Debtor’s can now strip second mortgages in Chapter 7 bankruptcy

By Massachusetts bankruptcy lawyer, Michael Goldstein

For many years, it has been well settled law that a Debtor who owns real estate with more than one mortgage can file a Motion with the Bankruptcy Court to eliminate, or “strip,” the second mortgage or equity line from that property. More specifically, “[t]o the extent that a lien secures a claim against a debtor that is not an allowed secured claim, such lien is void.” 11 U.S.C. § 506(d). The caveat to this rule, however, it is that the law was just as well settled that only those consumers in a Chapter 13 case could take advantage of 506(d). Up until recently, a Debtor who filed a Chapter 7 bankruptcy case and wanted to discharge all unsecured debt was not allowed to strip a second lien. The reason for this rule was that, in a Chapter 13 case, the Trustee retains an interest in the property for the bankruptcy estate. Conversely, in a Chapter 7 case, presuming the Trustee abandons any exempt asset, there is no interest in the property by the estate and section 506(a) does not apply. As a result, the court cannot bifurcate the debt into secured and unsecured debt, and without this bifurcation there is no unsecured debt to discharge. Additionally, a Chapter 7 discharge does not extend to an in rem claim against property; the discharge is limited to a discharge of personal liability. Dewsnup v. Timm, 502 U.S. 410 (1992).

This week, however, the rule that lien strips cannot take place in Chapter 7 bankruptcy has been turned on its ear. In Re: McNeal, Case: 11-11352, Lorraine McNeal v. GMAC Mtg. held that, at least in the 11th Circuit, even though a Debtor still cannot cramdown the value of an investment property as clearly noted in Dewsnup, a Debtor can strip a junior lien from a primary residence. The Court reasoned that because the United States Supreme Court in Dewsnup disallowed only a “strip down” of a partially secured mortgage lien and did not address a “strip off” of a wholly unsecured lien, it is not “clearly on point” and as such, the issue was not intended to be addressed by that Court.

Upon a reading of this opinion, it seems that this case is ripe for appeal because the court essentially held that, where the Supreme Court only discussed a cramdown in a Chapter 7 case under 506, entirely stripping a junior lien was not addressed. As such, the 11th Circuit Court reasoned, there is no restriction on lien stripping. To me, this argument is a little thin. Under this ruling, a Debtor cannot reduce the principal owed to a Creditor, but that Debtor can completely eliminate it. If this holds up, though, it could be very helpful to many Debtors who meet all of the criteria for a Chapter 7, but find themselves in a Chapter 13 for no other reason then to file a Motion to Avoid a Lien.

School Transcripts and Bankruptcy

Colleges and universities treat your school transcript like it was top-secret information. Not only do you have to pay them to get the transcript sent to your new school, but if you owe the university or college anything (tuition, library fines, school parking tickets, etc.), they won’t send out your transcript. How does bankruptcy affect this?

School tuition (or other money owed to the school) is dischargeable debt. This is different from student loans. Student loans borrow money from a third party to pay to the school. Unpaid
tuition is money that is owed to the school itself. The filing of the bankruptcy should get your transcript released by the action of the automatic stay. The discharge you receive at the end of the bankruptcy should also eliminate the debt and clear the way for your transcript to be released.

If you have already received your bankruptcy discharge and/or filed your bankruptcy and the school will still not release your transcript, talk to your attorney. Sometimes a strongly worded letter to the school will help things along. If that doesn’t work, there are stronger measures that can be taken to obtain compliance.

Why The Theory That Americans Are Too Broke To Go Bankrupt Is A Very Dangerous Suggestion For Consumers and Simply Not True

I am writing this piece in response to an article entitled Americans: Too Broke To Go Bankrupt by Blake Ellis | CNNMoney.com published on Mon, May 7, 2012 6:55 AM EDT. See http://finance.yahoo.com/news/americans-too-broke-bankrupt-105500347.html.  In this article, Mr. Ellis suggests that the pricing for filing a bankruptcy case is too high and that Americans cannot afford the prices. Money is important whether it is one dollar or a million dollars.  However, the amount of money that a Debtor pays for a Bankruptcy case verses the benefits received from the case is clearly something that Mr. Ellis has failed to mention in his article.  Mr. Ellis also fails to mention that most jurisdictions placed limits on the amount of fees that an attorney can charge a Debtor to prepare and administer the case.

