Tag Team Bankruptcy Filings: Blame the Game and the Player? (Part 1)
Everyone knows that one of the advantages of filing a bankruptcy petition is that it can stop a foreclosure sale dead in its tracks. Actually, to say that filing a petition can "stop" a foreclosure sale is inaccurate because the "stop" may just be temporary. "Pause" is a better word. The word that appears in the Bankruptcy Code is "stay" which is a synonym for "pause" but everyone knows what a "pause" is, which is probably why they used "stay" instead. After all, if law books were written so that regular people could understand them, no one would need a lawyer.
Wait! Forget I said that...
Moving on, very generally speaking, to turn a temporary pause of a foreclosure sale into a permanent ban against the sale, a Debtor would have to prove to the court that, should the pause be allowed to stay in place, they would be able to resume their regularly scheduled monthly payments along with at the same time catching up on their missed payments by paying a certain amount of those missed payments every month for a certain amount of months. And then, after you proved you could do it, you would have to go and do it.
But suppose that after you file your petition to stop the foreclosure sale, you failed to prove you can make all those payments. Suppose also that the bankruptcy petition you filed is incomplete, and when the bankruptcy court gives you a deadline by which to catch up on the missing documents, you still don't file them. Suppose also that you don't pay the mandatory filing fee. Suppose also that you don't take the mandatory online credit counseling course. What would happen? Your case will get dismissed by the court about four months after you filed it and then, after your case was dismissed, the bank would be able to reschedule the foreclosure sale for, normally, about three or four months later.
But what Debtor would behave that way? Facing the loss of their home in a foreclosure sale, who would file a bankruptcy petition, and then not fulfill even the most basic tasks required of a bankruptcy debtor, only to have their cases dismissed and their foreclosure sale rescheduled?
Lets of Debtors, that's who. Why? Because the four months they are in bankruptcy plus the three months it would take to reschedule the sale = seven free months in their house. OK, you think, so big deal: seven free months? That's not much of an incentive to file what basically amounts to only the shell of a bankruptcy petition. No? How about if once the foreclosure sale is rescheduled, the day before the rescheduled sale, the Debtor's spouse now files a bankruptcy petition to stop the sale and also does absolutely nothing to further the bankruptcy petition and, naturally, that case gets dismissed too. Now the Debtor and their spouse have added seven more free months on top of the first seven to give them fourteen months of free lodging in their house. And let's take it even a step further. Suppose that after the foreclosure sale is rescheduled for a second time, the Debtor's adult son this time files a bankruptcy petition the day before to stop the sale and also does absolutely nothing to further the bankruptcy petition. Now the family has seven more free months. Seven plus seven plus seven = 21 free months in their house without having to make a mortgage payment. (And that's not even counting the three or four or more mortgage-free years that put them in foreclosure court in the first place.)
The Debtor's petition, followed by his spouse's petition, followed by his adult son's petition, are what are called "tag-team" bankruptcy filings designed solely to delay, and delay, and delay, and delay foreclosure sales while the Debtors enjoy free lodging. The Debtors, and their families who assist them, have neither the ability nor the intention of catching up on their payments. Their only intention is to game the system and, unfortunately, the system makes it very easy for them.
I have personally seen tag-team bankruptcy filings that have involved as many as seven shell bankruptcy petitions filed one after the other by five different family members, and they kept the Debtor and family in free lodging for years. And I hated it. Yes, I'm a Debtor's counsel but I will not be a counsel for thieves. I respect the Bankruptcy Code and the people that made it and the judges and the trustees and the attorneys who do their best to use it for the good of people who have fallen into difficult times, but I despise freeloaders and cheats and grifters like the recent infamous case of the man in Long Island, New York, who bought his house in 1998, made one payment, and then gamed the system for no less than 23 payment-free years before finally being evicted.
Some people might say: blame the game, not the player, because what these people are doing, after all, is not illegal. But just because it's not illegal, doesn't mean it's OK.
Next: Part 2: How to stop tag-team bankruptcy filers