Category: Bankruptcy laws

Can my bankruptcy case ever be reopened?

reopen case consumer bankruptcy

Can my bankruptcy case ever be reopened?

Yes, your case can be reopened in order to take care of new matters that crop up after the case. For example, if you receive an inheritance, a life insurance payout, or a divorce settlement within 180 days after filing, your case might need to be reopened to administer those assets. You might want to reopen the case to obtain an order discharging a debt when a creditor keeps pursuing you. The trustee might seek to reopen the case if it becomes apparent that you lied on your petition, omitted or concealed property, and so forth.

(Reviewed 11.14.08)

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And what debts are not washed out?

debts unwashed bankruptcy-law

And what debts are not washed out?

Congress has determined that the following types of debts are not dischargeable for public policy reasons (e.g., the nature of the debt or the fact that the debts were incurred due to the debtor’s improper behavior):

(1) taxes (subject to specific time rules), government fines, penalties

(2) spousal support (alimony)

(3) child support

(4) all student loans

(5) secured debts

(6) personal injury damages arising from driving while drunk

(6) debts from fraud, larceny, embezzlement

(7) punitive damage claims for “willful and malicious” acts (e.g., assault, libel)

(8) debts not listed on your bankruptcy papers (although this depends on the law in the federal circuit court jurisdiction)

To the extent that these types of debts are not fully paid in the Chapter 7 case, you are still responsible for them after the bankruptcy case has concluded.

Debts for last-minute purchases of luxury goods or services – or taking out cash advances on a credit card just before bankruptcy – are also non-dischargeable.

Another class of debts or claims (called “liens”) that are backed by property also survive (see the discussion of liens in next page).

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Are all debts discharged in a business bankruptcy? If not, which ones are not?

discharged business business bankruptcy

Are all debts discharged in a business bankruptcy? If not, which ones are not?

No debts are discharged in a corporate Chapter 7 bankruptcy. That’s because all of the business’s assets are distributed to creditors.

(Reviewed 11.10.08)

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Heck, if lots of folks and companies go into bankruptcy, why shouldn’t I?

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Heck, if lots of folks and companies go into bankruptcy, why shouldn’t I?

Bankruptcy is not something that should be entered into just for the heck of it. Some of your debts might not be dischargeable, and you might have to give up some of your assets if you file. Very often there are intelligent alternatives to bankruptcy that may produce a far better result than going into bankruptcy.

Bankruptcy also goes on your credit records, and may make it difficult to obtain new credit for years.

Before anyone files for bankruptcy he or she should consult with a bankruptcy lawyer. There are critically important issues as to timing and disclosure that you had better address before, not after, you file for bankruptcy.

(Reviewed 11.4.08)

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Can all debts be discharged in bankruptcy?

discharged debts bankruptcy-law

Can all debts be discharged in bankruptcy?

No. That is why it is so important to consult with a bankruptcy attorney. Depending on your circumstances bankruptcy may or may not make sense for you. If after the bankruptcy you will be no better off then you were before, why do it?

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Suppose the bankrupt committed fraud – would the debts be discharged in bankruptcy?

bankrupt code bankruptcy-law

Suppose the bankrupt committed fraud – would the debts be discharged in bankruptcy?

No. The Bankruptcy Code has long prohibited debtors from discharging liabilities incurred on account of their fraud, carrying forth a basic policy of affording relief only to an “honest but unfortunate debtor.”

Congress did not favor giving perpetrators of fraud a fresh start (by allowing them to wipe out their debts in bankruptcy) over the interest in protecting victims of fraud when it wrote the Bankruptcy Laws. Accordingly, Section 523(a)(2)(A) of the Bankruptcy Code excepts from discharge in bankruptcy “any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud.” 11 U.S.C. § 523(a)(2)(A).

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What debts are not discharged by bankruptcy?

nondischarged debts bankruptcy-law

What debts are not discharged by bankruptcy?