Nevertheless, let us really examine what Mr. Ellis is trying to say in his article.  He is suggesting that $1,500.00 is too much for Debtors to pay to get relief of debt that could range from $20,000.00 to more than $100,000.00.  Let us put a fee of $1,500.00 into perceptive for Debtors with $30,000.00 of debt owed to unsecured creditors.  I use $30,000.00 as example because this is the average amount of unsecured debt that our clients come into our office seeking relief from.  We find that the average monthly minimum payment that our clients are paying each month on this amount of debt adds up to nearly $1,100.00 a month.

If you take a step back from this debt you realize that, for the same price to pay on the minimum payments each month, a bankruptcy case can be filed.  This issue is very concerning for me because often our clients do not want to spend $1,500.00 for a fee to resolve their debt, however, they find it ok to continue to pay almost the same amount to their credit card companies while struggling each month to pay their basic utilities or put food on the table for their children.

Bankruptcy was designed to help Debtors deal with their debt so that they do not have to make the choice of paying for food or paying their credit cards.  Mr. Ellis’ article fails to address the value that a bankruptcy case can bring to a Debtor.  Instead, he wants us all to believe that it is too expensive for Debtors to even think about filing.  This is very dangerous.

The reason this is dangerous is because it gives Debtors the idea that they cannot file, which is simply inaccurate.  If Debtors do not file when they should, they could suffer a lifetime of creditors always coming to collect against them, court judgments, and bad credit.  Bankruptcy was designed to allow people who fall on hard times to protect themselves from collections, court judgments, and bad credit for life.  Debtors can turn their whole lives around in only three months in a Chapter 7 case or three to five years in a Chapter 13 case.

Our firm works with Debtors when it comes to fees.  We understand that Debtors may not be able to pay a full fee immediately.  We often set fees arrangements based upon what our client can pay each month.  Most of our clients realize that once they eliminate high monthly payments, which go mostly to interest on credit cards, they have the ability to live on their income without the need of credit cards and can afford the fee to pay for a bankruptcy case.

My major concern with Mr. Ellis’ article is that it misses the practical point of bankruptcy and the benefits that should never be overlooked.  Yes, it does cost some money to complete a bankruptcy cases with an attorney, but the amount is affordable and no one should use a price for services to deter people from getting a fresh start with a bankruptcy case.

Will I Lose my Stuff if I File for Bankruptcy?

By John M. Hilla, a Michigan Bankruptcy Attorney

Potential clients come to me with a wide variety of notions about how their assets are affected by the filing of a Chapter 7 or Chapter 13 bankruptcy. Some people are under the impression that they are “allowed” only a certain dollar-value amount of property in a bankruptcy and that the excess value will be lost; some are under the impression that they are allowed a static set of different things: 1 car, X amount of furniture, and so on.

In a shorthand sort of way, these assumptions are sort of true … but not entirely.

What you are allowed to retain in terms of personal assets through the bankruptcy process depends, first of all, greatly upon whether you are filing a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. In either case, the same process of listing, describing, categorizing, and valuing your assets must occur. However, only in a Chapter 7 bankruptcy is there any real prospect of your personal property actually being taken from you and liquidated, or sold off, for the benefit of your creditors whose debts are largely to be entirely discharged by the bankruptcy process itself. There is no liquidation of property or assets at all in a Chapter 13 reorganization bankruptcy, which is one of that Chapter’s greatest advantages.

