Assisting somebody in an AP?

[James24255]

I was curious if it is possible to furnish a letter trying to support/explain/refute charges of fraud/misrepresentation in defense of my ex-wife, and if so, whether the letter needs to be notarized in order to be used. She has a preliminary hearing tomorrow. She is ADHD and can't afford to have an attorney defend her. She didn't even consider filing for Ch.7 until I brought it up *and* paid her attorney fees (though I had no obligation to do so)...so she had no reason or opportunity to conspire to defraud her creditor. I'm not sure the arguments I make would even make a difference, but I'd like to help her out if I can.

This all started when my ex moved out and was on her own for about a year when she asked me some advice about a debt consolidation loan. She had started her own business the year previous and wasn't making much money (enough to move out though!), but had spousal support that covered her rent that was only lasting a year. I advised her to look into filing no asset ch. 7, which she had no clue about and had no cash, so I paid the fees because I know what it is like having that debt hanging over your head (and I had got off real easy on the spousal support).

Her filing went smooth until the last day for creditors to file an AP, which one did.
She apparently did a lot of spending during the last 90 days prior to filing, just shy of $6K, though in the AP they are trying to include some additional spending prior to it outside of the 90 days, claiming fraud, misrepresentation, etc, suing for a bit over $9K. Some spending was personal but plenty that was related to her business and a lot just related to living expenses.

Summary of points expressed
*Her income used to be higher when she had a job in previous years, but after failing to find another job, she started her own business. She was busy enough that she had hired some contractors to help.
*She wasn't expecting her business to do poorly, and wasn't banking on failure
*Her approved debt consolidation loan could have paid off all her creditors, so it isn't as if she had "no ability" to pay her debts in full.
*She made payments regularly, including some payments that were well above the minimum payment
*She didn't really know how bad off she was...after she started the filing and had to do the income vs expense exercises in credit counseling is when she learned she was so upside down and was able to start making changes to address that.
*She was largely not responsible for managing household finances and budget during the previous 6 years to her being on her own, she wasn't aware of her net worth and hasn't even filed her own taxes before, I used to handle all of that.
*She was not considering filing up until about a month before the filing date when I brought it up, nor could she afford the attorney's fees.

Essentially once she found out about it and that I was willing to help cover the fees, she started the process. I had told her to talk to the attorney about any previous expenditures and see if they would recommend adjusting the timing of filing, but I'm not sure she did or if the firm just wanted to get the cash and get started ASAP without regard to the potential for APs. I wasn't privy to any of that.

Anyways, thanks for the read if you were able to muddle through it. Not sure if she can even use the letter I wrote for her as is or if I need to notarize it, and even if it is usable, whether it will actually help, given the circumstances. The only thing her current attorney is doing is telling her she can start a payment plan to the creditor, starting by coughing up $2K. Her Schedule I & J was balancing out to about -615/month, so that obviously can't happen.

[LadyInTheRed]

Don't send anything to the court without running it past her attorney. Is her attorney at least going to try to defend her at the AP?

[Pjmax]

Hi James, I'm sorry I don't have any advice for you, but I wanted to say I think it's great of you to help your ex, instead of just writing her off. You can only do so much I know, but I'm sure you've got extra points with the karma gods.

[James24255]

The lawyer is not contracted to represent her in regards to the AP. The lawyer is also very slow and unmotivated to answer any questions pertaining to the AP, since at this point she is no longer being paid for her time. They just wanted the $ for the easy no asset filing part, not anything else, apparently. She will have no representation. I wasn't sure of how to actually provide a letter for her to use in her case. I just emailed her a word document. Wasn't sure if she could bring that in or if I'd have to notarize it and submit it independently or something. I have no idea how this works, or if it will even make a difference.

[LadyInTheRed]

I don't know if you are willing to pay any more attorney fees for her. Pjmax is right that you have already earned Karma points for helping as much as you already have. But, having an attorney appear at the AP could be helpful. It may be too late to get somebody to appear tomorrow. But, she could go to court and ask the judge to continue the hearing to allow her to hire an attorney.

I don't know how helpful the letter will be. The statement from you that you suggested BK to her only a month before she filed might help counter the presumption that charges within 90 days are non-dischargeable. One thing you want to be careful of is that you are submitting the letter as a witness, not making legal arguments. You are not licensed to practice law and shouldn't be making legal arguments on her behalf. For purposes of the AP, she is her own attorney and must make her own legal arguements.

