Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

Bankruptcy attorneys are good at hyping the bankruptcy discharge. Terms like “Erase Your Debts!” and “Start Fresh!” abound in consumer bankruptcy advertising. You may know that at the end of your bankruptcy case the court will enter an order discharging certain debts. But what exactly happens to debts that are discharged?

The bankruptcy discharge does not “erase” or “eliminate” the debt. The discharge is a permanent order injunction against certain creditors. The discharge forbids all action to collect the debt from the discharged debtor. This injunction applies to the original creditor, any collection agency or subsequent creditor, and to any attorney or other representative who may attempt to collect the debt.

The discharge injunction prohibits collection action against the discharged debtor. For instance, if a credit card debt is included in your discharge, then the creditor is barred from attempting to collect on the debt from you, personally. The debt still exists, but the creditor cannot take any legal action against you to collect.

A creditor may still have options to collect on a discharged debt. The bankruptcy discharge only applies to the individual debtor, so any co-debtor (who has not also filed bankruptcy) is fair game. In most cases, a co-debtor will be 100% liable for the entire remaining debt. The creditor cannot sue you for payment, but it can sue your co-debtor. Your co-debtor is also prevented from suing you for payment.

A creditor may also seek to collect from any property that was used as collateral for the discharged debt. Often property that was not acquired through financing (called “non-purchase money security”) can be protected, but the general rule in bankruptcy is that secured property must be paid for or returned. After the bankruptcy case is closed, a secured lender can repossess collateral that secures a discharged debt without violating the bankruptcy discharge injunction. Repossession after bankruptcy is actually very rare. There are several ways to protect property (especially a vehicle) during and after bankruptcy, including redemption, a Chapter 13 cram-down, or reaffirmation. If you have secured property you would like to keep, discuss your options with your attorney.

Many debts that are “forgiven” or “charged-off” can be taxed against the debtor. The IRS sees the forgiven debt as taxable income. Fortunately, the federal law contains an exception to this rule for debts discharged by bankruptcy. Discharged debts are not taxable as income by the IRS.

Since the debt still exists after the bankruptcy case, the discharged debtor may choose to make voluntary payments. The discharge injunction only applies to the creditor, and there is nothing that prohibits voluntary payments. Voluntary payments do not “revive” the debt, and it does not negate or suspend the discharge. The creditor is forever and always barred from contacting the debtor regarding the debt, and cannot call or even send reminder notices to pay.

If you have bills that you cannot afford to pay, contact an experienced attorney and discuss your options under the federal Bankruptcy Code. Bankruptcy is a powerful defense that can shield you from the negative effects of overwhelming debt.

 In “the old days” (before 2005) a bankruptcy debtor with a mortgage problem could file a Chapter 7 bankruptcy and discharge all of his unsecured debts, then immediately turn around and file a Chapter 13 to deal with real estate debt. Bankruptcy attorneys referred to this as a “Chapter 20” (Chapter 7 plus Chapter 13). The 2005 amendments to the Bankruptcy Code sought to kill this practice; however one recent case may bring Chapter 20 back to life.

The Bankruptcy Appellate Panel for the federal Eighth Circuit Court of Appeals has ruled in favor of a debtor who filed a Chapter 13 bankruptcy to strip away a wholly unsecured second mortgage, even though he was not eligible for a discharge in the Chapter 13 case. In this case, In re Fisette, No. 11-6012 (8th Cir. BAP Aug. 29, 2011), the debtor filed his Chapter 13 case soon after receiving a discharge in a previous Chapter 7 case. The Bankruptcy Code requires that a debtor wait six years after a Chapter 7 case to be eligible for a Chapter 13 discharge, so the debtor was not eligible for a Chapter 13 discharge. After filing Chapter 7, Fisette continued to make payments on his home without formally reaffirming his personal obligation on any of his three mortgages. By 2010 he was behind on his mortgage payments. Since the total amount owed on his first mortgage was more that his house was worth, Fisette decided to ask the bankruptcy court to strip away the second and third mortgages.

The Eighth Circuit BAP allowed Fisette to strip away the junior mortgages. Since Fisette had previously been discharged of his personal obligation on the junior mortgages during his Chapter 7 case, the bank had no recourse against Fisette or his property. This is the first time a federal appellate court has allowed lien stripping in a “Chapter 20” case since 2005.

Bankruptcy law can be extremely complex and is constantly changing. If you need the help and protection of the federal bankruptcy courts, get assistance from an experienced bankruptcy attorney. Your attorney can explain your rights and your options, and help you decide on the right course for you and your family.

 “When does my bankruptcy case end?” may sound like a simple question, but the answer can be very confusing. There are several different milestones that affect your bankruptcy case and cause this confusion. The most common of these events are: (1) an order of bankruptcy discharge; (2) an order to close the case; and (3) an order of dismissal.

The bankruptcy discharge generally occurs near the end of the debtor’s case. Once the discharge is entered, the automatic stay is no longer in place. The discharge injunction, which is narrower in scope, replaces the automatic stay injunction. That means you’re your creditors may collect in any way that is not prohibited by the discharge injunction. An example of this is a non-dischargeable income tax debt. Once the Chapter 7 discharge is entered, the tax collector is no longer prohibited from garnishing wages or seizing property.