In a Chapter 7 bankruptcy, the liquidation (seizure and sale) of some of the personal assets of the filing consumer is how their creditors are partially compensated by the court (and, therefore, by the US goverment), which is otherwise letting the consumer off the hook for all of his or her debt (other than debt that is not dischargeable, such as recent tax debt, student loan debt, and a few other forms of debt).

However, that said, most consumers who file Chapter 7 bankruptcy do not lose any personal property at all.

This is because the bankruptcy process does indeed allow you to retain X amount of your stuff. It is not, as some of my clients in Michigan have thought, an overall dollar amount. What you are allowed to retain depends on the type of property involved, and it depends upon how your attorney is protecting it.

By “protection” of property, what is actually meant is the exemption of the property from the legal bankruptcy estate containing everything you own, are owed, or owe anyone else that is created by automatic legal function as soon as you file a bankruptcy petition with the court. By default, everything you own (which should all be listed in the petition) is part of the bankruptcy estate–and subject to the power of the Chapter 7 Trustee assigned to your case after filing by the court to seize and liquidate it in order to distribute the resulting proceeds to your creditors. However, the Bankruptcy Code provides what are called “exemptions.” These “exemptions” are bits of the Federal Bankruptcy Code statute that allow you to “exempt” or remove from your bankruptcy estate certain types of property up to certain dollar value amounts. Most states have their own sets of exemptions as well, and, in some states, such as Michigan, where I practice, your attorney has the option of using either the state set of exemptions or the Federal exemptions.

One example of a Federal exemption is the jewelry exemption: up to $1450.00 (currently) worth of jewelry may be exempted from the bankruptcy estate. Property is generally valued, depending on your georgraphic area and the court rulings of your individual Federal court district, at liquidation or “garage sale” value—not replacement or insurance appraisal value. If your jewelry could be sold out of your front yard for no more than $1300.00, the Federal exemption would exempt—and protect—all of it. If it were worth $1500.00, on the other hand and there were no other exemption available to cover the additional $50.00, you would have to work out a settlement with the Chapter 7 Trustee through your attorney to pay the Trustee the additional $50.00 if you wanted to keep it–or you would deliver it to the Trustee for auction and sale.

Not every Chapter 7 case can be a “no-asset” case in which no property is subject to liquidation by the Trustee. Sometimes, that is just a cost of the benefit of walking away from a large amount of debt otherwise scot-free. However, it is the minority of cases in which this occurs, and, nearly always, at least in the Eastern District of Michigan, where I practice, the Trustee would always rather take a check for $50.00 than to have to sell your jewelry off. Deals can be made to retain even property that cannot be fully exempted.

Before deciding that bankruptcy is too great a danger to your assets to consider as an option for moving forward from unamanageable debt, speak with an experienced bankruptcy attorney who can expertly guide you through the options available: full exemption and protection, Chapter 7 and property surrender, Chapter 7 and Trustee settlement negotitation, or Chapter 13 bankruptcy. Not every option is a perfect option, but one of them may be significantly better than treading water against a years-long struggle against overwhelming personal debt.

Help! I can’t make my Chapter 13 payments

Since a Chapter 13 is generally a three to five year payment plan which is dependent on your ability to pay, there will more than likely be situations that arise in your life that may cause you to miss your required monthly Chapter 13 payment to your trustee.  Here are a few very general tips to help you through this process.

1.  And this is the most important one: Call your bankruptcy attorney immediately to let them know what is going on! We all understand things happen in life such as long-term illness, unemployment, or life’s many emergency repairs to your cars or home and we really are all here to help you.  We cannot work to remedy the situation if we don’t know the problem exists.

2.  Keep track of your monthly payments yourself.  In most jurisdictions, you do have the ability to check your case via a website (check with your counsel to get that web address and log-in information) but also try to keep a ledger. In the last six months alone, I have had two clients who tracked their monthly payments by handwritten spreadsheets realize they missed a payment and call me before there were more than one missed payment.

3.  Always remember there is solution to the problem and work with your attorney to find the best solution that fits your need.

