Lawyers Fined for Trying to Collect After Client’s Bankruptcy

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By Daniel Gill

A law firm and one of its lawyers were sanctioned by a New York bankruptcy judge for trying to collect fees from a former client after the debt was erased by the client’s bankruptcy.

The behavior was especially disturbing considering it has a bankruptcy department and should have known better, Judge Michael E. Wiles of the U.S. Bankruptcy Court for the Southern District of New York said May 8.

Adam Beschloss filed Chapter 7 in July 2015. In Chapter 7, a debtor’s assets are administered by a trustee for the benefit of creditors. The debtor receives a discharge, an order wiping out his debt, with some exceptions for particular types of debt.

Beschloss owed Bressler, Amery & Ross P.C. about $55,000 at the time he filed. The court entered a discharge in November 2015, and the case was closed.

Beschloss told the firm and Angela Scafuri, one of its attorneys, before he filed bankruptcy that he would continue to pay his debt after the filing was complete. But that promise was itself dischargeable, Wiles said.

Agreements to be liable for otherwise dischargeable debts are void unless the parties enter into an agreement reaffirming the debt, which must be approved by the court.

There was no such agreement here, Wiles said.

In 2016, Scafuri contacted Beschloss frequently inquiring about payments. In 2017, the firm “ramped up its efforts to collect the debt,” Wiles said, ultimately sending formal demands and filing a legal action.

These actions were knowing violations of the discharge, the court said. It didn’t matter if the firm had a reasonable basis to believe the debt wasn’t discharged.

Wiles ordered the firm to return the $1,000 it collected from Beschloss after the bankruptcy and assessed punitive damages of $4,000. The firm will also have to pay Beschloss’ attorneys fees in an amount to be determined later.

Bressler, Amery & Ross, Florham Park, N.J., represented itself. Beschloss was represented by Weltman & Moskowitz LLP, New York.

The case is In re Beschloss , 2018 BL 163623, Bankr. S.D.N.Y., 15-12139, 5/8/18 .

To contact the reporter on this story: Daniel Gill in Washington at dgill@bloomberglaw.com

To contact the editor responsible for this story: Jay Horowitz at jhorowitz@bloomberglaw.com

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