A strike against abusive debt collectors in Bankruptcy Court.

Authority:  9th Circuit Court of Appeals.

Why relevant:  A 9011 motion may be well taken where even one of the causes of action is without merit.

Relevant Code Section:  523(a)(2)

Note: Not Published

In this matter, Weinstein, Pinson & Riley (formally Weinstein & Riley) sued another Debtor yet again with insufficient evidence to back up their claim and were sanctioned under F.R.B.P. 9011 for meritless litigation.  Weinstein is a national law firm, renowned for filing claims against Debtors under 11 U.S.C. 523(a)(2) without a sufficient basis for alleging fraud.  Their goals are to scare the Debtors into some form of settlement by taking advantage of individual Debtors who have insufficient resources to defend themselves.  In this matter which comes out of the 9th Circuit court of appeals, the appellate court upheld a lower court ruling finding Weinstein to have filed their complaint without a sufficient legal basis even though at least one of their causes of action did have merit.

11 U.S.C. 523(a)(2) concerns debts incurred through fraud. Weinstein often sues for debts to be determined as non-dischargeable under 11 U.S.C. 523(a)(2)(c)(1) on the basis that debts incurred within the 90 days pre-petition that are incurred for the purchase of luxury goods or services with knowledge of the Debtor’s intent to discharge the debts prior to Bankruptcy should likewise be considered non-dischargeable.

In our experience, Weinstein can be scared off by an aggressive defense.  As a defending party, if the Debtor can cause Weinstein sufficient grief such that they do not want to continue litigation, they often dismiss the matter.  Further, our recommendation is to always proceed to trial.  Most Bankruptcy Judges are unfriendly to Weinstein’s tactics and the majority of Debtors will find themselves in a receptive court if they put forward a good, honest and solid defense regarding the nature of the claimed non-dischargeable debts.