUT that wasn't because I was trying to get back with him, it was because of my son and going through a major family crisis and my being their because of my son and it shows this in the declaration.

    This creditor also stated that what I claim in my petition of money owed to family members is questionable. I have bank statements showing deposits into my account aside from what I was bringing in from pay stubs. Some of this debt I can show and money being borrowed and deposited into my account and cash deposits but others I can't because it was given to me in cash and I used this cash for gas, etc., and don't have receipts for it.

    I am happy that the motion to lift was denied BUT I am absolutely livid at what this creditor is alleging. I already stated to the judge this morning that if such a proceeding is filed that I will be asking for my attorney fees to be paid for as well as sanctions. Basically when I announced this in court today in front of the judge and in front of this creditor showing that I am being unjustly accused and I will fight it and will be asking for my attorney fees and sanctions. Maybe this creditor will think twice about filing an AP against me esp if he will be responsible for my attorney fees and sanctions against him. NOW I am just sitting here and waiting to see if he does file.

    I'm trying so hard to relax but having a difficult time because I know the mind set of this creditor and how am I going to be able to fund this potential AP. I can show that I have debt owing to family members by the amount of cash deposits going into my accounts outside of what I was bringing in through my income.

    Can any creditor just simply allege 727 issues without supporting documentation to support their side and filing this lawsuit in the BK forum?

    Can they ask for documentation after the date of filing? My spending habits have greatly changed and I have been keeping my account at its minimum and withdrawing cash and paying for things this way because I'm terrified that my acct will be frozen but it's going to be difficult for me to show a paper trail after my filing and gas receipts, food bought, etc. I don't have a lot of money coming in and this is why for the change of spending habits and withdrawing cash now. I'm barely getting by now. This creditor knows I was borrowing a lot of money and this is documented in emails but now is alleging that they are questioning the amounts owed to family members. My family members were paying for my credit cards, etc., and this is how we were getting by. It's a complicated mess this last year and finances and all that has happened.

    I'm not rich. I have no property, etc., so there was no transfers, etc., etc. I didn't spend money with credit cards as they were all maxed out anyway.

    On my petition, there are a few areas that aren't accurate according to billing. BUT this is because I can't claim the entire bill is mine as there's an agreement with a family member to pay a portion of it such as my cable bill. I pay 100 of it and this is listed on my petition but the bill is 123 a month I think. The 25 or so is paid by my family member because they wanted the movie channels and they give a portion for the billing. Although right now, they are paying this bill in full and I cover rent. There's a 310 contribution from my family member a month and this is claimed on my petition. I ca use this for rent or to use it in other areas of expenditures such as utilities. All rent checks are in my name so it's going to be difficult for them to state that the 310 is to be exclusively for rent. I also don't have any deposits into my account for exactly 310. I don't have any deposits I don't think that are set every single month as I was borrowing so much money The deposits of cash are completely erratic and one time was as much as 4,000 I think.

    It's going to be difficult for me to show 400 a month for food because that's also inclusive of my son's lunch money given to him in cash, receipts I haven't kept for costco, etc. In a 727 issue and their questioning expenditures can they request that I show everything that justifies that amount. The same with my health issues. I have on average 351 a month for medical costs and I can show a portion of this BUT it also shows in my petition that these costs may decrease or increase. Lately they have decreased because money is very tight right now so I am skipping doses of medication to extend the need for refills. I have also not been to the doctor as I am supposed to do for tests, etc. My son hasn't gone to his psychologist and psychiatrist appointments because money is just too tight right now but it is needed medically.

    They're claiming that I can work more. I have 3 issues working against me in that regard. The instability of my job and the econimic crisis it has taken on my profession, my own health care needs and sometimes I need to take off because I'm not feeling well or time I need to take off for my son and caring for him as he is disabled.

    This is all just insane and what they're alleging. I haven't gotten the AP yet but honestly I am expecting it.

    I'm assuming that they won't be able to claim in their AP that I can work more, etc., etc., as this isn't part of my petition. I'm assuming in their AP all they can claim is possibly 727 issues and that I lied on my petition??? I know they are going to have an uphill battle.