4.  My final tip directed to my fellow practicing attorneys: monitor your cases every three-to-six months.  In most jurisdictions, the attorney has the ability to pull up a very quick payment summary of a case and identify missed payments even before a client may have called.  I adopted the policy 3 years ago to check all of mine (and our firms) open Chapter 13 cases at least every six months – some a lot sooner – to verify all payments have been received and if i see one missing, contact the client to try and thwart the problem before it gets too far out of hand.

Wading past the kiddie pool – a journey into Chapter 13’s

One question I am asked all of the time by my prospective clients and also from inexperienced practicing attorneys is why should I even consider filing a 13?

A very well-respected bankruptcy scholar put it best in a seminar I attended three years ago (and he often repeats this saying): filing a Chapter 7 is like going in the kiddie pool.  You can splash around and play and the rules are pretty straightforward.  If you have to file a Chapter 13 however, you have to wade into the deep end and tread water.

The truth is in most cases Chapter 7 is likely the best option however when Chapter 13 is the option, do not be afraid of the fact that there is a payment plan for 3 to 5 years and how the plan is calculated.  Sit down with your attorney who can guide you through the specifics and more importantly, work with you on calculating a plan that will very likely work within your budget.

Do I need Trustee’s approval to get a new job?

By Massachusetts bankruptcy lawyer, Michael Goldstein

Consumer debtors who file for bankruptcy protection under Chapter 13 do so in order to propose a plan to demonstrate the ability to pay back their creditors to the extent that their disposable income will allow, within the guidelines of the law. A Chapter 13 plan under the Bankruptcy Code requires the Debtor to propose a plan which demonstrates the best effort to pay back all of the creditors over the course of the plan. This “best efforts test” requires a Debtor to devote all disposable income to the plan. 11 U.S.C. § 1325. In order to determine how much money a debtor can afford, a Debtor must calculate how much money the household brings in each month after the employer, or other revenue generating source, withdraws taxes, insurance, and mandatory payroll deductions; otherwise known as the Debtor’s net income. From that net income, the Debtor then also deducts all reasonable and necessary household expenses.

The difficulty of proposing a Chapter 13 reorganization plan is that this type of debt relief is not typically a short process from start to finish. In general, these plans propose payments from anywhere between three and five years. That is a long time for anyone to continue to do the same thing. As a matter of fact, the Bureau of Labor Statistics of the U.S. Department of Labor reported in a study spanning three decades in September, 2010 that the average person between the ages of 18 – 44 keeps a job for 2.36 years. Moreover, in the current economy, the sad fact is that many people lose their jobs due to corporate downsizing and, as a result, many Americans are moving from job to job much more frequently these days then they have in the past.

Changing jobs, especially where your income remains substantially the same, is not something that is of great concern in a bankruptcy case. However, there are times when you may wish to change jobs and, as a result, it is either required or, at least a very good idea, to discuss your plan with the Chapter 13 Trustee. For example, in the event that your hours at work are going to be temporarily cut, or you are going to start a new job and your income will need to ramp up in order to pay your Chapter 13 plan payment, you want to let the Trustee know what is going on. In these cases, your attorney can file a Motion with the court to suspend or modify your payments on a temporary basis.

In a more typical scenario, a Debtor will either lose a job or need to voluntarily resign due to a hostile work environment. In this situation, you may be able to work with the Trustee to again suspend your payments for a short time. If, however, the Trustee does not know that you are struggling to make your payments and you either fail or refuse to make the payments, the Trustee may file a Motion to dismiss your case for failure to stay current with the proposed and confirmed plan.

Finally, there is the scenario where a Debtor obtains new employment and receives an increase in income. Many people believe that once a Chapter 13 plan is confirmed there is no need to disclose anything about having more money. The problem with this concept is that, unless the Debtor is already in a 100% plan, the Debtor still has an obligation to put forth the best effort of paying back the creditors. As such, if a Debtor’s income increases significantly, a modified plan may be required by the Trustee.

