Can a Bankruptcy Filing Be "Expunged?"

A special thanks to our summer intern Mike Burgher in his assistance with preparing this article!

Expungement — Civil action lawsuit with the objective of eliminating from public record any criminal conviction.  Law on subject varies between states.  State Law for Michigan found under Chapter 780 in the Michigan Legislature.  Process and application for expungement found from 780.621 – 780.624.  Expungement is unavailable for criminals convicted of sexual offense under M.C.L. 750.520c, 750.520d, or 750.520g, a felony/attempted felony punishable by life imprisonment, a traffic offense, or if person has other prior convictions or convictions that had previously been set aside.  The process for an applicant convicted of a criminal offense must follow the steps listed from the following link (http://expungement.uslegal.com/expungement-of-criminal-records/michigan-expungement-law/)

Because bankruptcy is classified under a non-criminal offense and considered a voluntary action by the declaring party, expungement authority is unclear and decided on the discretion of the Judge for the individual case.  The U.S. Bankruptcy Code does not grant the Court any specific powers in these instances, nor does it offer much direction on how to proceed when a Bankruptcy Expungement case is brought before it.

The following cases show various rulings by the Court on different circumstantial hearings:

In re Buppelmann, In re Fountain (Pennsylvania, 10/18/2001)

This case ran in two parts.  The first part was between Helmet and Marguerite Buppelmann, and their attorney Eric Levande.  Helmet said he and his wife had signed a document that was attached to a list of creditors on 5/29/1996 due to medical bills incurred by Marguerite.  She passed away in early 1997, prompting Helmet to tell Levande not to file for bankruptcy.  But on 10/15/1997, Levande filed the documents for bankruptcy using forged signatures.  The case was dismissed because Helmet did not appear at his § 341 hearing.  Helmet wished to have his case expunged from public record.  The Court did not expunge the bankruptcy case, but instead indicated in the dismissed case file that the original filing of the case was due to fraud from Levande (or a party other than the Debtor) so as to alert creditors the reason for the bankruptcy filing.

The second part included Robert C. Fountain, who signed a petition in bankruptcy because of an arrangement between himself and Homeowners Rescue Service, with the understanding that the petition would not be filed unless he authorized it as a “last resort.”  He neither instructed the agent to file the petition, nor did he tell the agent not to file the petition.  The bankruptcy was initiated on 10/1/1998. For this reason, he wanted his case expunged.  The petition was later dismissed for not having all the required schedules.  The Court did not rule in favor of Fountain, citing that turning over a legal document to an agent made the assumption that the document could be filed at the convenience of the agent, and that the document contained no amount of fraud.

This case established a three-pronged course of action outline for dealing with Bankruptcy Expungement.  The 1^st course of action the Court could take for Buppelmann was to grant the request for expungement and destroy the related documents of the bankruptcy from public record.  The 2^nd course would be to add a notation to the filing petition indicating that the petition itself was fraudulent and occurred without consent from the debtor, for use by future creditors.  The 3^rd course was to order the court Clerk to delete all references to the debtor’s name(s) on all of the case dockets.  As seen in the first part of the case, the Court chose the 2^nd course of action.

In re Storay (South Carolina, 11/22/2006)

Johnny and Patricia Storay brought a case against their bankruptcy attorney, Blaine T. Edwards, citing that Edwards filed a bankruptcy case under the couple’s name without proper authority from either persons.  They sought to have attorney’s fees returned to them and have the bankruptcy case expunged.  The bankruptcy case had been filed 10/16/05 and dismissed 11/29/05 due to a “failure to file documents required by Title 11.”  The Court ruled in favor of the Storays, who were awarded the amount paid in attorney’s fees and had the case expunged based on inconsistencies between actual petition and electronic petition filed, and based on the testimonial of Patricia Storay.  Court used power granted from § 105 and§ 107 of Bankruptcy Code in the ruling.

In re Joyce (Delaware, 1/6/2009)

Robert F. Joyce filed a voluntary petition for a CH 7 Bankruptcy on 10/13/03, which was discharged on 1/21/04.  He claimed that he was filing the petition, in-part, due to a loss of $1,285 from a loan scam he applied for out-of-country because he was already in financial trouble and wanted to avoid bankruptcy.  He argued the scam sent him deeper in debt and that the false company had also stolen his identity.  However, Joyce admitted multiple times that all creditors listed on his Schedule F on the bankruptcy petition had been “personally incurred” and not a result of the fraud.  On 9/2/08, Joyce filed the motion asking the court to expunge his bankruptcy from public record.  The Court ruled against Joyce, citing that no other charges were made that hurt Joyce’s finances after he gave his information to the loan scam, and all charges were personally incurred as part of his voluntary bankruptcy filing prior to the scam taking place.