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A creditor’s ill-advised theory that the assets of a debtor’s fianc�e must be included in a bankruptcy petition has resulted in sanctions and a sharp reprimand from a federal judge. Northern District of New York Bankruptcy Judge Robert E. Littlefield Jr. said the theory advanced by attorney David P. Antonucci of Watertown, N.Y., was so flawed that his client, Northern Federal Credit Union, should be penalized as well for relying on such poor counsel. “Unfortunately for Attorney Antonucci, this case does not exemplify good lawyering,” Littlefield wrote in In re: Gregory Eliopoulos, 03-16950. “Unfortunately for the Credit Union, it was not objectively reasonable for it to rely upon such poor legal advice… . As such, they are jointly and severally liable for any sanction to be awarded by a final order of this court.” Littlefield’s decision arose in the context of an adversary proceeding Antonucci instituted on behalf of his credit union client. The creditor, which the court described as “aggressive,” suspected that debtor Gregory Eliopoulos had access to more assets than disclosed in his Chapter 7 petition. It challenged that petition, arguing that the debtor was funneling money into his fianc�e’s home and living expenses for her children. Antonucci said, according to court records, that the theory was a “[shot] in the dark” and that he had no proof to back up the claims. The judge said Antonucci “freely admitted” on at least five occasions that neither he nor his client had sufficient information to back up its allegations. “[B]ecause of its bizarre conduct in this case and its frequent appearance as a litigant before this court, it seems that the Credit Union sought by way of example to send a message to its broad customer base that any bankruptcy filing will be highly scrutinized,” Littlefield wrote. The judge said there is no legal authority for the theory that a debtor is required to disclose a fianc�e’s income. When it became evident that that theory would fail, Littlefield said, Antonucci then offered a “particularly bizarre” argument that �707(b) of the Bankruptcy Code, which gives the U.S. Trustee authority to seek relief for substantial abuse, can be invoked by the creditor. “When it became apparent that Attorney Antonucci had exhausted the ‘concealed income’ theory in defense of his filing and continued advocacy of the complaint, he argued that the complaint was legally warranted on alternate grounds of undisclosed, fraudulently concealed assets or preferential transfers,” Littlefield wrote. “The court does not wish to chill the Credit Union’s participation in future bankruptcy proceedings, but it cannot tolerate or condone the conduct of Attorney Antonucci and the Credit Union in this proceeding.” Anthony Inserra of Watertown appeared for the debtor.

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