Posted on March 13, 2017 in Discharge of Debts

A creditor or a bankruptcy trustee could potentially object to the discharge—legal write-off—of ALL your debts. Very rare, and preventable.

Challenging the Discharge of One Debt vs. All Debts

Ten days ago (on March 3, 2017) our blog post was about a creditor challenging the discharge of its debt. Certain special kinds of debts are never discharged—for example, child and spousal support. Other specific kinds are not discharged unless meeting certain conditions—for example, income taxes. But a creditor can challenge the discharge of virtually ANY debt if that debt was created through a debtor’s fraud or misrepresentation, or through “willful and malicious injury” to person or property. Those kinds of debt-discharge challenges are relatively rare. Most people incur debts honorably, and just can’t pay them back later.

If challenges to the discharge of a single debt are unusual, much rarer are challenges to the discharge of ALL debts. Under certain very limited circumstances a creditor or bankruptcy trustee can object to the discharge of all your debts. Usually such an objection is based on fraud or some other illegal activity by the debtor in connection with the bankruptcy case itself.

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 Posted on March 10, 2017 in Bankruptcy Law

Sue a creditor to confirm that a debt will be discharged, or to punish the creditor for violating the automatic stay or the discharge order.

Last time we got into the advantages of using bankruptcy court to sue your creditor. Some of the advantages are:

• The issues that can be raised by a debtor in bankruptcy court are narrow. This makes for simpler litigation, and a less expense way to resolve a dispute. That’s crucial when money’s tight.
• Bankruptcy court is usually much faster and more efficient than state courts. This saves you both aggravation and money.
• You already have your bankruptcy attorney in your corner, familiar with you and your circumstances, and likely very experienced in the narrow legal issue in dispute.

So what are the specific issues that you can sue a creditor for in bankruptcy court? We introduce three of the main ones today.

1) Discharging a Questionable Debt

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 Posted on March 08, 2017 in Bankruptcy Procedure

Sometimes it’s in your best interest to force an issue in bankruptcy court by, in effect, suing a creditor in an adversary proceeding.

The last two blog posts have been about you as a debtor being hit by an adversary proceeding. A creditor may try to use that tool to prevent you from legally writing off a debt. A Chapter 7 or Chapter 13 trustee may try to kick you out of bankruptcy altogether if you don’t follow the rules. Even though these situations are relatively rare, you still want to get advice so that you can avoid them.

However, you can also use an adversary proceeding as a tool to benefit you in certain circumstances. You have some significant practical advantages in bankruptcy court that you would not have in normal state court.

The Advantage of a Limited Issue

The disputes that you can and would want to raise are specific, limited ones. Issues like whether you can discharge—legally write off—a debt. Or whether a creditor violated bankruptcy law and has to pay you damages.

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 Posted on March 06, 2017 in Bankruptcy Procedure

Usually it’s not hard to avoid getting into a dispute with your trustee. But you need to know the law and follow it.

Last time we introduced the term “adversary proceedings,” essentially the name for lawsuits in bankruptcy court. We focused on adversary proceedings brought by creditors against debtors when challenging the discharge of their debts. Today we turn to possible adversary proceedings by trustees.

We have to keep emphasizing that most consumer bankruptcy cases involve NO adversary proceeding at all. Most cases go generally as expected, that is, assuming that the debtor is represented by an experienced bankruptcy lawyer. This also assumes that the debtor is honest and thorough with the lawyer so that any potential issues can be nipped in the bud.

But disputes sometimes do arise. So it’s helpful to have some idea what those might be and how they are resolved.

The Trustee in Bankruptcy

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 Posted on March 03, 2017 in Bankruptcy Procedure

Disputes in bankruptcy court requiring the judge's resolution may be done so through an adversary proceeding.

What’s an Adversary Proceeding?

It’s simply a lawsuit that is part of a bankruptcy case. Like it sounds, it’s a way for adversaries to fight it out in bankruptcy court.

The main bankruptcy case involves a debtor and the creditors of that debtor. The bankruptcy court clerk assigns each case a case number.

In an adversary proceeding, as in most lawsuits, one or more plaintiffs file a complaint against one or more defendants. The debtor in the bankruptcy case can be either a plaintiff or a defendant in the adversary proceeding. The debtor is usually one or the other, but not necessarily. Disputes can arise in a bankruptcy case that don’t directly involve the debtor as a party.

