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Serial Bankruptcy Filer Held Accountable in Court

Posted on in Bankruptcy

Serial Bankruptcy Filers Held Accountable in CourtOne of the advantages that debtors gain by filing for bankruptcy is putting a stop on debt collection and property repossession efforts by creditors. By using bankruptcy, debtors often pay less than what they actually owe and discharge their remaining debts afterward. Some debtors abuse the process by being serial bankruptcy filers. Bankruptcy laws require filers to waiting a certain number of years before they can discharge their debt again. Serial filers try to continuously delay creditors’ debt collection actions by repeatedly filing for bankruptcy without ever completing a case. Debtors who attempt to defraud creditors through serial bankruptcy can face criminal charges.

Recent Example

In the case of United States v. Williams, the defendant was convicted on five counts of bankruptcy fraud for using repeated bankruptcy filings to prevent debt collection efforts by her condominium association. The defendant had fallen behind on payments to several creditors, including fees she owed to the condominium association. As part of the scheme to avoid debt collectors, the defendant would:

  • File a petition for chapter 13 bankruptcy to put an immediate stop to debt collection efforts;
  • Submit a bankruptcy repayment plan; and
  • Fail to make the planned payments, which caused the bankruptcy case to be dismissed.

The defendant filed for chapter 13 bankruptcy five times between 2003 and 2009. After the second bankruptcy case was dismissed, the defendant temporarily transferred ownership of the condominium to a friend so that he could purchase a mortgage on the condominium. After the fifth bankruptcy case was dismissed, the court temporarily barred the defendant from filing for bankruptcy so that the condominium association’s eviction lawsuit could proceed. The defendant tried to prevent eviction by transferring ownership to the friend, who then filed for bankruptcy. However, the friend later admitted in court to the fraudulent activity, and the bankruptcy case was dismissed. The defendant was charged with bankruptcy fraud in 2014 and, upon her conviction, was sentenced to 46 months in prison.

Remedies Against Serial Bankruptcy

Bankruptcy law limits the automatic stay on debt collection efforts if a debtor files for bankruptcy multiple times within the same year. The stay is limited to 30 days after a second bankruptcy filing and is non-existent for a third bankruptcy filing. Serial bankruptcy filers may try to avoid this limitation by not filing within the same year. However, their bankruptcy cases can be dismissed if they are creating bankruptcy repayment plans in bad faith. A Chicago debt collection attorney at Walinski & Associates, P.C., can contest your debtor’s attempts to abuse the bankruptcy process. To schedule a consultation, call 312-704-0771.


Illinois Creditors Bar Association Chicago Bar Association Illinois State Bar Association
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