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Bankruptcy Alphabet – B for bad faith filing

by Dorota Trzeciecka on January 17th, 2012

Can I file Chapter 13 to stop a foreclosure sale to buy more time to work out a short sale with the bank, and then dismiss the case? This is a a real life question that keeps coming up more and more often in this new economic reality.  The answer is “no”.  Why?  Because this is a classic example of bad faith filing.   You take up precious judicial resources and exploit  bankruptcy system for the purpose for which it was not designed.  But, more importantly,  it is because the Bankruptcy Code presumes any subsequent bankruptcy filing within the preceding one year period as being filed not  in good faith.   What it means is that, when you file a case, and your case is dismissed either by you, voluntarily, or by the court for failure to provide required documents, for example, any subsequent bankruptcy case that you may file within that same year is presumed to be filed in bad faith.  The consequence of such filing is that the automatic stay, which protects you from certain actions by creditors when you file bankruptcy, is in place for only 30 days.  Such actions may include foreclosure sale, vehicle repossession, filing of a lawsuit or proceeding with a pending lawsuit against you, recording a lien against your property, and seizing your personal property or income, such as garnishment of your bank account or your wages.  To continue the automatic stay  beyond  the 30 days, you have to file a motion with the court, and show that your current case was not filed in bad faith.  One of the factors that the bankruptcy court may consider in its decision on your request to continue the stay is, among other factors, whether or not you filed more than one prior bankruptcy  in the past year.

So, if you’re remotely considering filing Chapter 13 to stop foreclosure to buy yourself more time to either negotiate a short sale with the bank, or to remain in your home, you should consider it very carefully, and explore other possible alternatives.  Filing multiple bankruptcies can land you in a big trouble.  When the court spots bad faith filers, it has the power to ban them from future filings, and refer them to the US Attorney’s Office for a perjury prosecution, if they made any significant misstatements in their petition.

If you’re interested in learning more about bankruptcy terms beginning with letter “B”, follow these links:

Bailout

Bank Account

Bank Account Levy

Bank Tips

Bankruptcy

Bankruptcy Estate 

Bankruptcy Mill

Bankruptcy Petition Preparers

Bar Date 

Best Interest of the Creditors

Beware of these Credit Card Offers

Borrow

Business

Business Bankruptcy for Individuals

Business Bankruptcy

Buy Low Sell High