Lies!
Bankruptcy helps relieve the burden of credit card and loan
debts, medical bills, back utilities and rent, and so forth.
But there are some debts that bankruptcy does not affect;
that are “immune” from a bankruptcy discharge - the word is
“non-dischargeable”. This means that when the smoke clears and the bankruptcy
is over, these debts will still have to be paid.
My previous blogs were about taxes, traffic fines, speeding tickets and their ilk, and student loans.
Today I’d like to discuss what I call Intentional Debt. It’s not a legal phrase and you won’t find it in a law dictionary or
on other legal websites or blogs.
I made it up.
Intentional Debts are the kinds of debts incurred that
you should not have incurred – and knew you should not have. You were
being naughty when you incurred the debt. Shame shame!
***
Here is the law that states that some
intentional acts are non-dischargeable. The law that says so is 11 USC
523(a)(2). I will reprint it here without all the legalese:
A debt is not discharged in bankruptcy if
it is “… for money, property, services, or an extension,
renewal, or refinancing of credit … obtained by … false pretenses, a false representation,
or actual fraud, other than a statement … (of) … the debtor’s or an insider’s
financial condition.”
In other words: you lied.
About anything. Whether it was on the loan
application or over the phone or in person. If you intentionally lied to get
the loan, that debt can be ruled non-dischargeable and you will have to
continue to pay it even though you filed for bankruptcy.
If you said you were working and you were
not. Or that you were NOT working and you WERE (this applies to overpayment of
unemployment, for example), if you said you were current on your rent or
mortgage and you were not. If you said you owned your car and you did not. If
you said you have no children living with you and you have two. You get the
idea.
Remember we are talking “intentional” …
“You said you co-owned a car with your
ex-boyfriend but he traded that car in the month before!”
“He did?”
***
Let’s pause a minute and let reality sink
in. It’s hard to get a ruling against you with this kind of action. Because
it’s hard to prove intent.
“You didn’t list the fact that you still
owe on a credit card!” Maybe when you filled in the loan application you
honestly forgot about that. You DID list the car, the OTHER credit card, the
computer loan … maybe it was an honest mistake. Maybe the application only had
room for a few loans and you didn’t have space to put it in. Maybe the loan was
going to be used to pay OFF that credit card and so why bother list it? (Hey,
that line of logic made sense to you at the time – and it still makes sense!).
“You didn’t list all your bank accounts on
the application!” Was it a Christmas club and the application was filled out
the spring (and you forgot about the ten dollars in it)? Was it a joint account
that you forgot about?
The creditors will comb through your
bankruptcy paperwork for things like this.
Fortunately things like this fall through.
“I got the bank account after I got your loan but before the bankruptcy. Same
with the credit card. Same with the car loan.”
If the creditor is smart they will ask
your bankruptcy attorneys about these discrepancies before bringing any court
action. Your attorney will ask you about the facts (when did you open the
account? When did you buy the car or get the credit card?) and relay them to
the attorney for the creditor. The creditor can then decide whether it is worth
filing an action in the bankruptcy court.
Do you see the inference here? As long as
the creditor can prove you were NOT twirling your moustache and snarling,
“nyah-ah-ah!” after getting the loan, you are probably safe.
The creditor still has a right to try the
case before the bankruptcy judge. You will still have to defend yourself or
hire an attorney to help you defend yourself.
Keep that in mind: do you want to pay an
attorney a thousand dollars to defend an eight hundred dollar loan?
Check with a local bankruptcy attorney
anyway if this happens. It may be you have a solid defense. And in some cases
the losing side pays the winner’s attorneys fees. Since the creditor who is
filing the challenge to the bankruptcy is usually a business, collecting the
attorney’s fees will be easier than if it were an individual.
***
Read through those examples above and
remember that your bankruptcy trustee will also be listening. You didn’t list a
bank account on your loan? Was it also missing from the bankruptcy schedules?
You might not only be in trouble in this proceeding to have the loan ruled
non-dischargeable, but NOW the trustee might file an action for not telling the
truth on your bankruptcy schedules.
Calm down. If the missing bank account (or
missing vehicle or other asset) is not enough to make the debt in question
non-dischargeable, it is probably inconsequential enough to escape the
trustee’s wrath, too. To be safe, amend the schedules to add the bank account
or vehicle or asset anyway…
***
One last example:
“You forged your grandmother’s name as a
codebtor so you could get the loan?” Um, yeah. If that is true; I think they
got you. You’d better own up and admit that debt will survive the bankruptcy …
***
The bottom line is that if you were
cackling with glee over “getting away” with what you did – getting the loan –
that loan may survive the bankruptcy if the creditor (the person or company you
owe the money to) challenges your bankruptcy.
A good local bankruptcy attorney will have the experience and
knowledge of your district to advise you how the bankruptcy judge of that
district views and reviews these factors.
***
If the creditor wins and the debt is ruled non-dischargeable,
it will survive the Chapter 7 bankruptcy and you will have to resume paying it
when the bankruptcy case is over. In a Chapter 13, any amount not paid by the
disbursing Trustee will survive, including unpaid interest (if the original
loan allowed for interest). In neither kind of bankruptcy will you have to pay
on the debt during the bankruptcy.
***
Copyright
2016 Michael Curry
My name is
Michael Curry and I have practiced law in Mount Vernon, Fairfield, Flora and
throughout Southern Illinois since 1992. During that time, I have helped more
than 5,000 people (and businesses) overcome their financial difficulties by
filing for bankruptcy. As a solo practitioner, I will also be happy to help
protect you and your family’s future with estate planning, wills,
powers-of-attorney, real estate transactions and other legal services.
Please
call or text me at 618-246-0993, email me at michael.curry.law@gmail.com or send me a letter: 123 South 10th Street, Suite 507, PO Box 93, Mount
Vernon, IL 62864
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