Help. Question about adversary proceeding

[sylvester30]

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[jal1129]

I don't have experience in this area but have read cases in this forum that cc can go back 6 months from the date of filing for large (over $2000) cash advances and purchases. And Chase seems to be one of the ones known for doing this type of thing. Sorry I could'nt be of more help. I am sure someone else will come along who knows more than I do.

[HHM]

First understand, the trustee has nothing to do with creditor objections, the trustee makes no ruling on the matter and the trustee is not involved. Creditor objections are strictly between the debtor and and the creditor (and the bankruptcy court).

However, I do not have much good news for you here, the way you described the situation...Chase, in my opinion, has a better than 50/50 case. The charge was made 5 months from filing BK, it was a significant charge, and a cash advance (convenience checks are usually considered cash advances) and the debtor did not make any conforming payments, i.e. did not even make the minimum payments. Essentially what that means to the court will be that the debtor made this charge with no reasonable expectation that she could pay it back according to the terms of the credit cards, hence bankruptcy fraud.

What chase would file is what is called an "Objection to Discharge" Which means, that, Chase is asking the court, under section 523 of the BK code, to issue order saying the money your fiance owes to Chase is not discharged and she will be required to pay it back after the BK is discharged. (note, her BK will still receive discharge, but if Chase wins, you must still pay them back). If Chase files the objection with the court (assuming you can't settle), there will be a hearing, your fiance will probably testify, (and perhaps you too), and be cross examined by Chase's attorney.

[SamanthaJones]

Has anyone in here ever faced a hearing for an adversary?

It seems like a lawsuit has to be filed- anyone can do that for about $90 to try to scare someone, but to actually follow up in a court with a lawyer, I have not heard of that happening (regarding credit cards objecting). I have heard of several people agreeing to a concession/reduced debt amount, though, after becoming aware that a creditor had 'threatened' a lawsuit. I am thinking that actually pursue the lawsuit would be too expensive for the creditors- and really, they can view the debtors 'spreadsheets' to realize that the debtor does not have the money to pay the debt, even if the case were won in court?

[lrprn]

SamanthaJones, I don't know where you've been reading, but credit cards do indeed object to specific debts and file objections to bankruptcy cases all the time.

Columbia University's Omni Law website at http://www.columbia.edu/itc/tc/bolot.../db/7when.html lists what typically triggers creditors to object to discharge:

"Increasingly, the creditors most likely to object to the discharge of a debt are credit card issuers. There are few specific rules about what constitutes credit card fraud in bankruptcy. But courts are increasingly looking to the following factors to determine fraud:
* short time between incurring the charges and filing for bankruptcy
* consulting an attorney before incurring more debt
* recent charges over $1,150
* many charges under $50 (to avoid pre-clearance of the charge by the credit card issuer) when you've reached your credit limit
* charges after the card issuer has ordered you to return the card or sent several "past due" notices
* changes in your pattern of use of the card (for instance, much travel after a sedentary life)
* charges after you're obviously insolvent (no job, income or savings); you could probably defeat a claim of fraud because of no job if you diligently sought employment
* charges for luxuries, and
* multiple charges on the same day."
Unfortunately Sylvester30 made a very large $13K cash advance fairly close to filing. Going to court to not discharge that amount is easily worth the effort.

Even though the $13K charge was made outside the 90 day window, since the amount is so large and close enough to filing, the trustee will have an easier time stating that the charge was fraudulent. Since they took out the money while both of them were unemployed, unless they can show they were actively trying to find employment during that time, it will be an uphill battle for sylvester and his fiance to now prove they took the money with every intention of paying it back in a timely manner.

HHM is right. In this circumstance the creditor has most of the advantage unless Syvester30 and his fiance can prove taking the advance by charging it on their credit card was necessary, can prove that every penny of that advance went for legitimate purposes, can prove that there was a good faith effort to start paying it back before filing, and that they had a way to pay in place beforehand to make sure they could pay the $13K advance back in a timely fashion. A very tall order for two unemployed college students who don't plan to be employed until 2008.

[HHM]

Also realize, (and particularly with Chase) the local attorney who would file the action is working on contingency (20%-25%) and these objections are not like a typical lawsuit, so they are not as expensive as you might think. The objection, itself, is a relatively simple form document. Once the document is filed, a hearing is set (a mini trial) in which evidence is presented, and the judge will make a decision. The evidence that is required is primarily paperwork from the creditor (to prove the charges happened) and the rest is generally testimony from the debtors. The entire hearing only takes about 2-4 hours (if that).

Moreover, if Chase wins, they are sometimes entitled to attorney's fees and costs on top of the judgment. From the attorneys perspective, they are looking at a fee of roughly $3,250 on this case (25% on $13,000) for about 6-7 hours worth of work. Granted, they would rather settle the case for less and only spend about 1-2 hours on the matter, but because of the amount involved, this case would be worth pursuing for Chase (and their local attorney) if the debtor cannot or will not settle.

