Creditor’s Attorney’s Knowledge of Bankruptcy Was Not Enough to Place Creditor on Notice of Debtor’s Filing

A debtor’s significant mischaracterization of a six-figure debt ultimately placed him on the hook for repaying the debt after a bankruptcy court, and the Ninth Circuit, concluded that the debt was non-dischargeable. Even though the attorney who represented the creditor knew about the debt, the debtor remained obliged to repay, because the lawyer found out too late to constitute notice to the creditor.

Cery Bradley Perle, a former securities broker, filed for Chapter 7 bankruptcy in 2001. Among his obligations was a 1998 arbitration award he owed to securities dealer Fiero Brothers in the amount of $350,000, for securities fraud. The debtor listed the debt on his bankruptcy schedules, but he declared the creditor as “NASD/NASD regulation,” stated the amount as “unknown” and gave a date of 1999. The court discharged Perle’s debts in March 2002. Martin Russo, the attorney who represented Fiero in the arbitration, knew of the debtor’s bankruptcy. Although Russo continued handling some work for the dealer, he no longer represented it in its dispute with Perle.

In 2006, the creditor asked the bankruptcy court to reopen Perle’s case and declare the arbitration debt non-dischargeable. The court agreed with the creditor, and the Ninth Circuit upheld that ruling in In re Perle. The debtor’s “serial mischaracterization of known details of the 1998 arbitration award” was sufficiently egregious to prevent Fiero from receiving proper notice of its potential claim. Had the disclosure been more accurate and clear, and given the creditor sufficient notice, the creditor’s four year delay would have fallen well outside the normal 60-day rule for making such claims.

Additionally, the Ninth Circuit concluded that the creditor’s attorney’s knowledge of the debtor’s case was not enough to impute knowledge to the creditor itself. The lawyer, Russo, did not learn of the filing until after he concluded his legal representation of Fiero on the Perle matter. Although he continued to serve as the creditor’s attorney on other matters, that was not enough, the court decided. Not only had Russo only learned about the bankruptcy after finishing his representation of Fiero in the Perle matter, he learned about the case while working on behalf of an unrelated client. As a result, knowledge or notice could not be imputed to the creditor, the court determined. The court was clear in stating, however, that a creditor’s attorney’s knowledge of a debtor’s bankruptcy very possibly could constitute notice to the creditor in certain situations.

Part of the essential benefits of completing a bankruptcy proceeding is obtaining a financial “fresh start.” In order to this, you must ensure that your bankruptcy documents provide meaningful notice to your creditors. To make sure your bankruptcy discharge will hold up, and give you the new start you need, contact the Bay Area bankruptcy attorneys at the Law Offices of Melanie Tavare. Oakland bankruptcy attorney Melanie Tavare can advise you and guide you through the many steps of a Chapter 7 bankruptcy, as well as striving to ensure that your bankruptcy gives you the opportunity to start your new chapter in life. Call (510) 255-4646 for your free consultation today.

The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code