    If these jerks can do whatever they want and file an AP against me without any supporting documentation and their just saying, well, I think this and I suspect that, etc., this is just completely unjust against a debtor because what if the debtor can't afford to defend it and it's the creditor's way of backing the debtor up into a corner and forcing them to settle or what have you.

    I don't know. It hasn't happened YET but I know this creditor pretty well and they want their money no matter what and will do whatever they can to get it.

    Any advice from anyone, espeically a lawyer or a moderator that is familiar with APs will be most appreciated.

    Thank you

  • #2
    Yes, any creditor can file a 11 USC 727 motion to dismiss. However, I think that would be dumb of a creditor who was just trying to file a Motion for Relief from Stay. A 727 motion is for fraud and seeks to deny discharge of the entire case, not just the creditor's claim. A creditor would more than likely file a Complaint alleging an 11 USC 523 exception to discharge instead.

    However, the complaint (adversary proceeding/AP) is more expensive to prosecute than a "contested matter" on a 727 motion to dismiss. However, that creditor or trustee filing a 727 motion to dismiss must show that the debtor;
    • knowingly in a bankruptcy case makes a false account, oath or claim
    • destroys or conceals his property within one year before filing or after the date of filing, with the intent to hinder, delay or defraud a creditor
    • conceals, destroys, falsifies or fails to preserve records of his financial condition
    • gives, offers, receives, or attempts to obtain money, property or an advantage for acting or forbearing to act
    • withholds from an officer of the estate records related to his property or financial affairs
    • fails to satisfactorily explain any loss of assets
    • refuses to obey court orders or refuses to respond to questions posed by the court
    (amongst other things from 11 USC 727)

    If you end up in an actual Adversary Proceeding (AP) you should find an attorney either through pro bono services available at the court, or a fee paid by you. APs are complex and a couple of additional new set of rules are applied (Rules of Civil Procedure, Rules of Evidence), amongst terms like summons, cross-summons, cross-complaint, deposition, discovery, pre-trial conference, and other words that frighten even the seasoned pro se debtor!

    You will just have to wait and see what they do. Hopefully, they trip up and miss the dischargeability bar date and you can be done with this.

    (I was actually just writing a complaint now for an adversary proceeding against one of my creditors. It is a totally different ball game from mere "paper shuffling" in the normal bankruptcy context.)
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      [QUOTE=justbroke;403154]Yes, any creditor can file a 11 USC 727 motion to dismiss. However, I think that would be dumb of a creditor who was just trying to file a Motion for Relief from Stay. A 727 motion is for fraud and seeks to deny discharge of the entire case, not just the creditor's claim. A creditor would more than likely file a Complaint alleging an 11 USC 523 exception to discharge instead.

      However, the complaint (adversary proceeding/AP) is more expensive to prosecute than a "contested matter" on a 727 motion to dismiss. However, that creditor or trustee filing a 727 motion to dismiss must show that the debtor;
      [LIST][*]knowingly in a bankruptcy case makes a false account, oath or claim

      ****This is what they claimed at the motion for relief this morning. That they are questioning amount owed to family members, and family contribution of 310 a month.

      [*]conceals, destroys, falsifies or fails to preserve records of his financial condition

      *****I have records of bank statements, etc., showing deposits and so forth outside of my regular income. But I am lacking other records such as gas receipts for my car, etc., and I haven't maintained these records. I have some but not all as i didn't think I would have to be so meticulous afterwards and so forth. Also some of these expenditures I did not keep the receipts because technically I wasn't buying them. it was from money borrowed so I didn't think of a need to keep every single receipt. But a great majority of my financial affairs is documented in my banking statements before filing as I didn't change much in the way of my spending habits. I can also provide and show that my family member was paying for my credit crds, etc.