The bottom line in all of this is that, if you are in a Chapter 13 bankruptcy case and your income changes or is certain to change in the near future, you need to communicate this fact with your attorney to ensure compliance with in the guidelines of Title XI.

Will My Friends and Neighbors Know If I File Bankruptcy?

by John M. Hilla, a Michigan Bankruptcy Attorney

Concern for one’s reputation is one of the most widely expressed misgivings that potential clients want to talk about when we initially meet to explore the option of a personal bankruptcy. This concern is particularly strong among people in professions requiring licensure, such as insurance agents or stock traders or real estate professionals (not to mention military security clearances, on occasion!), as well as those who simply interact regularly with the public and whose livelihoods depend upon them being viewed as trustworthy individuals: attorneys, medical professionals, teachers, and others.

It is a basic fact that bankruptcy is a public process and that the components of your bankruptcy petition that are filed with the US Bankruptcy Court are publically available on the Federal Court System’s PACER document website (with the exception of the single page of a typical bankruptcy petition containing your full Social Security Number—this page is not viewable on PACER). Thus, the safe assumption is that, if it is required to be disclosed in the bankruptcy petition (and all assets and liabilities—or debts—are), it is susceptible to being discovered by someone you might not rather have discover that information.

Generally speaking, however, when we are concerned about public reputation and friends and neighbors, there is not much to be concerned about from a practical standpoint. If you are a politician or celebrity or someone whom the media has a general interest in writing about, it is a virtual certainty that a bankruptcy filing would be discovered and publicizied. But for the rest of us, even those of us with real estate or other licenses, it is fairly unlikely that anyone will bother to think to go to the PACER website, apply for and receive a user-ID and log-in password, and arbitrarily search you out. Should you file bankruptcy and should someone be motivated to do that (and know how the not-always-very-user-friendly PACER system works), they will find you. But, in most instances, people we casually or socially or even professionally know are not quite so motivated.

Further, given the state of the economy over the past ten or more years, you may be surprised to discover who among your friends and acquaintances has already availed themselves of this legitimate and legal process, the roots of origin of which date back through the US Constitution, the Magna Carta, and the Book of Deuteronomy. The “taint” of bankruptcy is not what it used to be, as I am repeatedly reminded when I receive a phone-call or email from a new potential client who has been referred by one of my prior clients.

Once upon a time, bankruptcy clients did not offer referrals because they were too embarassed to admit that they had undergone the process. This is no longer the case as more and more people have moved forward with the most effective form of debt-relief available under American law.

Will you friends and neighbors know if you file bankruptcy? If you tell them that you did so, yes. Otherwise, odds are against it. But, even if they discover that you have gone forward to find a fresh start for yourself and your family, the chance that they will view you with disfavor because you have done so is, in this day and age, far more slim than it has ever been.

The initial bankruptcy consultation with the attorney: What should be discussed

I recently met with a potential client at my Cumming, Georgia bankruptcy lawyer office who made clear that he had previously discussed his situation with another attorney. This did not offend me in the least, as I recommend debtors visit multiple attorneys to discuss their bankruptcy options.

However, what intrigued me about our conversation was at the end when I mentioned to the client that the more appropriate chapter for him to file would be Chapter 7, he said the other attorney he met with recommended Chapter 13. I felt that he did not have sufficient income to support a Chapter 13 repayment plan, and knew he did not have assets he would likely lose in Chapter 7, so I recommended Chapter 7.

I asked the potential bankruptcy filer why the other attorney said Chapter 13, and he said because the other lawyer told him he could not keep everything in Chapter 7. After reviewing his list of assets, I knew that was not true and a Chapter 7 filing would most likely be a no distribution case, so I asked him what assets the other attorney felt like he would lose. He said he was not sure, as him and the other attorney did not go over his list of assets.

This made no sense. Either something was lost in translation in their conversation, the other attorney did not know enough about bankruptcy law or was perhaps purposefully steering him into the wrong chapter.

