What Bankruptcy CAN’T Do: Intents and Purposes, Part Four
A Tale of Two Bankruptcies
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.
Previous blogs were about taxes, traffic fines, speeding tickets and their ilk, student loans and Intentional Debt - that is, lying to get a loan – either by preparing
a false financial statement or otherwise.
Sometimes people get a loan or cash
advance or purchase a luxury item just before filing bankruptcy. These kinds of
debt are presumed to be dischargeable – you intentionally bought a luxury item
or got a cash advance or loan with no intention of paying for it. I talk about
that here.
I finished that blog saying that the non-dischargeability of
those kinds of debts is presumed and a debtor can rebut or disprove that
presumption.
Tell them your story …
***
Here are two bankruptcy cases in which I was the Debtors’
attorney. Coincidentally both of the cases were filed in January (of different
years). One was a married couple (I will call them the Smiths), the other a
divorced man (Jones).
Although there were three people filing bankruptcy – I will
refer to them as only two entities – Smith and Jones. Three people, two cases,
two names.
In the middle of Smith’s bankruptcy I received a letter from
one of his credit card creditors. I was expecting the call because I noticed
the recent charges on his credit card.
He charged over $3,000.00 on this card during a vacation to
London. Then he filed bankruptcy in January. (Once upon a time the limit for
presumption of dischargeability was $500.00 in charges within 30 days of filing
and $1,000.00 within 90 days of filing). The credit card company told me they
were planning on filing a motion to make their debt non-dischargeable.
BUT, Smith had an intervening circumstance. True, he charged
up his London vacation in November, but when he was fired from his job in
December. I proved to the credit card company that 1) his vacation has nothing
to do with his dismissal (he was not running out the clock) and 2) more
importantly, I could show that had he not been fired, he would have paid the
credit card. They did not file their motion to make the debt non-dischargeable.
Remember that the loser paying the attorney fees in these issues … so there was
no “we have nothing to lose by filing” from the credit card company.
In the middle of the Jones bankruptcy, I got a letter from
one of his finance company loans. They were going to file a Motion to have
their debt ruled non-dischargeable, too. He got a loan of $5,000.00 from July
of the year before – seventeen MONTHS before filing bankruptcy.
How on earth were they going to accomplish that? Because he
had not made a single payment on that debt in seventeen-plus months. Not. One.
He was still at the same job as when he got the loan. He was
at the same pay rate. He did not marry, divorce, have a child, get sick, lose a
family member or was hurt or injured at work or elsewhere. All he did was incur
more debt. Also his demeanor was a bit … well, let’s just say the conversations
about this issue contained a lot of “who cares” and “so what”s.
Nothing happened between the time he got the loan and the
time he filed bankruptcy.
The odds were good that he had no intention of paying that
loan – even though the loan was far past the time allowed by law. Remember one
of the often-repeated phrases in this blog series: A good local bankruptcy
attorney will have the experience and knowledge of your specific district to
advise you how your bankruptcy judge views and reviews these issues.
There was very little chance the judge would rule in his
favor – especially with Jones’ apparent lack of concern. Add to that he would
likely have to pay for the loan company’s attorney fees (as well as mine). We
agreed to allow the loan to survive the bankruptcy. He didn’t care about that
too much, either.
The debt was too far in the past for me to know about it.
Perhaps I could have delayed his bankruptcy filing – give him time to make a
few payments on the debt.
Of course, that would have been obvious, too. “When did you
see your attorney?” “December 17th.” “When did you make your first
payment on this debt?” “December 18th.” A judge would see through that.
But if the payments were made for six months or more … if he could have waited
that long or longer; the debt might have discharged.
***
Intent is the key. Jones had no intent of running up the
credit card without paying. On the other hand, Smith had no intent to pay HIS
debt.
THAT is the difference.
***
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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