Plaintiff Acted in Bad Faith by Not Disclosing All FDCPA Claims to Bankruptcy Court, Says D.N.J.

Plaintiffs who file for bankruptcy often list potential Fair Debt Collection Practices Act (FDCPA) claims on their schedule of assets. On Friday, August 30, the District of New Jersey calling out a plaintiff for concealing FDCPA claims from the bankruptcy court by failing to update the court of all FDCPA claims filed throughout the bankruptcy proceeding. 

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According to PACER, Igor Litvak of The Litvak Law Firm, PLLC represented plaintiff in the bankruptcy proceeding while Yaakov Saks of Saks Stein, PLLC represented the plaintiff in eight separate FDCPA claims. The decision discussed here is combined from two of these cases: Vedernikov v. Atl. Credit & Fin., Inc., No. 18-15273 (D.N.J. Aug. 30, 2019) and Vedernikov v. Oliphant Financial, LLC, No. 18-17365 (D.N.J. Aug. 30, 2019). Plaintiff initiated all eight FDCPA claims after he filed for bankruptcy but before the bankruptcy court issued a discharge. 

The court noted, however, that plaintiff did not disclose all of these claims to the bankruptcy court. Plaintiff filed two updates to his schedule of assets. While the first update notified the court that plaintiff initiated several FDCPA lawsuits, the second update did not—likely because there were no new lawsuits filed in the week-long time frame between the two updates. However, five FDCPA claims were filed after these first two updates, but plaintiff failed to update the bankruptcy court about them.

A timeline is helpful here:

• 10/08/2018: Plaintiff files for bankruptcy, listing a single “potential FDCPA” claim valued at $1,000.
• 10/23/2018: FDCPA lawsuit 1 filed.
• 10/24/2018: FDCPA lawsuit 2 and 3 filed.
• 11/20/2018: Plaintiff updates bankruptcy schedule of assets. 
• 11/27/2018: Plaintiff again updates bankruptcy schedule of assets.
• 12/12/2018: FDCPA lawsuits 4, 5, and 6 filed.
• 12/18/2018: FDCPA lawsuit 7 filed.
• 12/27/2018: Trustee declared that bankruptcy estate was fully administered and there was no property available for distribution.
• 01/30/2019: FDCPA lawsuit 8 filed.
• 02/01/2019: Bankruptcy court discharges plaintiff’s bankruptcy petition.

Ultimately, the court found that plaintiff acted in bad faith. Plaintiff had a duty to disclose to the bankruptcy court any potential claims and, in this case, he failed to do so. According to the court, Plaintiff was aware of the additional FDCPA claims before the bankruptcy discharge occurred. This is shown by plaintiff’s statements in the other court filings and plaintiff’s own bankruptcy filing, which listed the defendants of these FDCPA claims as unsecured creditors. The court stated:

By shielding the FDCPA Matters from the bankruptcy court. Vedernikov secured a benefit for himself in the bankruptcy proceeding while attempting to protect his interests in the FDCPA Matters. Such behavior runs afoul of Vedernikov's duties as a debtor and threatens the integrity of the bankruptcy process. Vedernikov's response to the [Order to Show Cause] shows that he fails to comprehend his duty to disclose and would like the Court to simply wait until he decides if he is going to comply with the Bankruptcy Code. This position "assault[s] the dignity or authority of" the Court and the Bankruptcy Court.

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