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How do I respond to a threat of an adversary proceeding (11 U.S.C. 523 (a)) on a Chapter 7?
Anonymous0 views4 answers
After filing for bankruptcy, My wife and I received a letter from an attorney representing Chase Bank threatening to file an adversary proceeding against us for charges on the credit card statement. I recently lost my job and was in a motorcycle accident which was the straw that forced the bankruptcy. My wife also received a dramatic reduction in pay. All charges were necessary (Car repairs, Croceries, Rent, Vehicle Registration). There is absolutely nothing extravagent (TV, Vacations, Clothes). In their letter they make an offer to pay them in lieu of the 523 but We have nothing to hide. How do we handle this? Do they have to prove their case just like in a standard court case? What should we provide to prove our innocense? And what exactly are the laws regarding this matter?
I assume you are representing yourselves and do not have an attorney. These type of letters are both fishing expeditions by the creditor but also opportunities to explain your circumstances. You must have had some usage on the credit card account near in time to filing your bankruptcy case or single transactions which were large and out of the ordinary. These are red flags.
The threat is that they will file a complaint based on fraud. That is, that you incurred debt without the ability or reasonable expectation of being able to repay it. Depending on when you incurred the debt, and for what, the burden of proof may be on you to disprove their allegations, as opposed to the burden on them to prove them.
Either way, however, it is very fact specific and you should have an attorney analyze your situation and--if you decide to respond to the letter--handle it very carefully. I respond to these letters for my clients when they have a good explanation about the recent charges (for example, a sudden unexpected job loss that occurred AFTER the charges were made, etc.). That will usually prevent the creditor from filing the adversary proceeding.
There's no real harm in NOT responding to the letter, so if you're uncertain, that's the best way to go. If they file the adversary proceeding, you will then have time to present your case defense, but at that point you will likely need to hire an attorney to defend you.
If the charges were made in the 90 days before you filed bankruptcy you will have to prove that you intended to make thepayments when you made the charges. Outside of the last 90 days andd tghe creditor has to prove that you had no ability or intent to repay the debt.
Adversary proceeding is very much like a civil complaint in non bankruptcy court. The rules you need to know are the Federal Rule of Civil Procedure, the Local Rules of Fed. Pro. and the Fed. Bankruptcy Rules. In short you need a lawyer. This is truly not something you will learn overnight. I wish I could help you but I am 3000 miles away. Our church is reaching out to people being manipulated by Credit Card companies that are using procedure (s) to win their point. Maybe you should contact your church and ask if they have a lawyer in the congregation that can help.
The information provided is based only on the information contained in the question. My Opinion is general in nature concerning common legal issues. Individuals receiving such information should consider retaining the Barbieri & Associates or an attorney of their choice to obtain a more in-depth individual analysis of their relevant facts and legal issues. This answer is not intended to and does not create an attorney-client relationship between a Barbieri & Associates and any Requesters.
Most of the time these letters are fishing expeditions. You should be careful if and how you respond because you may provide the other side with evidence that can be used against you, which it does not have. If the credit card charges were incurred more than 90 days before you filed your bankruptcy, there is a legal presumption that they are not fraudulent and dischargeable. If they were made within 90 days of filing bankruptcy, the presumption does not arise. If they were for cash advances aggregating more than $1,500 or for purchase of luxury goods or services, you may have to settle or risk losing at trial. However, your description of the expenses seems to indicate otherwise.
So, if all the charges are 90+ day charges, I would not respond at all. If you feel you must respond state in effect, the charges are over 90 days and I don't have to prove anything, so leave me alone.
If they are within 90 days of filing, I'd recommend responding (in writing) by stating, the charges were for necessities, and I intended to repay the charges when I incurred them, but I recently lost my job and was injured in a motor vehicle accident so I was prevented.
If the creditor brings an adversary under 11 USC 523(a)(2) and loses, and the court determines it was not substantially justified, you may be entitled to be compensated for your attorney's fees. So if the creditor brings an adversary, I would recommend hiring a competent bankruptcy lawyer, unless the amount is just not worth it.