Something she should keep in mind is that the 90 day presumption applies to purchases of luxury goods and services. She should point out all charges that were not for luxury goods and services. She should bring evidence that she continued to made payments after making the charges. For debts that do not fall under the presumption, the creditor must prove the debt is not dischargeable. For debts that do fall under the presumption, she must prove they are dischargeable.

She should read and understand the law about exceptions to discharge: http://www.law.cornell.edu/uscode/text/11/523

Here's the part describing the types of debt that are presumed to be non-dischargeable:

(C)
(i) for purposes of subparagraph (A)—
(I) consumer debts owed to a single creditor and aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and
(II) cash advances aggregating more than $750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable; and
(ii) for purposes of this subparagraph—
(I) the terms “consumer”, “credit”, and “open end credit plan” have the same meanings as in section 103 of the Truth in Lending Act; and
(II) the term “luxury goods or services” does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor;

For debts that don't fall under that description, the burden of proof is on the creditor.

[James24255]

Hmm the lawyer is saying she doesn't think the letter will help and that it is already too late. She has also apparently never dealt with a proceeding like this before. She also told her not to show up in court because the case was just going to be continued anyways.

I'm a bit concerned that nobody responded to the Motion/Answer due date, in which case I guess none of this matters anyways (or would the case be continued if there was no response made within the 30 days)? The only thing she was getting from her lawyer was offers to set up a payment plan from the creditor!

Quite confusing.

[tobee43]

i hope she is granted a continuous, james you been a great soul for helping her. she needs a bit more guidance tho.

a real true alarm went off in my head with the atty told you they never dealt with a situation like this. of course an AP is not included in the fee for filing the bk, however, the atty should have explained and spoken with your ex about when was the last time she used her cards etc. by delaying the filing this situation could have been avoided all together...and i know hind sight is this and that. most APs in the day i filed cost $500-$700 each, however, times have changed and they could be more now, however, a small price to pay with you think of what it can result in. an AP is a bit tricky and an atty that is on your side is a valuable tool to help one through this.

as lady points out usually applies to the purchases of luxury goods and services, so if she charged a cruise, that could be an issue. can there by a way you can get there with her today and explain to the judge you need to time for her to get an atty.
your ex is not paying her bills now, correct? so she should have some funds to retain someone to help her through this. if not, i would call legal services and see if they can point her in a direction, i know the firm that handled our case also handled pro bono cases for those that couldn't afford an atty.

best of luck and i hope it all works out for her.

[frogger]

You need to be extremely careful in "helping" in this matter unless you have a license to practice law.

[justbroke]

A couple of things.

First, if no one answered, then the plaintiff (lender) will ask the Clerk of the Court to file an order finding you (the defendant) in default. It's hard to get around the default to start with.

Second, writing a letter will not do anything that I now of. Testimony under oath is the only way to testify on behalf of someone. The letter is nothing more than hearsay in the court.

I would say that settlement on the AP may be warranted. Only an attorney can advise you on whether to settle or not; it appears that one has. You could negotiate the amount of the settlement (for less than what they are seeking) and maybe even arrange reasonable payments. (Personally, I do not believe a first payment of $2K on a $6K (or $9K) debt is even worth mentioning. Try to take the amount, divide by 36 months and offer 36 payments at 0% interest. That's about $166 - $250/month over 36 months.)

The AP is serious business and there is likely to be a judgment.

(P.S. if a bankruptcy attorney, whether skilled in APs or not, is saying to settle, settle, settle and make a payment arrangement... that should tell you something. My reading is that the attorney believes that there is no defense. From what you wrote about the $6K in charges within the 90 days, I don't think so either.)

[James24255]

I'd like to take a moment and acknowledge all of the helpful feedback that has been provided. The value of this forum and its members investing their time and thoughts on the behalf of complete strangers is, relatively speaking, beyond compare. Thank you.

While I'm still a bit confused as to what is going to happen with her situation, I have found great use and understanding in the feedback that has been received and have passed some information along. The referral to legal aid I'm hoping will be fruitful, but I know she lives with somebody so I wasn't sure if she'd qualify. I was really hoping I could submit a sworn affidavit as testifying in court was a bit more involvement than I was planning for, but I'm hopeful she'll still get some guidance from her BK attorney to assist in settling. Perhaps the implication of a fight might help make the terms better. I'll just have to wait and see what they come up with.