楊清泉-BK RULE 9011 DOES NOT PREVENT PURSUIT OF CLAIM DESPITE WINNING DEFENSE PART1

There are adversary complaints that creditors can file and pursue against debtors who file for bankruptcy. Most of these complaints involve exempting creditor’s claim from discharge. If creditor is successful in the complaint, either he wins at trial or in a summary judgment, creditor’s claim is not discharged. For example, debtor filed for Chapter 7 bankruptcy to discharge $100,000 of personal unsecured debt. You are a creditor of debtor because you invested $20,000 in his “pie in the sky” business. Debtor told you that the business you were buying into was a “special biochemical process that debtor invented to convert hair that is picked up from barber shops and hair salons all over the country into usable crude oil that is better than the crude oil produced by Saudi Arabia”. You file an adversarial complaint objecting to the discharge of your investment on the ground of fraud. Debtor’s answer alleges that he did invent the protein that converts human hair into crude oil. He provides proof of the patent. The problem, he says, is that the main ingredient of the formula is cow testicles from India, and that the Indian government would not allow him to buy any cow testicles because cows, and any of their parts, are considered Holy beings in India. He provides proof of the denial of his application for a license to import Indian cow testicles.

So, debtor alleges that there is no fraud, just a failed business enterprise. “Blame it on the Indian cow testicles, or the lack of it, not me!” Now debtor says that you initiated the adversary proceeding even though you knew debtor had a winning defense, and asks sanctions against your lawyer for $100,000 for pursuing a claim despite the existence of a winning defense. Debtor relies on bankruptcy rule 9011. It states that if your lawyer signs your claim, he has certified to the court that “the claims, defenses, and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;” Now you know why you should become a doctor instead of a lawyer. Who will win?