Bankruptcy Judges Try to Protect “Honest but Unfortunate” Debtors

03 May Bankruptcy Judges Try to Protect “Honest but Unfortunate” Debtors

While the recent trend in Congressional tweaking of the Bankruptcy Code and resulting case law decisions from various federal circuit courts and even the Supreme Court has been to reduce the level of protection available to debtors, bankruptcy judges remain extremely protective of the integrity of the automatic bankruptcy stay. A recent Northern District of Georgia case involving a commercial real estate bankruptcy reveals just how seriously bankruptcy judges will go to preserve the core protection of the bankruptcy code.

In the Lilly Development, LLC case, the owner of the LLC filed a pre se Chapter 11 case the day before a pending foreclosure sale. The foreclosing creditor immediately filed a motion for emergency dismissal and stationed an attorney at the Superior Court to proceed with the foreclosure in anticipation of a favorable decision by the judge.

In bankruptcy court, a corporate entity must be represented by an attorney – a non-attorney corporate owner or officer cannot represent a corporation in federal court proceedings. The lender argued, therefore, that the Chapter 11 filing was fatally flawed because the Chapter 11 petition was filed without counsel.

While the lender was technically correct, the bankruptcy judge decided not to elevate form over substance and denied the creditor’s motion. She allowed the case to survive long enough to stay the foreclosure. The LLC subsequently hired counsel and is proceeding with a Chapter 11 reorganization.

Judges are equally protective of the automatic stay in consumer bankruptcy cases. I have previously written about two personal bankruptcy cases that resulted in significant fines against aggressive creditors due to automatic stay violations.

The point here is this – when you file your bankruptcy case – even if you file hours or minutes before a foreclosure, repossession, garnishment or other adverse action takes place, there is a reasonable chance that your bankruptcy judge will look for a way to offer you protection. This is especially true if you have never filed bankruptcy before and your case is viable. Obviously there are exceptions but do not assume you are bound by erroneous quasi-legal advice from a bill collector about your rights.

Over the years I have seen numerous instances where educated and thoughtful people deal with debt issues under completely wrong understandings about federal and state debt collection laws, bankruptcy laws and credit reporting laws. If you are facing legal action that could result in the loss of your home, a vehicle or your wages, talk to a lawyer with experience. Do not hesitate to ask for a second opinion. And never, ever rely on information given to you by a bill collector or creditor representative.

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Jonathan Ginsberg, Esq.

I represent individuals in Chapter 7 and Chapter 13 cases filed in the Northern District of Georgia, which includes Atlanta, Newnan, Gainesville and Rome. I publish several informative web sites, including and an Atlanta bankruptcy blog, Please mention Bankruptcy Law Network when you call.
  • Pat
    Posted at 15:20h, 09 May

    Didn’t include foster care payments as temporary foster provider on bankruptcy creditor is suing to have discharge overturned. I was told by fosterr care agency that monies receives was a stipend not income.

  • Bankruptcy Laws
    Posted at 12:32h, 26 May

    I think that its a great idea, separate the irresponsible from the unlucky.