Bankruptcy Lawyer Bryan W. Stone answers the question: “Do I need an attorney to file bankruptcy?”
A recent article in the Milwaukee Journal Sentinel discussed a strategy used by some landlords in the city to avoid paying fines: repeatedly filing for bankruptcy protection. The practice is used by those landlords who the city is trying to come after for providing substandard housing to tenants. By filing for bankruptcy protection, the landlords avoid paying mounting fines and are able to shield their property from being seized by the authorities. The article focused on the actions of one landlord who is an especially egregious abuser of the bankruptcy system.
According to the newspaper, Jesse Hyche has filed for bankruptcy protection six different times to keep the city and other creditors from taking action against him. Hyche has been in bankruptcy, nearly continuously, since January of 1989, an astounding 27 years. Hyche appears to file for bankruptcy with the sole purpose of evading creditors, never intending to actually complete the bankruptcy process. When one bankruptcy ends and creditors begin to circle, Hyche then refiles. Hyche has been so diligent about filing that since 1989 he has only spent 22 months outside of Chapter 13 bankruptcy protection.
So why would Hyche do this? What’s the advantage to being under bankruptcy protection? The bankruptcy system is designed to give debtors a bit of breathing room and it prevents creditors from taking action to seize the assets of debtors. This is known as an automatic stay and it prevents things like foreclosures, garnishments or even basic collections efforts. The automatic stay remains in effect so long as the person is operating within the bankruptcy system. This is what nefarious landlords in Milwaukee have figured out. By filing for bankruptcy repeatedly, they can frustrate efforts by the authorities to punish them for their many infractions. The city is prevented from collecting fines from the landlords and is also denied its normal ability to seize assets, including the offending rental properties.
People like Hyche are known in the bankruptcy world as serial filers. Serial filers can cause headaches for creditors and end up harming other honest bankruptcy filers. By abusing the system, rules are made stricter for others, essentially punishing the innocent by forcing them to pay for the misdeeds of the serial filers. Some experts believe as many as 20 percent of those in the bankruptcy system could be categorized as serial filers, though no solid numbers have been shown to support such claims.
Have the rules been changed to try and address the problem of serial filers? You bet. New bankruptcy rules exist to reduce or even eliminate the benefit of the automatic stay. Now, if filers have had one previous bankruptcy case dismissed (either voluntarily or involuntarily) within the year prior to filing, the bankruptcy court will assume your new filing is in bad faith. As a result, the court will limit the automatic stay to only 30 days. After 30 days, the protection that debtors so eagerly want disappears. For those who have more than one previous bankruptcy case dismissed in the year prior to filing, the automatic stay is eliminated completely, meaning no additional protection is granted with the new filing.
The good news for those who aren’t trying to abuse the system is that the stay can be extended. Either you or the trustee will need to show why your new filing is not done in bad faith. Assuming you are able to do so, the stay can be extended for as long as it would in a normal bankruptcy case, offering you the protection other filers would ordinarily receive.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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