What Bankruptcy CAN’T Do: Intents and Purposes, Part Two
Damn 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.
Here is another example of
Intentional Debt: 11 USC 523(a)(2) is the part of the
Bankruptcy Code that controls if a debt is discharged or not discharged. A debt
is not discharged in bankruptcy if it is a debt “… for
money, property, services …” (or “… an extension, renewal, or refinancing …” of
a loan) if you got the loan because you used “… a statement in writing … that is materially false; (that was
about your) … financial condition; on which the
creditor … reasonably relied; and that the debtor (made
the statement in writing) … with intent to deceive.
This time we are still talking about
lying, but lying on paper specifically about your financial condition.
Wait.
Wouldn’t that be included in the “false pretenses, a false representation, or actual fraud” you
talked about last time? Yes, but that part of 11 USC 523(a)(2) specifically
says that does NOT count to a writing about your financial condition.
Why not?
I don’t know. Someone, somewhere,
must have been able to worm their way around the “false pretenses, a false
representation, or actual fraud” because it was something in writing about their
financial condition. So the legislature added this extra part.
In this case, I am talking about
writing on an application (or anything in writing) that you make $40,000.00 per
year when you make $20,000.00 per year. When you put in writing that you own
your car when you still have a loan on it.
It’s the Nixon problem. It’s not the
fact that you did it (which is bad enough) but the fact that you lied about it
– on paper.
And this specific part of the code
deals with anything in writing about your financial condition. When you checked
that you were NOT convicted of any crime when you were; that doesn’t count –
even if you intentionally lied (and that is not something you tend to forget).
Of course, the creditor can still “get” you on the “false pretenses, a false
representation, or actual fraud” part.
***
Or can they? Remember I said that it
is difficult for a creditor to win these kinds of actions. If only because a
creditor – usually a company in the business of lending money – has ways to
check and double-check what you say.
Did they ask for copies of your
paycheck stubs? How did they verify your income? Did they NOT verify your
income?
That was kind of … well … stupid wasn’t it?
A common defense as to not listing
all your debt is to ask if the company got a credit report before approving the
loan. Does the credit report show the unlisted credit card? Why did they
approve the loan in the first place when they SAW there was a credit card not
listed on the loan application?
This is especially helpful when they
say “I wouldn’t have given her that loan had I known she owed that much on her
Discover Card!”
And they will ALWAYS say that.
***
If, in the course of the lawsuit, it
seems the judge is siding with the debtor – and a good attorney can tell most
of the time – the attorney may pursue how the debtor got the loan? Did they get
a letter saying they were pre-approved? Well, if they were pro-approved it
hardly matters WHAT they put on their application, doesn’t it? J
***
The Court will use reasonableness
and common sense with these issues. Forgetting one or two other loans on an
application? That’s probably okay. Forgetting about tens of thousands of dollars’
worth of debt? That is NOT reasonable.
You forgot your name was on your
brother’s car? That’s probably okay. Forgetting that you DON’T owe on the car
you are currently driving? That is not reasonable.
Stating you make $35,000.00 per year
when you make $40,000.00? That’s probably okay. But if you were out of work
when you made the loan? That is not reasonable. Did the question ask about
potential future income? We might be back to reasonable again. This is the kind
of thing your attorney will ask the creditor – do you ask about his current
situation? Did you follow up on the questions about potential income?
***
“Intent
to deceive”. That is the key. Cackling with glee over your nefarious deed.
Twirling your mustache. Nyah-ah-ah.
***
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.
***
More “Intentional Debts” next time …
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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