This afternoon, I received a call from a potential client with an unusual problem. He advised me that he filed a Chapter 13 on December 29, 2005, but that the mortgage company went ahead with foreclosure on January 2, 2006 and now he was facing an eviction. How could this be?
A quick look at the Court docket explained what had happened. The debtor had filed a previous Chapter 13 case back in June, 2005 and had elected to pay his filing fee in installments. The case ended up being dismissed, but the debtor never paid the remaining balance due for the filing fee.
When the debtor filed his second case in December, 2005, he again requested permission to pay the filing fee in installments. After the case was filed and a case number issued, the computer system in the clerk’s office flagged the case as one with unpaid filing fees from a previous case.
The Judge’s office then sent a form letter to the debtor advising him that he had 10 days to pay the outstanding balance due on the previous case or the current (December, 2005) case would be dismissed and the automatic stay annulled ab initio. For those of you who do not speak Latin, this means that the case and the automatic stay would be treated as if it never existed at all, dating back to the date of filing.
Unfortunately the debtor, who was proceeding without a lawyer, did not understand or recognize the seriousness of the judge’s order and he failed to pay the outstanding filing fee. After the 10 day period elapsed, the judge issued and order dismissing the case and annulling the stay ab initio.
Shortly after the dismissal order was issued, the bank initiated eviction proceedings. Unfortunately, I had to advise the debtor that there was nothing I could do for him. I recommended that the debtor call my good frieind Schuyler Elliott to see if there was any wrongful foreclosure angle here. Schuyler has developed a Georgia wrongful foreclosure practice here in the Atlanta area. Schuyler felt that there might be some issues with the foreclosure but the debtor’s failure to preserve his bankruptcy protection would make any wrongful foreclosure action time-consuming and expensive.
The lessons you can take from this story are as follows:
1. It is not wise to enter into bankruptcy without the help of an experienced lawyer. This is especially true under the new bankruptcy law and this is especially true if you have previously filed a case. One of the purposes of the new law is to discourage repeat filings and there are many traps that can bite you when you file a second case.
2. You need to read any documents issued by the Clerk of Court or by a bankruptcy judge. Here, the judge issued an order where the most important phrase was in Latin. Is there a constitutional problem there? Maybe. But this debtor has neither the money nor the time to pursue a challenge.