June 20, 2011
Bankruptcy Court Questions Naiveté of Debtor – When the Debtor’s Spouse is a Paralegal
Allegations in credit card company’s complaint, that Chapter 7 debtor ran up more than $3,700 in charges against her account in space of roughly one month, at time when debtor’s total unsecured credit card debt of more than $88,000 was in excess of her ability to pay it and when debtor, through her paralegal spouse, had access to legal advice, sufficiently pled facts supporting an inference of fraudulent intent to state plausible claim to except credit card debt from discharge on “false pretenses, false representation, or actual fraud” theory, and to preclude dismissal of complaint as failing to state cause of action. In re Vanarthos 445 B.R. 257 (Bkrtcy.S.D.N.Y.,2011).
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During 15 years of practicing bankruptcy law, I observed borrowers who were heavily over extended in credit card debt. I had to console many borrowers who cried because they were unable to pay their creditors. Only an isolated few seemed to have an attitude which indicated that they might have planned a credit card bust out. Nevertheless, I observed debtors in bankruptcy who were represented by bankruptcy mills whose clients were routinely sued in adversary proceedings seeking to prevent their debtor clients from discharging their credit card accounts because of alleged fraud. Although the particular debtors described in this post may have represented themselves, I have observed enough to know that many bankruptcy lawyers do not know or do not care and act surprised later when the "stuff" hits the fan. Although newbie bankruptcy lawyers account for a substantial portion of the incompetent advice, bankruptcy mills run by experienced bankruptcy lawyers who presumably know better probably injure more consumers.
Posted by: Florida Bankruptcy Lawyer | Jul 10, 2011 11:30:27 AM