An adversary proceeding gets its own case number distinct from the bankruptcy case number.

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 Posted on February 22, 2017 in Secured Debts

To determine whether a “lease” is actually a disguised secured purchase, the bankruptcy court looks at the deal’s economic substance.

In our last blog post we showed how in bankruptcy a lease isn’t always a lease. A transaction labeled as a lease of personal property may actually be a secured purchase for bankruptcy purposes. We showed that when a so-called “lease” is not a true lease, through “cramdown” you can often keep the property being “leased” for much less than you’d pay otherwise.

Today our blog post is about the factors that the bankruptcy courts look at in distinguishing a true lease from a disguised secured purchase.

Federal Bankruptcy Law or State Laws Govern?

Generally, under the U.S. Constitution federal law governs what happens in bankruptcy. (See Article I, Section 8.) However, the U.S. Bankruptcy Code does not define the term “lease.” It doesn’t say how to distinguish between a lease and secured purchase.

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 Posted on February 20, 2017 in Secured Debts

A "lease" of furniture or other consumer goods may actually be a disguised purchase. If so, through "cramdown" you can pay much less on it.

Our last blog post was about your bankruptcy options on leases of personal property—such as furniture or electronics. Your basic options are either to “accept” the lease or else “reject” it. When “accepting” the lease you keep possession of the property and must accept ALL of the lease’s terms and obligations. When “rejecting” the lease, you surrender the property and ALL of the remaining lease debt is discharged—legally written off. It’s all or nothing.

But what if that lease is really just a disguised purchase over time, with the “leased” property as collateral? If so, that may give you some major advantages. There can be a big difference in the bankruptcy consequences leasing something instead of buying it on time.

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 Posted on February 17, 2017 in Bankruptcy Law

Leases of consumer goods—furniture, appliances, electronics—are like vehicle leases: you can “accept” or “reject” them.

Our last 9 blog posts have been about vehicle leases and residential leases. How are leases of other kinds handled when you file a Chapter 7 or Chapter 13 case?

For example, if you didn’t buy but rather leased your living room furniture, what happens to the furniture in bankruptcy?

Real Estate vs. Personal Property

There are different rules in bankruptcy for real estate and residential rentals vs. those involving personal property. Personal property includes all property that isn’t real estate. It includes vehicles, furniture, computers, and pretty much anything you can touch (and some property you can’t touch!) as long as it isn’t real estate.

The rules about vehicle leases pretty much apply to other consumer personal property leases. We covered vehicle leases in four blog posts recently, published on the website from January 27 through February 3, 2017. Check them out if you want to.

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 Posted on February 15, 2017 in Chapter 13

Chapter 13 has advantages and potential disadvantages compared to Chapter 7—it’s more flexible but there’s a chance you’ll pay more.

The last blog post was about the advantages of leaving behind your residential lease after filing a Chapter 7 case. Most of those advantages apply to a Chapter 13, too. And then some.

Reminder about Chapter 7 vs. Chapter 13

The rest of this post will make much more sense after understanding the basic differences between Chapters 7 and 13.

Chapter 7 "straight bankruptcy" is usually a 3-4-month procedure that quickly discharges (legally writes off) most debts. It doesn’t help much or at all with debts that are not discharged. Its protection against creditors lasts only a short time.

Chapter 13 "adjustment of debts" is usually a 3-5-year procedure that deals with your debts more flexibly. It can be especially helpful with debts that Chapter 7 does not discharge or does not handle well otherwise.

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 Posted on February 13, 2017 in Chapter 7

Chapter 7 bankruptcy gives you serious advantages for getting out of a residential lease—advantages in money, time, and peace of mind.

Getting Out During Bankruptcy

Your financial problems may be unrelated to your rental home or apartment. You may be reasonably happy with where you are and be current on your obligations there.

On the other hand your rental place may be a big part of your problems. It may be too expensive, and/or leave you stuck with a long lease term you wish you could break. You may have gotten a new job and need to move closer to it. You may be behind on your rent and wish you could just move and not have to pay the arrearage. Your landlord may have already started an eviction proceeding.

Whether you were or weren’t considering it, bankruptcy gives you a great opportunity to get out of your lease. Think about whether it might be advantageous once you’re filing bankruptcy regardless of your prior intentions about it.

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