What’s Going on with Michael Avenatti’s Law Firm Bankruptcy?

You probably have seen Michael Avenatti if you’ve ever watched CNN cable news. The passionate critic of President Trump made a name for himself by representing porn star Stormy Daniels in a lawsuit against the President. He also routinely alleged that Trump would be impeached. Whether you like the President or not, it was hard to look away whenever a fiery Avenatti appeared on TV.

However, things have gone south for the famous lawyer. In fact, things have been going downhill for him for quite some time. Mr. Avenatti’s old law firm, Eagan Avenatti, filed for bankruptcy protection back in 2017. Now comes news that the same firm has filed for bankruptcy protection for a second time.

Legitimate Move or Attempt to Frustrate Creditors?

The latest bankruptcy filing seems to be in response to the move by Jason Frank, a former lawyer at the firm, to collect on the $10 million judgment he received against Eagan Avenatti. The media darling is personally on the hook for half of Mr. Frank’s $10 million judgment. Because of the bankruptcy filing, the automatic stay prohibits any creditor from taking an action to collect on a debt. The automatic stay kicks in immediately (hence the “automatic” in its name).

Frank, who has been trying to collect on the debt for some time, alleges that the filing is fraudulent—and he has a good argument. Avenatti agreed to place his old law firm in receivership, and the receiver has the exclusive authority to file for bankruptcy, not Avenatti. However, Avenatti did not get the receiver’s consent to file for bankruptcy protection this second time.

Mr. Frank has alleged that Avenatti is hiding assets that could be used to pay his judgment. His lawyers were set to question Avenatti under oath about the location of assets and whether he is hiding anything, but the bankruptcy filing has temporarily delayed the questioning.

Delay Tactics Don’t Work Forever

This latest chapter in the long-running saga involving Avenatti raises questions about whether debtors can abuse the bankruptcy process to prevent creditors from obtaining payment for debts owed. The answer is an unqualified “yes.”

Although we don’t know how Avenatti’s case will turn out, the fact that he filed for bankruptcy protection without the receiver agreeing to it is strong proof that he is using bankruptcy as a delaying tactic. Unfortunately, it will not work forever and eventually the bankruptcy court will probably dismiss the petition. Whether Mr. Frank is ever able to obtain payment on the $10 million he is owed is another story.

Facing Financial Stress? Consider Hiring Us

Just because some people abuse the bankruptcy process does not mean that everyone does. In fact, these types of shenanigans are very rare, especially when dealing with regular people who aren’t millionaires.

If you are feeling financial stress, discuss your options with a Plantation bankruptcy attorney at Nowack & Olson, PLLC today. The automatic stay can stop creditors from harassing you, and you can emerge from the bankruptcy with your finances in order.

Call us today, 888-813-4737. We offer a free initial consultation.

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