Expert: Los Angeles Bankruptcy Lawyer Leon D. Bayer - 4/1/2011

Question
QUESTION: Saturday, March 19, 2011

I hired a bankruptcy attorney to file business and personal chap 7 bankruptcy for me in March 2010. I own a construction company and due to several factors like the economy and a client not paying me I found myself for the first time in my life not being able to pay my bills on time.  The reason I hired him was I liked his experience as a bankruptcy attorney and he seemed like a very nice man. I had to borrow money from a friend to pay him up front for both my cases. I had no savings, stocks, bond or liquid assets of any kind. I was and still am insolvent and I am upside down on my home and several months behind on the mortgage, although I am planning to keep my home and do a loan modification.  The main thing I was concerned about was my two company trucks that are my only source of transportation and the only way I can make a living. I have owned both since new and they have my company name and signage all over them and they are 2003 and 2004 Chevy’s.   
I sat in his office in our first meeting and elaborated to him that if I was to file bankruptcy I needed to keep my trucks and that I had borrowed money in mid 2009 on them and I had recently added the lender as a lien holder on the trucks. I also told him I was not putting the lien holder in the BK because I was paying him back as I would not be able to finance new trucks and I had already been turned down to refinance my trucks at the credit union. He said he would put the trucks in my personal BK and that we would wait a month or two after my business chap 7 was filed to file the personal chap 7 because I owned them before I started my corporation. He seemed like everything was fine and at no time questioned me about the transaction on the trucks and I thought he had everything under control by the swift way he went about filling out the bankruptcy paperwork on his computer. And the facts that I emphasized the trucks were very important to my livelihood and I would not file bankruptcy if I was in jeopardy of losing them. Also I was aware of the $21000 wildcard exemption in chap 7 if I needed it since I had no other real assets I felt secure and we proceeded.
The business had no real assets so my business chap 7 went as planned. The trustee hearing went fine just as he said it should. Again I felt in good hands. About a month later his office contacted me and said he was proceeding with my personal chap 7. I did not question him as I was completely unaware at what was about to happen. During this month his office asked for the some paperwork from me and one of the things were the registrations to the trucks which clearly had the lien holder information on them.

When we went to the trustee hearing the trustee pointed out that the liens had been added to the trucks 75 days prior to my filing and fell within the 90 day period that voided these kinds of transactions and the court wanted my trucks. I had never heard anything about this before that hearing and my attorney neglected to inform me about this in our meetings even though it was such an important issue to me. I had made it in my opinion, perfectly clear to him where I stood before bankruptcy. He calmed me after the meeting when I asked him what happened by telling me that we had time to figure this out. Then when the trustee started the process of suing the lien holder my attorney sent me a settlement agreement that he had composed for me. Then is when I questioned his reason for me being in this position and being blindsided by this at the trustees hearing and he got very defensive. He basically called me a liar and that I had mislead him and concealed this from him. Nothing could be further from the truth. I had no reason to mislead him. He was my attorney. I was totally up front about my situation and at no time did I do anything to mislead him. The reason I hired an attorney was so I could get honest feedback or help with my case, there is no way I would conceal anything or did conceal anything. This would only harm me. I did not know I did anything wrong and only added the lien holder to protect his interest in the trucks thinking all along it would not matter to the bankruptcy court and that the liens were in effect when I signed the promissory notes and excepted the checks back in 2009. He went as far as to say that someone must have advised me to do this and again nothing is farther from the true. I was very up front with him but he either neglected what I told him or worse just led me like a lamb to slaughter.
The day that I was going to my hearing I witnessed the trustee and my attorney talking in front of me before I was to be seen about another case that the trustee needed help on going after a person claiming bankruptcy. the trustee requested the help of my attorney to consult with him and help him go after the assets of this person. Also I am aware that the trustees are paid on a commission basis.  the asst attorney in my attorneys office has told me that the trustee and my attorney have a “good working relationship”. This seems to be a classic case of the good ole boys club. It seems to me that I was thrown into this Chap 7 by my attorney hastily at least of even knowingly at worst. he has  shown total disregard at this point even thought this will create a dire hardship for me. I have pleaded with him to help me finish the case and negotiate with the trustee but he refuses. Now I have tried hiring other bankruptcy attorneys to help me and they all know my attorney so they refuse to take the case and I am left with no legal help and no more money. I feel completely helpless and taken advantage of and as if I am stranded on an island.


I can’t seem to get good legal help and have no more funds. Furthermore the lien holder is being sued by the trustee rather than me and even my attorney says he doesn’t understand this move. At least I could represent myself but now I will have to pay for legal counsel for the lien holder since this is my responsibility. I have bowered money from friends and family and now face what maybe homelessness over my attorneys actions.
I could have waited a long time before filing personal bankruptcy. I had no judgments against me and no assets for them to take if I did. Most of my debt was from my corporation that was shut down. my attorney had the same technology available to him that the trustee did yet I was blindsided at the trustees hearing about the trucks. my attorney never questioned the time line of the lien and never informed me about the 90 bankruptcy code about this. He was given plenty of information from me and plenty of time to inform me of any liabilities yet he neglected to. He also was the one who picked the timing for my personal bankruptcy filing, not me.  Just 15 days prior to this not being an issue!


To this day I have asked his office several times both verbally and by email for an explanation of what the code is, what is in question and they have refused to answer me. I have asked to meet with him and he has refused. I guess out of site out of mind.