Whatever the reason, there simply is no way to determine whether someone belongs in Chapter 7 or 13, without knowing the following: (1) the debtors assets and equity position in those assets (2) income and ability to qualify under the means test (3) arrearage amounts on secured debts the debtor wishes to retain (i.e., home or car)(4) previous bankruptcy filings of the debtor (5) an accounting of the debtor’s secured, priority and unsecured debts.

Without going over all of those in full, the attorney cannot accurately tell the debtor: (1) whether a Chapter 7 discharge is likely (3) whether the debtor can retain all property in a Chapter 7 (3) what a Chapter 13 repayment plan would look like.

So if you meet with an attorney who does not go over all of those with you, it’s time to get a second opinion.

This article was written by Peter Bricks. He is an Atlanta bankruptcy attorney, with offices in Jonesboro and Cumming, Georgia.

Attorney Fees and Filing Fees in Illinois and Missouri Chapter 7 and Chapter 13 Bankruptcies

Attorney Fees and Filing Fees in Illinois and Missouri Chapter 7 and Chapter 13 Bankruptcies

It is important for debtors to know about the attorney fees and filing fees associated with filing bankruptcy before their bankruptcy petition is submitted to the court. In Missouri – Eastern District, the attorney fees charged for a Chapter 7 will vary depending on the lawyer. Debtors can call attorneys and get price quotes and possibly do consultations to determine the exact amount each individual attorney charges for a Chapter 7 bankruptcy.

Some attorneys will allow clients to pay in installments while they work on their paperwork; however, the entire amount must be paid before the case can be filed. Attorneys are required to fill out a compensation form with the filing of the petition, which asserts their fees and how much they have been paid, and those two numbers must match and show $0 still owed in a Chapter 7. Otherwise, the attorney would be one of the debtor’s creditors. In Missouri, the court sets the price for a Chapter 13 bankruptcy at $4,000 unless the attorney works on an hourly rate fee. The attorney must alert the court which option they prefer on a case by case basis. What the attorney charges up front varies, and the rest is paid through the plan. The filing fee for a Chapter 7 in Missouri is $306, and the entire amount must be paid before filing and attached with the petition. In Missouri, the filing fee for a Chapter 13 is $281, which also must be paid when the petition is filed.

Why Is It Essential To Attend the 341 Creditor Meetings?

When a debtor files a Chapter 7 or Chapter 13 bankruptcy, they are required to attend a 341 Creditor Meeting. Many debtors wonder why they must attend these meetings and do not understand the significance of these meetings. When a person files bankruptcy, the bankruptcy petition and schedules are submitted electronically. One of the reasons why it is important to attend is so the trustee (the person who is overseeing the bankruptcy and sending their recommendations to the court) can see the debtors in person and match their driver’s license and social security number to the person and to the information in the bankruptcy petition.

 

 

This is the trustee’s opportunity to make sure the debtor signed the bankruptcy petition and schedules and that the debtor understands what they signed and has read the Statement of Information, which is a document many attorneys attach to the Notice of Bankruptcy when they forward it to their client and a document all debtors must read before their meeting. The 341 meeting is also a chance for the debtor’s creditors to appear and question the debtor. They are given the date and time of the 341 Creditor Meeting. Most of the time, the creditors do not appear, but they must be given this opportunity to address the debtor if they wish. Overall, the 341 creditor meeting is a chance for the trustee to verify information with the debtor under oath and make sure everything has been included and is accurate before the case can be discharged.

Homestead and Mobile Home Exemptions

In a Missouri bankruptcy proceeding, there is a homestead exemption and a mobile home exemption to exempt and protect equity in a debtor’s home or mobile home. A person’s homestead, according to Mo. Rev. Stat. 513.475.1, consists ” of a dwelling house and appurtenances, and the land used in connection therewith, not exceeding the value of fifteen thousand dollars, which is or shall be used by such person as a homestead, shall, together with the rents, issues and products thereof, be exempt from attachment and execution.” A debtor can exempt $15,000 equity in their home only if they own the home and it is their primary residence where they reside.

