Bankruptcy Court Warns Filers to Stop Abusing the Bankruptcy System

By: Allen A. Kolber, Esq. 

Last week the Federal Bankruptcy Judge in White Plains, NY issued a warning that many people are filing emergency Bankruptcy cases to stop foreclosure sales.  The Bankruptcy Court warned that these individuals were abusing the system by paying only a partial filing fee, failing to file the required documents and failing to appear at the Bankruptcy hearings.  The White Plains Bankruptcy Judge (who covers Rockland County) discussed his concerns with the Chief Bankruptcy Judge (who covers Orange and Ulster Counties).

While it is a Constitutional right to file a Bankruptcy case to cancel a foreclosure sale, it is an abuse of the Bankruptcy Code to file a case in “Bad Faith”, which means:

  • Filing more than 1 or 2 cases within 1 or 2 years.
  • Using the Bankruptcy Court to stop only one lawsuit.
  • The flier fails to provide documents or appear in court
  • The filer fails to make required payments to the Bankruptcy Trustee.

The Bankruptcy Court, its Judges, Trustees and attorneys are all under the supervision of the U.S. Department of Justice, which supervises the FBI and is responsible for investigating financial fraud through Federal prosecutors.

I am full-time Bankruptcy attorney.  I spend most of my week in Bankruptcy Court in front of these Judges.  I am usually in Court when the Trustee calls out the names of filers who have never appeared in Court and advises the Judge that this particular individual has filed for Bankruptcy two or three times in the past.

In my own private practice, I have heard stories of homeowners who have paid others to fill out the Bankruptcy forms and help them file the Bankruptcy case.  This is a Federal Crime. I have heard stories of homeowners who have paid others to go to the Bankruptcy Court for them to file the Bankruptcy case to stop a foreclosure action.  This is also a Federal Crime, by both the homeowner as well as the filer.

But Doesn’t a Bankruptcy Stop a Foreclosure Sale Each Time?   Only the first time.  The filing of a Bankruptcy case will automatically “Stay” or cancel a foreclosure sale.  

But if you file a second Bankruptcy case, the Bank can reschedule the Foreclosure Sale after 30 days.  A third Bankruptcy filing within twelve months will not cancel a foreclosure sale at all.

If you dismissed your own Bankruptcy case then you are prohibited from filing a second Bankruptcy case for 180 days.

Of course, it sounds self-serving that I am writing this article as a Bankruptcy attorney asking homeowners not to file Bankruptcy cases by themselves.  But I am also a member of the larger community in Rockland, Orange and Ulster counties that makes up most of these “serial filers”.

If you must file your own Bankruptcy case, do not abuse the system!  Fill out your own bankruptcy forms and file them in bankruptcy court on your own if you do not wish to use a bankruptcy attorney.

For more Foreclosure and Bankruptcy FAQ’s and articles, please see my website at www.AllenKolber.com. I have been practicing Foreclosure Defense, Bankruptcy Law and Business Law and Litigation for over 25 years.