Debtor Fraud Can End A Bankruptcy

I am not an attorney, I am a judgment referral expert (Judgment Broker). This article is just my opinion, based on the laws I have studied, and what I have learned. Nothing in any of my articles can ever be considered legal advice.

What if you are enforcing a judgment for about $32,000 against a debtor that appears to live very well? What if you had previously paid for a court reporter at an Order to appear for EXamination (OEX) of the debtor, and you recorded them lying about bank accounts, and saying he had no income at all, and that his wife pays all the bills.

What if the debtor then files for Chapter Seven bankruptcy protection three days after they discover that you (as your next step for enforcement) had subpoenaed his corporate banking records? What if you expect that the bank records will prove the debtor perjured themselves. Can you use this information to thwart the judgment debtor's bankruptcy?

In California, personally serving a debtor with an OEX creates a silent 1-year lien on their personal property. What if you also already recorded a property lien long before the bankruptcy?

To make our story even more interesting, what if the debtor also fraudulently transferred his car after your attempt to levy it? With all your proof of fraud, does it make sense to challenge the judgment debtor's bankruptcy (starting by attending the 341 creditor's meeting)?

Especially if the judgment debtor files a "no asset" bankruptcy, it does not matter if you are listed as a creditor or not. In California, your OEX lien made you a secured creditor, as did your filed abstract of judgment, if the debtor has real estate.

I am not an attorney lawyer, however I would file a proof of claim. Then, study the judgment debtor's bankruptcy schedules, to see if that car they recently transferred is listed, or for anything else that may be suspicious.

Then, attend the 341 Creditor's meeting. Then, think about the bankruptcy court's tendency to say "So What?" when you prove the judgment debtor's lies.

At the 341 meeting, ask the debtor questions about their schedules. Either they will admit that their schedules are wrong, or they will lie. Either way might be good for you. The 341 meeting is recorded, and you can request (for a small fee) a CD of the recorded proceeding, and then you can order a transcript, which may be valuable.

If bankruptcy schedules are amended too often, some bankruptcy judges may deny a discharge, if their schedules were signed under penalty of perjury and there is no valid excuse for omitting an asset or lying about it, or if assets are transferred soon before the BK petition was filed. Your questions at the 341 meeting should be to catch their lies, but not disclosing what you already know.

There are two types of adversarial bankruptcy motions that one (or more likely one's lawyer) can start. One is a 523 action, where only a particular judgment or debt may be rendered non-dischargeable. More Powerful is a 727 action, where all debts and judgments can be declared non-dischargeable.

You have two choices, the first choice is you can challenge the judgment debtor at the 341 meeting - and the trustee may say, "So what? Let's get this over with" and probably will let the judgment debtor change their petition to conform to the truth.

Another choice is you may file a Rule 523 or a 727 Action for 1) fraudulently transferring assets within one year of filing their petition or 2) for "untruthfulness" of their bankruptcy petition. Note that some bankruptcy judges do not allow pro-pers to appear in their court rooms.

That a judgment debtor previously lied in state court, is usually one of those "So what?" situations. Bringing a 523 or 727 action is expensive and difficult, so it makes sense only when you know you can win, and the judgment debtor actually has some assets somewhere.

When you win your 727 action, this is sometimes named a "bankruptcy bomb", because all the debtor's listed debts are made forever non-dischargeable. This is a scary thing for the judgment debtor, and often they will quickly drop out of bankruptcy. See http://doney.net/bkcode/11usc0727.htm

If you win your 727 motion, the judgment debtor's bankruptcy estate still gets administered. It is a nightmare for the debtors. All of their assets are tied up and get liquidated, and none of their debts get discharged. In a 727 action, all creditors benefit from your effort and expense.

Even in a community property state, non-debtor spouses are not liable for the debts of their debtor-spouse. Instead, the community estate is subject to enforcement, if such an estate exists.

A discharge of the debtor-spouse's debt invokes the bankruptcy permanent injunction of the community estate. When the judgment debtor receives a discharge, it effectively prevents you from enforcing against the non-debtor spouse's community estate.


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Mark Shapiro - Judgment Broker - Free leads for Judgment Enforcers and contingency collection attorneys.

http://www.JudgmentBuy.com - is the best judgment solution, where Judgments quickly get Purchased or Enforced by the best!