Bankruptcy as an Impregnable Shield to Enforcement? Not So Fast.

 

 

 

A quick hypothetical: A debtor isn’t paying. You’ve unleashed your full arsenal of enforcement allowed under the law, bank levies,  a motion for the appointment of a receiver, motion for sale of a dwelling house, etc. The whole gamut.

Everything is going along well enough, until your fax machine coughs out a friendly notice from your local bankruptcy court that your debtor filed Chapter 13.

That’s funny, you were sure that your debtor had deep pockets. Bankruptcy? This debtor could write you a check tomorrow if he weren’t still bitter that you had the sheriff sell his Lamborghini. No, this time it’s personal. Your debtor just doesn’t want to pay.

Your debtor then sets forth a plan which purports to pay his creditors (You) 100 cents on the dollar, but in monthly payments spread out over 5 years and with no interest.  This doesn’t sound appealing at all.

The court in the case of  In re Steven Allan Korn (CAEB, Case No: 11-91339) rejected precisely such a plan, finding that when bankruptcy is filed for the sole purpose of frustrating the enforcement attempts of a single creditor the filing was in bad faith.

Read the full opinion here.

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