I am not a lawyer, I am a judgment referral expert (Judgment Broker). This article is only my opinion, about the laws I have read, and what I have learned. Nothing in any of my articles should ever be considered legal advice.
What if you have a judgment for around $30,000 against a judgment debtor that appears to live very well? What if you had previously paid for a court reporter at an Order to appear for EXamination (OEX) of the debtor, and you recorded them lying about bank accounts, and saying he had no income at all, and that his wife paid all their bills.
What if the judgment debtor then files for Chapter 7 bankruptcy protection three days after he discovers that you (as a next step for enforcement) had subpoenaed his corporate banking records? What if you expect that the bank records will prove the debtor perjured themselves. Can you use this information to unravel the debtor's bankruptcy?
In California, personally serving a judgment debtor with an OEX creates a silent 1-year lien on their personal property. What if you also already recorded a property lien long before the bankruptcy?
To make this story even more interesting, what if the debtor also fraudulently transferred his vehicle after your attempt to levy it? With your proof of fraud, does it make sense to challenge the debtor's bankruptcy (starting by attending the 341 creditor's meeting)?
Especially if the debtor files a "no asset" bankruptcy, it does not matter if they listed you as a creditor or not. In California, your OEX lien made you a secured creditor, as did your property lien, if the debtor has real property.
I am not a lawyer, however I would file a proof of claim. Then, study the debtors's bankruptcy schedules, to see if that vehicle they recently transferred is listed, or for anything else that may be suspicious.
Then, attend the 341 Creditor's meeting. Then, consider the bankruptcy court's tendency to say "So What?" if you prove the debtor's fraud.
At the 341 meeting, ask the debtor questions about their schedules. Either they will admit that their schedules are wrong, or they will lie. Both might be good for you. The 341 meeting is recorded, and you can order (for a small fee) a CD of the recorded proceeding, and then you can order a transcript, which may be valuable.
When bankruptcy schedules are amended too often, some bankruptcy judges will deny a discharge, if the schedules were signed under penalty of perjury and there is no valid excuse for omitting an asset or lying about it, or if assets are transferred soon before the BK petition was filed. Your questions at the 341 meeting should be aimed at catching their lies, but not exposing what you already know.
There are two kinds of adversarial bankruptcy motions that one (or more likely one's lawyer) can start. One is a 523 action, where only their particular judgment or debt may be rendered non-dischargeable. Stronger is a 727 action, where all debts and judgments can be declared non-dischargeable.
You have 2 choices, the first choice is you can challenge the debtor at the 341 meeting - and the trustee may say, "So what? Let's get this over with" and probably will let the debtor change their petition to conform to the truth.
Another choice is you can file a Rule 523 or a 727 Action for 1) fraudulently transferring assets within one year of filing their petition or 2) for "untruthfulness" of their bankruptcy petition. Note that some bankruptcy judges do not allow pro-pers to appear in their court rooms.
That a debtor previously lied in state court, is usually one of those "So what?" situations. Bringing a 523 or 727 action is expensive and difficult, so it makes sense only if you know you can win, and the debtor actually has some assets somewhere.
If you win your 727 action, this is sometimes named a "bankruptcy bomb", because all the debtor's listed debts are made forever non-dischargeable. This is a scary thing for a debtor, and often they will quickly drop out of bankruptcy. See http://doney.net/bkcode/11usc0727.htm
If you win your 727 motion, the debtor's bankruptcy estate still gets administered. This is a nightmare for the debtors. All of their assets are tied up and get liquidated, and none of their debts get discharged. In a 727 action, all creditors benefit from your effort and expense.
Even in a community property state, non-debtor spouses are not liable for the debts of their debtor-spouse. Instead, the community estate is subject to enforcement, if such an estate exists.
A discharge of the debtor-spouse's debt invokes the bankruptcy permanent injunction of the community estate. When the debtor receives a discharge, it effectively prevents you from enforcing against the non-debtor spouse's community estate.
Mark Shapiro - Judgment Broker - Free leads for Judgment Enforcers and contingency collection attorneys.http://www.JudgmentBuy.com
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