Not all debts are discharged. In general, liens (such as mortgages and security interests in cars) are non-dischargeable as are some other types of obligations including:

(1) Federal, state and local tax claims (subject to specific time rules)

(2) Customs duties

(3) Spousal support

(4) Child support

(5) Most student loans

(6) Secured debts

(7) Fines and penalties imposed by government agencies

(8) Debts incurred due to false statements made with the intent to deceive

(9) Fraud committed in a fiduciary capacity, such as embezzlement or larceny

(10) Punitive damage claims for “willful and malicious” acts

(11) Debts not listed on the forms and schedules filed with the Court

(12) Drunk driving obligations

A non-dischargeable debt is one that will survive the bankruptcy proceeding. The debtor still has the obligation to pay this debt; the creditor has every right to collect.

That is why it is so important to consult with a bankruptcy attorney. Depending on your circumstances bankruptcy may or may not make sense for you. If after the bankruptcy you will be no better off then you were before, why do it?

(Reviewed 11.5.08)

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Can a creditor ask a debtor to reaffirm the debt?

creditor debtor bankruptcy-law

Can a creditor ask a debtor to reaffirm the debt?

Yes, this means that the creditor is asking that the debtor pay the debt anyway, even though it is eligible to be discharged in bankruptcy. A debtor may be willing to do this if there is a co-signer or guarantor of the debt (such as a family member, friend or employer) that the debtor does not wish to leave saddled with the debt. Also, a debtor may want to reaffirm a debt in order to avoid having a secured creditor take the collateral securing the debt. A creditor may also ask a debtor to reaffirm the debt before he (the creditor) will agree to do business with the debtor again. This only applies in Chapter 7 consumer bankruptcy. This will not usually happen in a business Chapter 7.

The decision to reaffirm a debt is voluntary; no law requires the debtor to do it. The debtor can also choose to pay a debt that has been discharged in bankruptcy without reaffirming the debt, which means that the lender has no legal rights to collect the debt. Reaffirmation agreements can’t impose an undue burden on you or your dependents and must be in your best interest.

A debt is reaffirmed in an agreement filed with the court within 60 days after the first meeting of the creditors in the bankruptcy case, also called the 341 meeting. Once you sign a reaffirmation agreement you have 60 days or until the judge issues the discharge order in your bankruptcy case to cancel the agreement.

It is important to remember that a reaffirmed debt is not wiped out (discharged) in bankruptcy. Once your bankruptcy order is filed and the debt is reaffirmed, you must pay the debt. If you don’t, the creditor can sue you for the balance owed or repossess the property in a secured debt.

(Reviewed 11.4.08)

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What is Chapter 12 bankruptcy?

chapter twelfth bankruptcy-law

What is Chapter 12 bankruptcy?

Chapter 12 is designed for “family farmers” or “family fishermen” with “regular annual income.” It enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts. The purpose of the “regular annual income” requirement is to ensure that the debtor’s annual income is sufficiently stable and regular to permit the debtor to make payments under a chapter 12 plan. But chapter 12 makes allowance for situations in which family farmers or fishermen have income that is seasonal in nature.

Relief under chapter 12 is voluntary, and only the debtor may file a petition under the chapter.

In tailoring bankruptcy law to meet the economic realities of family farming and the family fisherman, chapter 12 eliminates many of the barriers such debtors would face if seeking to reorganize under either chapter 11 or 13 of the Bankruptcy Code. For example, chapter 12 is more streamlined, less complicated, and less expensive than chapter 11, which is better suited to large corporate reorganizations. In addition, few family farmers or fishermen find chapter 13 to be advantageous because it is designed for wage earners who have smaller debts than those facing family farmers.

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Is bankruptcy bad?

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Is bankruptcy bad?

In calendar year 1999, approximately 1.3 million individuals sought the relief from debts and claims of creditors by filing for bankruptcy, down slightly from the 1.4 million in calendar 1998. With that huge number of people seeking relief from their debts and the claims of their creditors, much of the stigma of “going bankrupt” has gone away.

In addition to providing relief from debts and obligations for individuals, hundreds of such long established blue chip companies as Dow Corning, Montgomery Ward, Penn Central and Texaco have used the provisions of the bankruptcy laws.

(Reviewed 11.9.08)

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