Moreover, if the debt is declared non-dischargeable, Chase now has a judgment against the debtor that can NEVER be discharged or eliminated. That judgment has value, Chase can easily sell it to a 3rd party debt buyer for well over 50% of the value and between the tax right off for the charge-off and the sale price of the judgment, Chase would probably break even.

I really feel bad about this situation...and it really sounds like your attorney gave some bad advice. Without knowing more, declaring BK was probably not the right course of action, at least not yet. You are not even out of school, by your own admission, neither of you is working and you are accumulating huge student loans. At the very least, you should have waited (if possible) until you were finished or nearly finished with school, because if you are living off debt, that means you will only accumulate more debt after this BK. Given the amount of student loan debt, I am guessing you are a couple of budding Doctors, correct? If so, at least that means you will have plenty of options for getting student loan forgiveness.

[aa06a47]

I do not know what you and your finance's degree is in, but if you will have 500k in student loans to pay back, I hope the degree will offer you the abiltiy to make bookoo bucks to pay that 1/2 million back.

As others above had said, Chase has local attorneys, mainly in larger cities, who get paid a % of what they collect. I actually know one of those attorneys. She recently bosted her firm collected over 1/2 million last year for Chase in credit card settlements from objections to discharge in bk cases.

The reason your attorney believes he has a 50/50 chance of winning in court is that the burdon of proof lies on Chase to prove your charges were fradulant. Chase will present there case as to why the charges are fradulant, and you will have to provide a defense on why Chase is wrong. That big of cash advance tied in with no income to pay it back, will probably make there job easy.

Other creditors may choose to object to discharge if similiar charges were made within 6 months of filing. I understand most credit card companies don't go back much more than 6 months but some do look back as far as a year.

[sylvester30]

Adversary Proceeding??? Additonal Info

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[HHM]

An "Objection" to Discharge that is filed by a creditor, IS an "Adversary" Proceeding, Creditor vs. Debtor. So yes, if Chase wins, the entire debt you owe Chase will not be discharged. Remember, the judge is bound by the law here, you may have a sympathetic story, but if at the time you made the cash advance...you were unemployed, had no source of income, etc, I am not sure the judge will have any choice but to rule in Chase's favor. Obviously, we don't have all the facts, I hope you win, I really do.

Also, you need to realize that Fraud for purposes of bankruptcy is a very different beast than Fraud. Again, the BK Trustee and the US Trustee are only concerned with whether you have any "assets" or "income" with which to pay creditors. They do not care how you got into debt. So, if the BK Trustee or US Trustee come after you, it is because they believe you are trying to abuse the system by having your debt discharge when in fact you can pay those debts.

When a creditor comes after you for fraud, it is about you using the credit they offered, but you having no reasonable belief or ability that pay it back.

In short, for BK Fraud purposes
US Trustee and BK Trustee only care if you have the ability to pay something back to creditors, but are trying to get your debts discharged instead

Creditors care about if you used their money within a short time of filing BK, and had NO reasonable belief or ability that you could pay it back.

[keepmine]

Chase does play rough. Here's a post from another site from someone dealing with an adverserial proceeding.

http://forum.freeadvice.com/showthread.php?t=353973

The notion fom another post that legal fees may prevent a creditor from challenging the discharge of a debt is just wrong. Chase is one of the largest financial institutions on the planet. What's a few grand to them?

[JollyGG]

I agree with HMM it sounds like you don't have the best lawyer for your case. But, It's too late to worry about that now.

You could always try to settle for the $5000 as your lawyer sugested and work out a 12 month payment plan. What year of medical school are you in? Sometimes the summer research projects can get you a pretty decent paycheck that could be used to work on this debt. Then just cross your fingers that other creditors won't object. It sounds to me like Chase is one of the more agressive about objections.

If you decide to have your lawyer fight the objection here is how that will work.
1. Your lawyer will send chase a letter basically stating that this is a dischargable debt due to (whatever he thinks will work).
2. Chase will have to decide if they actually still want to object. (I had two smaller debts that decided to not go forward at this step as the debt was not very large. Unfortunatelly your debt is large and they are likely to object)
3. Objection is filed.
4. Hearing is held
5. If you loose you are responsible for the the debt (it is nondischargable) for that specific card and you are responsible for your lawyers fees.
If you win the debt is discharged with your bankruptcy. Ask your lawyer about requesting Chase pay legal fees in this case. There is code in the bankrupty law to allow this.

I hope things work out for you and your fiance. Just remember that at this point it looks like you will at least come out of this mess better than before even if some debt survives.

[SinkingFast]

You might wanna ask your attny what the fee is to defend you in this action. Typically, defending you in an Adversarial proceeding is beyond the scope of the initial BK fee you paid when you filed. Our attny charges $2K, in advance, to defend clients if a Creditor files an adversarial procedure.

That's something you need to consider too.

[Spartan]

....... <edited due to not having anything nice to say, after remembering the original story...>

[HHM]

Was this one of the cash advances used for Gambling that you didn't tell your fiance about? You had posted earlier about Gambling (which you have edited out now)?

[sylvester30]

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