      If you end up in an actual Adversary Proceeding (AP) you should find an attorney either through pro bono services available at the court, or a fee paid by you. APs are complex and a couple of additional new set of rules are applied (Rules of Civil Procedure, Rules of Evidence), amongst terms like summons, cross-summons, cross-complaint, deposition, discovery, pre-trial conference, and other words that frighten even the seasoned pro se debtor!
      This creditor is not all that bright and is not familiar with the BK laws. He is representing himself at this point. He is also an attorney who practices in another area of law.

      You will just have to wait and see what they do. Hopefully, they trip up and miss the dischargeability bar date and you can be done with this.


      They are claiming that it is or their fees are community debt. My husband will be filing for a Chapter 13 next week and they will be included in his BK as well. So I am hoping they don't file for an AP because I can't afford it. The judge also brought up an Objection to Dischargability for their debt. They know it would be impossible to show that their debt is not dischargeable under 523. So it seems their only option would be to file for 727 issues and I don't have anything to hide other than it is going to be really difficult for them to prove that there is no debt owing to family members as well as a 310 money from family and where this money is going. I have rent checks and very little deposits into my account. She is paying utilities right now so that 310 monthly can be spent there. In my petition, I have listed rent and utilities as expenditures but in my income or additional monthly income of 310 is from family so that amount can be used anywhere in my expenditures such as utilities or rent, etc.

      I know this creditor typically does not litigate and prefers to settle. The judge already told them that they have until June 1st to file. Since he does not know the BK laws and does not like to litigate and would have to hire a BK attorney to navigate through the complexity of it and knows that it would be difficult for him to prove, hopefuly he won't file it. I'm hoping that if my estranged husband files by next week and they know they will get paid something that this creditor may leave me alone, especially if he knows he is gong to be out more money and then possibly paying for my attorney fees and sanctions if he loses. I'll see what happens. This next month and a half is going to be the longest most stressful time of my life.

      At this point, I'm looking for reassurance I guess and how likly this creditor is to file such an AP against me, especially if he knows he is going to have a difficult time proving it. I wish all of this was done and over with. I just hope I get through the next month and a half. I guess one good thing is that the judge denied the motion to settle the issue in State court and that it needs to be settled in the BK forum. She told him as of right now his fees are dischargable until he can prove otherwise through an AP proceeding.

      Comment


      • #4
        Originally posted by Jengo View Post
        She told him as of right now his fees are dischargable until he can prove otherwise through an AP proceeding.
        Oh, so I guess the Judge telegraphed that it needs to be a Complaint (Adversary Proceeding) and they'd have to do it under 11 USC 523 (Exceptions to Discharge). Cool.

        I hope they know it's $250 just to file an Complaint and that they have to know how to serve a summons. If they are doing it pro se, they are likely to mess up some aspect of it.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          Originally posted by justbroke View Post
          Oh, so I guess the Judge telegraphed that it needs to be a Complaint (Adversary Proceeding) and they'd have to do it under 11 USC 523 (Exceptions to Discharge). Cool.

          I hope they know it's $250 just to file an Complaint and that they have to know how to serve a summons. If they are doing it pro se, they are likely to mess up some aspect of it.
          Yeah, the Judge was really nice and no nonsense. She did tell him that he has until June 1st to make an objection. But as it stands, the amount owing is dischargeable. She told him that what he is alleging in his motion to lift was for an adversarial proceeding and not for a motion to lift and what he is alleging is a 727 issue. He attempted to claim I wasn't living at my place of residence which is just insane because the first time they served me come to find out it was serviced to the wrong apartment complex so I was never served. The judge then also told him about objection to dischargeability which would be impossible for them to prove. So the only area they can go on is that I lied about the debt owing to family members and that they believe there is more money coming from family members than I am claiming, etc. Yes, since filing, my checks have decreased and I have needed a bit more help but this is also noted in my petition that I am a 1099 ad there is likely going to be an increase or decrease in income. If they ask who is giving money at this point, I can just state that my mother is helping a bit more on that one month because my income decreased that much but this is after my filing.

