## Facts

- Dorothy Johnson and her son, Joseph Johnson, jointly owned two parcels of real property in Richmond, Virginia (including 3309 4th Avenue), both facing foreclosure.
- Peter P. Balas held the note secured by a deed of trust on the 3309 4th Avenue property.
- Dorothy and Joseph retained Virginia attorney Andrew Adams to file multiple bankruptcy cases to invoke the automatic stay and postpone foreclosure; the court dismissed those cases as improper or for noncompliance.
- During the serial filings, Adams violated court orders and deadlines, with violations causing further delay of foreclosure proceedings; the court warned Adams more than once about possible sanctions and required remedial steps (including continuing education and a state bar audit), which Adams repeatedly failed to complete on time.
- When Dorothy and Joseph could not obtain further foreclosure delay through their own filings, they brought Joseph’s 18-year-old daughter, Jessica Ashley Johnson, to Adams.
- Jessica had recently graduated from high school and had little or no meaningful debt, no significant employment or banking history, and no independent financial reason to seek bankruptcy relief.
- Dorothy and Joseph transferred their interests in the properties into Jessica’s name shortly before she filed, including a deed of gift for the 3309 4th Avenue property recorded eight days before Jessica’s petition and on the eve of a scheduled foreclosure sale.
- Adams filed a Chapter 13 case for Jessica to trigger a new automatic stay, even though the expected benefit of the filing was to Dorothy and Joseph, not Jessica.
- Balas moved for in rem relief from the automatic stay under 11 U.S.C. § 362(d)(4), alleging that the transfer and filing were part of a scheme to hinder, delay, and defraud creditors.
- At the stay-relief hearing, Adams appeared for Jessica, charged her for the representation, and offered no substantive defense.
- The court issued an order directing Adams to show cause why he should not be sanctioned for his conduct connected to Jessica’s bankruptcy filing.

## Issues

1. Whether the creditor was entitled to in rem relief from the automatic stay under 11 U.S.C. § 362(d)(4) because the petition was part of a scheme to hinder, delay, or defraud creditors involving a last-minute transfer of the secured property and multiple bankruptcy filings affecting that property.
2. Whether the debtor’s counsel’s conduct in arranging and pursuing a bankruptcy filing that provided the debtor no meaningful benefit, and that functioned as a device to delay foreclosure for third parties, warranted sanctions or other court-imposed remedies.

## Decision

- The court granted Balas in rem relief from the automatic stay under § 362(d)(4) as to the 3309 4th Avenue property.
- The court found that the transfer of the property to Jessica shortly before foreclosure, combined with the history of multiple filings affecting the property, showed a scheme to hinder, delay, and defraud creditors.
- The court determined that Adams’s role in the abusive filing and his handling of the case raised serious professional-responsibility concerns and ordered him to show cause why sanctions should not be imposed.

## Legal Principles

- Under 11 U.S.C. § 362(d)(4), a bankruptcy court may grant in rem relief from the automatic stay as to real property if it finds that the petition was part of a scheme to hinder, delay, or defraud creditors that involved (i) an unauthorized transfer of an interest in the property or (ii) multiple bankruptcy filings affecting the property.
- A deed transferring property on the eve of foreclosure to a new debtor, followed by an immediate bankruptcy filing, is probative of an improper scheme when the new debtor lacks independent financial distress or a legitimate reorganization purpose.
- A pattern of serial filings dismissed for failure to prosecute, lack of eligibility, or noncompliance supports a finding that the bankruptcy process is being used as a foreclosure-delay device rather than to obtain relief for the debtor.
- Bankruptcy courts have authority to police attorney conduct in cases before them and may impose sanctions or other remedies for unprofessional conduct and misuse of the bankruptcy process.
- Counsel has an obligation to provide competent advice about the consequences and likely outcomes of a bankruptcy filing, and not to file or maintain a case primarily to benefit nondebtors or to obstruct creditors through the automatic stay.

## Conclusion

In re Johnson involved a Chapter 13 filing by an 18-year-old with no meaningful debt after her father and grandmother transferred foreclosed property into her name to obtain another automatic stay following a string of dismissed cases; the court found the transfer-and-filing sequence and the prior filings established a scheme within § 362(d)(4), granted in rem stay relief to the secured creditor, and required the debtor’s attorney to show cause regarding sanctions for his role in the abusive filing.


In re Johnson, No. 07-33312-KRH (2008)