HELP! I just got a 523 Adversarial Complaint

[cal]

I filed a Chapter 7 no assets bankruptcy with my husband back in December and the Trustee has already reported no assets to he court. But we have a nightmare creditor after us stemming from a judgment for $150,000. I don't think the creditor is an attorney, but I think he does judgment recovery and know that he owns www.tenantscreeningbackgroundcheck.com He has filed pro se against me and my husband a 523 proceeding alleging three counts of fraud. Our original state court judgment from years ago did have fraud alleged but we settled it and because we did not pay any money to the creditor then, we had a stipulated judgment entered against us.

One of the counts against us is a 523(a)(19) accusing us of securities fraud. We did own a corporation with privately held stock at the time and he says we failed to give creditor stock for a loan that the we promised to give. But I don't know how he can prove that because wasn't in the agreement for the loan but the allegation was in the original lawsuit filed against us that lead to the judgment alleges our promise to give stock.

Presently, we have an attorney but we are thinking about defending ourselves pro se because he wants an initial retainer of $10,000 to defend us in the 523 and he says this could cost us over $50,000.

What is a reasonable retainer for a 523 alleging 3 accounts of fraud and a possible 727 action coming because we have blocked out some details on financial statements?

And how can we defend ourselves in a 523?

Any advice is greatly appreciated!

[HHM]

Pay the $10,000 (sorry to say). Even if the other side is pro se, sounds like he at least knows the system to some degree, you will need an attorney to help control him from a procedural level. I doubt the case would go as high as $50,000, but a pro se plaintiff with more time can make a real mess of things and chew up a lot of time.

Note, adversarial proceedings are separate actions from your bankruptcy, so you can hire a different attorney to handle it.

The burden of proof will be on the plaintiff, but with a possibility of having a $150K judgment declared non-dischargeable, which means it can NEVER be discharged, the cost benefit of you going pro se does not make sense.

[TurnThePage]

I agree with HHM. Allegations of fraud should definitely be grounds to consider hiring an attorney. The plus side is that if you do win the case, the Creditor will also be liable for your attorney fees.

[cal]

Unfortunately, I don't think I could get attorney fees and costs awarded even if I could win my 523. My attorney sent me code that determines the awarding court costs to debtor who wins:

To obtain an award of attorneys' fees under [sections] 523(d), the debtor must prove that:

(a) a creditor requested a determination of dischargeability of debt under [sections] 523(a)(2);

(b) the debt is a consumer debt; and

(c) the debt was discharged.

When the debtor makes a prima facie showing by establishing these three elements, the creditor can avoid the imposition of attorneys' fees and costs only by proving:

(a) the creditor's actions were substantially justified; or

(b) special circumstances exist to make an award of fees unjust.


The sad part is that my debt is not considered personal debt but a loan made to my corporation. I am so scared because this creditor is really after me. I hope he doesn't try to get us both put into jail because we have altered documents in our 2004 exam?

I am worried sick because all the attorney's we are no talking with are wanting a LOT of money and tell me we don't have a very good chance of winning.

[jimbo367]

10K, crazy

At $250 an hour that's 40 hours.

3-4 to prepare, 2-3 hours at a trial, don't go flat fee.

This is a $2500-$3500 deal at most shop it.

[HHM]

10K, crazy

At $250 an hour that's 40 hours.

3-4 to prepare, 2-3 hours at a trial, don't go flat fee.

This is a $2500-$3500 deal at most shop it.

BS, you have no idea what it takes to go trial. Or I should say, to go to trial and do it right. Any AP is a minimum of $5K and goes up from there. If an attorney really spent only 3-4 hours preping for a full blown case, they would be guilty of malpractice. In a case like this, there will also be discovery and deposition. This isn't some credit card objection with basic facts. The entire underlying case will might need to be essentially retried.

[jimbo367]

No BS, been there done that,

Especially with the creditor going pro se, your lawyer knows he would have an edge in your favor.
when he said it could go 50K he's just playing you IMO

In fact re rereading the OP go forward pro se, you'll be going against a pro se litigant you will be on a more level play field.

[cal]

We have 3 counts and not just one against us on a 523 + facing a possible 727. All of the attorneys that I have showed this to so far tell me that I am in big trouble because this guy is not just your average pro se litigant - he has been filing stuff in court against us now for months and winning. I have not yet found an attorney that believes we have a chance of winning. The advice I have been getting is that he will drag this out to cost us an absolute fortune in discovery. The way he is, I am sure this could go on for a year.

A big problem we apparently have is that our fraud with securities doesn't even have to be proven, just alleged in the complaint from state court. If that is true, we are cooked I am afraid.

[MSbklawyer]

I'm with HHM on this one. If you have confidence in your attorney, then beg, borrow or steal the 10K. You don't want a 150K non-dischargeable debt following you around for the rest of your life.

[jimbo367]

he will drag this out to cost us an absolute fortune in discovery. The way he is, I am sure this could go on for a year.

A big problem we apparently have is that our fraud with securities doesn't even have to be proven, just alleged in the complaint from state court. If that is true, we are cooked I am afraid.

[cal]

In consultations, attorneys have made it clear that my stock fraud is a serious problem and yes, it doesn't matter it it is privately held stock, the fact is the complaint ALLEGES fraud with stock that was not delivered as promised. This issue was never litigated in state court because there was a settlement agreement and the agreement only stated that this whole thing would go away IF we paid the money promised which we paid NOTHING.

The other major problem is that the discovery is not just limited us as debtors in a deposition but for me to produce all of the documents that will be requested AND all of the third party discovery requests that will be made. Creditor will be able to go on a fishing expedition of serving subpoenas on many financial institutions and begin meddling with all of my business dealings such as former employees, landlords for business leases, and clients of my corporation. This could go on for over a year and meanwhile he is threatened to also add a 727 action because we have refused to cooperate with a 2004 exam.

I have not heard anyone mention settlement - would this possibly be the best avenue to explore?

Thanks for all your help!

[HHM]

Well, you already settled once and didn't pay, so I am not sure what the other sides motivation would be to settle. (sorry, had to point that out).

You can try to settle, but you still need to respond to the complaint within a certain period of time, so you don't have that much time to put this together.

[TurnThePage]

"I graduated last in my class from a fly-by-night law school that no longer exists .." Have to say, I love MSbklawyer's disclaimer, LOL

[JackBondLove]

Have you thought about emigrating?

[TurnThePage]

cal, I do think your best bet is to retain the attorney, if there is any possibility that you can afford it; it sounds like the plaintiff has a strong case against you, especially with the possibility of a 727 action.

You could shop around for a better rate in attorneys' fees, but most will probably charge at least $5,000 plus an hourly rate for these AP's ... As the case proceeds, you'll need an attorney to raise affirmative defenses, objections, technical defects, etc., in all of these procedural allegations. AP's are very complicated as they utilize the Federal Rules of Bankruptcy Procedure, the Federal Rules of Civil Procedure, & the Federal Rules of Evidence. Good luck.

Disclaimer: While I was a pro se litigant in an AP, I am not an attorney and cannot offer legal advice.