          You know what, this is or can be quite complicated, esp with my income fluctuations, the mess of my bank account statements and all the deposits, etc., and a lot for them to go through and the burden is on them to prove so they would have to incur deposition fees, court reporter fees, and so forth and may prove not worth their time. They are saying they are owed 45,000 or so. But again, I will try to defend it and can provide my financial statements or at least as much as possible to show. But I guess benefits on my BK petition it states that my income fluctuates and shows that my medical needs may also fluctuate so if I can't provide all necessary documentatoin I am at least covered in that aspect. I am hoping if they are aware that they will incur possibly 10,000 iuut of pocket to prove their case which will be difficult that this is enough for them not to proceed with it. Plus my estranged husband will be filing his Chp 13 so they will know they will get paid something rather than forking out more money to pursue a 727 issue as a 523 would be impossible for them to prove.

          This is an attorney for legal fees that are owed to him so he knows the filing costs and how to serve, etc. He may very well file to see how I would respond. As of right now, I have or can come up with about 1800 for an attorney to put in an answer and objection, etc. I don't know. I just want all of this to be over with.

          Do you know the average cost to prosecute a 727 issue? Or even a 523 issue?

          Thank you so much for responding as it is helping a lot. I'm so stressed out right now.

          Comment


          • #6
            Originally posted by Jengo View Post
            Do you know the average cost to prosecute a 727 issue? Or even a 523 issue?
            Most attorneys would want a $4,000 retainer to defend an Adversary Proceeding. That's to start. The rate is $200-$250/hour and they take time. You may end up with depositions, transcript fees, discovery, cross-complaint and bunch of other things that cost $$$.

            Your Judge was very nice to both of you. First to tell them that they don't even have a legal standing for a Motion for Relief from Stay or an 11 USC 523 (Exceptions to Discharge) complaint! Hopefully that would scare them away. I have seen very very few 11 USC 727 complaints, and the last one I saw was the other day. Your adversary would have an uphill battle with that because the entire burden of proof would be on them.

            Hopefully, the Judge discouraged them, because that what it sounds like the Judge was trying to do.
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment


            • #7
              Originally posted by justbroke View Post
              Most attorneys would want a $4,000 retainer to defend an Adversary Proceeding. That's to start. The rate is $200-$250/hour and they take time. You may end up with depositions, transcript fees, discovery, cross-complaint and bunch of other things that cost $$$.

              Your Judge was very nice to both of you. First to tell them that they don't even have a legal standing for a Motion for Relief from Stay or an 11 USC 523 (Exceptions to Discharge) complaint! Hopefully that would scare them away. I have seen very very few 11 USC 727 complaints, and the last one I saw was the other day. Your adversary would have an uphill battle with that because the entire burden of proof would be on them.

              Hopefully, the Judge discouraged them, because that what it sounds like the Judge was trying to do.
              I would imagine that it would cost more for them to pursue it than my having to defend it. There's no reason for me to take their deposition. They would have to incur the costs of taking my deposition to find out more information or inconsistencies. They would probably have to subpoena family members to testify or what have you and I would assume that wouldn't be out of my pocket because they have the burden of proof and their needing to find out information. It seems from what I got from the hearing is that they have questions in re to family debt and family contribution. There are a few other areas alleged in their motion but again I have evidence showing they screwed up the service. I have proof of my residency, etc. Even that won't hold up in that declaration because it states I was at my estranged husband's house 3 to 4 day a week at that point in my life which the rest of the declaration explains why I was there. According to a 727 issue, it seems it would only be in the area of debt owed to family and family contribution that they have questions on which just floors me because they knew the entire time that I was borrowing money or trying to figure out ways to come up with money.

              I guess also a good indication that they don't know what they are doing is that they filed the wrong thing or wrong motion and what they were alleging. If they can't figure that out, Lord knows they're not going to be able to figure out all the rest and the complexities of it on their own and they would have to retain counsel. I know money is an issue for them. He would have to fund the AP, potentially pay for my fees and sanctions if any, and possibly losing their claim of 45,000. Hmmm...that's quite a bit to take in and weighing the pros and cons of it for them. But if my estranged husband files next week like he wants to and they will be included on his, cut your losses type thing and go to the side where you know you'll get some money back rather than risking losing a lot more.

              Comment

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