The property must not be a person’s rental property or second home if they wish to exempt any equity under the homestead exemption in Missouri. If two people are filing bankruptcy together, this exemption does not double.

Mo. Rev. Stat. 513.430.1(6) exempts, “Any mobile home used as the principal residence but not on or attached to real property in which the debtor has a fee interest, not to exceed five thousand dollars in value.” This means that a debtor can exempt equity in their mobile home up to $5,000 as long as it is their place of residence.

Myths and Truths About Chapter 7 Bankruptcy, Part V

(Legal Series: Read the previous parts at www.lickerlawfirm.com)

Myth: A Chapter 7 bankruptcy will prevent a foreclosure or repossession.

Truth: A Chapter 7 bankruptcy will not prevent a foreclosure or repossession. A person should not file a Chapter 7 bankruptcy if they are trying to prevent a foreclosure or repossession and/or are behind on their payments. A Chapter 13 should be filed in that case. In a Chapter 7, a person should be current on their vehicle and/or home. There is an automatic stay that is implemented in the Chapter 7 as well as the Chapter 13; however, there is no repayment plan in a Chapter 7 bankruptcy like there is in a Chapter 13 bankruptcy.

Therefore, if a person files a Chapter 7 bankruptcy when they are delinquent on payments, the creditor will most likely immediately file a motion for relief from the automatic stay. If the debtor is unable to catch up on payments by the time of the hearing on the motion for relief, the court will likely grant the motion for relief, and the car or home can be repossessed or foreclosed.

Myth: In a Chapter 7, debtors will lose their house and/or vehicle.

Truth: In a Chapter 7, debtors will not necessarily lose their house or their vehicle just because it is included in the bankruptcy. All assets must be listed in the bankruptcy petition.

Denied Discharge – Am I stuck with the debt?

I filed a Chapter 7 and did not receive a discharge. Am I now stuck with the debt?

The answer: No.

The law: 11 U.S.C. § 523(a)(10), which refers to Chapter 7 bankruptcies, states that a discharge does not discharge an individual debtor from any debt where the debt was or could have been listed by the debtor in a prior case in which the debtor waived discharge or was denied discharge.

Explained: The debt is not dischargeable in a Chapter 7.

However, 11 U.S.C. §1328(a) states that discharge is to be given at the completion of a Chapter 13 bankruptcy unless….

It states several things. However, debt that was denied a discharged in a prior bankruptcy is not listed.

What does this mean?

It means that even though your discharge was denied in a Chapter 7, and filing another Chapter 7 will not get rid of the debt, the filing and successful completion of a Chapter 13 does result in a discharge of this debt.

The information listed above is general in nature. Therefore, you need to speak with a bankruptcy attorney who can look at your specific situation in order to give you advice on your case.

Why was my discharge denied?

My discharge was denied. What does that mean? Why did that happen?

A denial of discharge can happen for many different reasons. The reasons also depend on which chapter of bankruptcy was filed. Commons reasons for denial of discharge for each chapter of bankruptcy are listed below:

Chapter 7

• Failure to provide documents to the trustee

Ø This can range from pay stubs, tax returns and bank statements to divorce decrees, etc. Anything that they trustee requests needs to be turned over.

• Failure to complete and file the Financial Management Course (FMC) which is the 2nd class that must be taken before you will receive a discharge.
• Failure to turnover assets that were discovered by the trustee.

Ø Ex. The trustee discovers you are owed a $5,000 refund and requests that it be turned over to pay your creditors. Refusal to do so can end in dismissal of your case or revocation of your discharge leaving you still owing all of your debt.

Chapter 13

• Failure to provide documents to the trustee (same as listed above)

• Failure to pay in the required amount to the trustee.

Ø This is most commonly seen as a Lack of Feasibility which means that the amount you are paying in is not high enough to pay the required creditors. This can easily be fixed, but if it is ignored it can lead to denial of discharge.

• Failure to turn over tax refunds that are to be paid to the trustee while in a Chapter 13 bankruptcy.