Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

I've had several clients come to me after working with debt settlement companies that have provided no service at all, except to take my client's money.  These debt settlement contracts usually provide that the debt settlement company will set up a trust account with your name on it and take their fees and payments first.  Then, when there's enough money in the account, they will begin to negotiate with your creditors.  When you agree to the settlement of the debt, the debt settlement company gets even more money.  To say that they nickel and dime you into further debt is being nice.  I would like to think of it as unconscionable; that's the legal term.

Bruce Weiner, a New York bankruptcy lawyer, points out the pitfalls of working with debt settlement companies in his recent blog, "1099-C and Forgiveness of Debt:  Another Reason to Be Wary of Debt Settlement Companies," and "Wall Street Journal Says, 'Beware of Debt Relief Offers,'"  that these companies make false promises and don't deliver.  Their marketing campaigns invade every inch of the media and they serve to disseminate bad information on a viral level that only confuses the general public and causes many to go further into to debt than needed to avoid the stigma of bankruptcy.

1. Debt Settlement Companies can be scams; and
2. Debt Settlement Companies can cause you to have to pay income taxes on settled debts.

Debt Settlement companies are, generally, not lawyers and cannot give legal advice about your debts, including advising you not to pay your debts.  They cannot stop lawsuits or wage garnishments; or foreclosure on your home.  The automatic stay, is an injunctive statute that stops all attempts to collect a debt from you the moment you file for bankruptcy.  DON'T GET SCAMMED!

• Email This
• Print
• Comments
• Trackbacks

The use of bankruptcy as a strategic move in litigation requires a fine line approach.  Susan S. Davis and Alicia N. Vaz wrote, The Impact of Adversary Filing for Bankruptcy during Civil Litigation , Los Angeles Lawyer (Sept., 2009), from a litigation strategy perspective.

As a debtor strategy, the first inclination in seeking bankruptcy protection is to invoke 11 U.S.C. §362(a), known as the “automatic stay.” The automatic stay operates to stop actions or proceedings against the debtor, the moment the bankruptcy petition is filed with the bankruptcy court.

Before continuing any action against the debtor, a party in a pending litigation must obtain relief from the automatic stay. Within the Central District of California, the party seeking relief from the automatic stay would file a Notice of Motion and Motion for Relief From the Automatic Stay under 11 U.S.C. § 362. You can find the forms here. The likelihood of prevailing on a motion for relief is highly dependent upon the type of bankruptcy action filed by the debtor, whether the bankruptcy court is the proper venue for the action and whether any insurance coverage will be afforded to the judgment.

Other considerations include timing, injunctions, removal, forum, varied jury pools and procedural concerns. Keep in mind that the bankruptcy court is a court of special jurisdiction and simply, is not equipped to handle the more complex and varied cases. Much like the law of insurance, if it should be covered elsewhere, then that is where it belongs.

From a debtor standpoint, be wary of using bankruptcy as a strategy in any civil litigation case because you must file bankruptcy in good faith and the other party will most likely be granted relief from the automatic stay where it would be appropriate for the court to do so. 

• Email This
• Print
• Comments
• Trackbacks

  Yesterday I received an invitation to connect with Steven Horowitz on LinkedIn.  His invitation to connect was unassuming, "I publish the Bankruptcy Bill and BAPCPA Man cartoons and thought it might make sense to link up."  I am open to build my professional network via LinkedIn and you may connect with me directly here.  As I surfed through several groups I belong to on the website, I came accross his blog, BankruptcyBill.  

Considering the negative stigma around bankruptcy law and in light of our nation's economic woes, these cartoons are a refreshing departure.  They're easy to read and understand.  They take the law and break it down into layman's terms; a gift I rather admire.  In BAPCPA MAN #2, he discusses the automatic stay as a force field that protects the debtor from their creditors.  The cartoon is a fun explanation of the law and below the cartoon itself, are links that provide the reader with additional information on the topic discussed.

It's genius!  The blog also provides links to other bankruptcy lawyer blogs and the authors even write Haikus.  You're invited to add your own in the comments section of the website.  What is a Haiku?  Here is my version of a bankruptcy haiku:

I love bankruptcy.  It will get you a fresh start.  A bright future now.

 I am a fan of creativity.  I encourage you to check out the blog.  My only suggestion is that it should be published on LexBlog's platform; I'm biased that way.

• Email This
• Print
• Comments
• Trackbacks