I understand that my attorney is respected and powerful in his field and has connections. I also know how this works that the little guy like me gets squashed as he gets wealthy raking in bankruptcy cases. I never had a problem with paying him his fee   and felt it was a good investment for my future however now I am totally regretful of ever hiring him and feel that he has no compassion for his client.

There are several other issues that I was not counseled on or told about. I told him I wanted to keep some of the assets along with their liabilities like my home to rebuild my credit. He neglected to tell me that after bankruptcy they stop reporting to the credit bureaus so it would not help my credit. I would think an attorney of his experience would know this. Also I told him I was in a home loan modification process, again no information was offered and I had to find out the hard way that the bankruptcy stopped that in its tracks. Now I can’t complete it until the case is settled with the trustee and they may foreclose on me. Also I have a $75,000 second on my home that could have been removed by chapter 13 which may have been better for me considering the all things but that was never discussed. It seems he just wanted to fly through his questions and answers on his computer (in the 15 minutes it took him to do it) and slam me into bankruptcy and say next! What happen to taking care of your client? Doing what was best for me?

Can I ask at this time the court to dismiss my bankruptcy as it was not filed properly. I did nothing to conceal anything from the bankruptcy court and if I were properly counseled on my options I would have opted to wait to file.

What is the law on this issue? What can I do to save my trucks? can I turn this into a chap 13? will that help?

I have been a hard working business owner that has paid his bills on time, had great credit, and given back to my community for decades. I don’t deserve this.

Thank you for your consideration in this manner.

Sincerely,
Michael Bryson

ANSWER: I believe there are no dumb questions, only dumb lawyers. I have answered over 1000 bankruptcy questions on this web site. Many of these questions just break my heart when I see what bad legal representation some of these folks have had. Unfortunately, you probably fall into that category.

The rule you have been so desperately seeking is Bankruptcy Code Section 547 - Preferences. You can get a general idea of it's effect by reading http://www.debt-relief-bankruptcy.com/faq-browse11-5/bankruptcy-guide.asp in my bankruptcy guide, dealing with transferring assets prior to bankruptcy. If you do a web search for "Bankruptcy Code Section 547" you will easily find it and you can read it for yourself.

The law presumes you were financially insolvent for at least 90 days prior to any bankruptcy filing. Payments that are given to your creditors, including a transfer of collateral to a creditor who was unsecured up until then, may trigger the rule, allowing the bankruptcy trustee to recover the collateral from the creditor that you have "preferred."

The preference term means giving special treatment to a favored creditor that you did not give to all of your other creditors. Even the perfection of the security interest, (when you filed the liens with your state motor vehicle department within 90 days prior to the BK filing) triggered the rule.

Converting your case to Chapter 13 might be a solution to the immediate problem - but I can't say without having access to all your records and a lengthy consultation.

I am very troubled by the actions of your lawyer. I strongly suspect your lawyer was aware of the issue prior to the filing, and then forgot that the preference was the reason why he was going to delay your particular filing - so he filed it prematurely. I strongly suspect he is now lying to save his own skin, and probably even told the trustee that you hid this fact from him just so the trustee won't lose respect for him.

Obviously, you need expert legal representation. I doubt the so called "good old boys network" is keeping other lawyers from taking your case. We lawyers rarely have such scruples, and we don't mind eating our own young for lunch, so long as we are getting well paid to do so! Probably the fact that you have no money to pay a lawyer is the reason you can't get one.

I wonder if you have any actual proof that your lawyer knew about the title lien perfection issue prior to the filing, such as mentioning it on written intake forms, emails, etc? If so, there may be serious malpractice and ethical violations that you might pursue.

I hope this has helped you to understand the situation, and I truly hope you will be able to get new legal representation immediately. Another interesting angle is that if you have good evidence of a legal malpractice, the claim against your lawyer is an asset of the bankruptcy estate, and your BK Schedules should be amended to list it as an asset! Perhaps the trustee would be interested in pursuing it against your lawyer to make him pay!
 

---------- FOLLOW-UP ----------

QUESTION: is it a slam dunk for the trustees attorney to get my trucks? does that fact that i have cancelled checks from the lender and the lender has a promissory note from several months early have any bite?

Answer
QUESTION: is it a slam dunk for the trustees attorney to get my trucks? Answer: YES, I THINK IT IS.

QUESTION: does that fact that i have cancelled checks from the lender and the lender has a promissory note from several months early have any bite? Answer: NOPE. THE STATUS IS DETERMINED FROM THE DATE THAT THE LIENS WERE FILED UP TO THE DATE THE BK WAS FILED. A PRE-EXISTING PROMISSORY NOTE, (UNSECURED DEBT WITH NO LIEN) MAKES NO DIFFERENCE AND DOES NOT THWART THE TRUSTEE. THE LIEN SHOULD HAVE BEEN FILED AT THE SAME TIME AS THE MONEY WAS BORROWED, OR ELSE THE BK NEEDED TO BE FILED AT LEAST 90 DAYS AFTER THE THE LIENS WERE FILED.

THE LAW GIVES A TRUSTEE THE STATUS OF A HYPOTHETICAL JUDGMENT LIEN CREDITOR ON ALL YOUR ASSETS EFFECTIVE ON THE DATE OF FILING, AND THUS LEGALLY THE TRUSTEE BEATS OUT A CREDITOR WITH A PRE-EXISTING DEBT WHO SUBSEQUENTLY OBTAINS A VOLUNTARY LIEN DURING THE 90 DAY PERIOD WHEN YOU ARE PRESUMED TO BE INSOLVANT.

If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com  and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/