The discharge order does not close the bankruptcy case. Typically an order to close a bankruptcy case follows shortly after an order of discharge, but sometimes the case will continue after the discharge order is entered. This happens when a Chapter 7 trustee keeps a bankruptcy case open to administer assets to creditors. The case closes once the estate is fully administered, the trustee files a statement that all trustee duties are completed, and all issues in the bankruptcy case are resolved.

Dismissal of the case ordinarily means that the court stopped all proceedings in the main bankruptcy case and any pending adversary proceeding. When a dismissal is entered, the debtor does not receive a discharge. A debtor can request a voluntary dismissal, or the trustee or creditor can request an involuntary dismissal. A hearing is typically required for dismissal, and the case terminates when the court enters the dismissal order.

Dismissal can have serious consequences! In some cases the debtor may be prohibited from filing another bankruptcy case for 180 days. In other cases the debtor may lose the protection of the automatic stay in a future bankruptcy case, unless permitted by the court. It is important to investigate all options with your attorney before allowing your case to be dismissed.

The Bankruptcy Code is very complex and requires the guidance of an experienced attorney. Simple questions like, "When does my bankruptcy case end?" has many "it depends" answers that are determined by the unique facts of your case. Experienced bankruptcy counsel can answer these questions for you and get you the debt relief you need.

 There are many myths circulating regarding bankruptcy. One of the most popular myths is that a bankruptcy debtor can pick and choose which debts are included in the bankruptcy discharge. This myth is simply the result of a misunderstanding of the discharge process.

When you file bankruptcy you are required to honestly disclose all personal financial information to the best of your ability. That means listing all of your income, expenses, assets, and debts in your bankruptcy schedules. Intentionally failing to list a debt is a very serious matter and the bankruptcy court could deny your discharge if you are less than honest.

In many cases a bankruptcy debtor has a good reason for wanting to continue paying on a debt. The most common reason is to retain property used as security for a loan (e.g. a car or house loan). In bankruptcy, secured property must be paid for or returned. Fortunately, the bankruptcy code allows the debtor to continue paying the secured creditor and keep the property.

In other cases a debtor may want to continue to pay an unsecured creditor. This is normally the case when the discharge of a debt in bankruptcy will cause financial harm to a co-debtor. For instance, you may owe money to a family member that you want to repay. The bankruptcy discharges the legal obligation to pay the debt, and enjoins the creditor from seeking collection. However, while the bankruptcy prevents your family member from asking for payment, it does not prevent you from making voluntarily payments after the bankruptcy.

The same voluntary payment principle applies to medical bills, credit cards, and any other financial obligation. Voluntary payments do not alter the bankruptcy court’s discharge injunction. A discharged creditor is forever prohibited from taking any action to collect on the discharged debt, including asking for payment, sending a bill or statement, or filing a lawsuit against you.

If you need a bankruptcy attorney in Texas, but also want to continue to pay certain debts, discuss your situation with an experienced Texas bankruptcy lawyer. Your attorney can explain your obligations under the federal bankruptcy code, and can help you decide which debts you should pay.

Discharging student loans through the federal bankruptcy court is extremely difficulty. Since 1978 Congress has increased restrictions on bankruptcy debtors seeking to discharge student loan debt. Today, nearly all student loans are dischargeable only if the debtor can prove that repaying the debt would impose an “undue hardship” on the debtor and his dependents. This standard applies to both federal student loans and private student loans, although a bill was recently introduced in Congress aimed at making it easier to discharge private student loans.

While student loans nearly always impose a hardship on a bankrupt debtor, the bankruptcy courts have interpreted the “undue hardship” standard to be an exceptionally high bar. First, the debtor must file an adversary action and have a hearing to determine whether repayment of the debt would constitute an undue hardship. At that hearing the debtor must show that: 1) the debtor cannot maintain a minimal standard of living and also repay the loan; 2) the debtor’s financial inability to repay the loan is likely to continue for a significant portion of the loan’s repayment period; and 3) the debtor has made a good faith effort to repay the loan. In one particularly harsh case out of Ohio, a bankruptcy judge told a blind debtor receiving $811 each month in social security disability that, “It remains to be seen . . . whether [the debtor] will find work or remain unemployed.” Wallace v. Educational Credit Management Corp., 2010 WL 5764771 (Bky.S.D. Ohio Dec. 1, 2010).

While discharging a student loan debt may be extremely difficult, lenders often find it equally challenging to “prove” the student loan debt during a Chapter 13 bankruptcy case. First, the lender who claims to currently own the debt may not be the original creditor on the contract. The current creditor must then prove that it has standing to collect on the loan. Second, the creditor must also demonstrate the amount owed. Financial records may be hard to produce if the loan has changed hands several times.

Even when bankruptcy cannot discharge or otherwise eliminate your student loans, it can provide some temporary relief. The automatic stay stops all collection action during the bankruptcy case and a Chapter 13 bankruptcy case provides an opportunity to make payments under court supervision. After the bankruptcy case is concluded, non-bankruptcy options are available including deferment, forbearance, loan forgiveness, and income contingent repayment plans. If you are experiencing financial difficulty and have student loans, consult with an experienced bankruptcy attorney and discover your options.
 

 The bankruptcy discharge is an extremely powerful court injunction that prohibits creditors and collectors from attempting to collect on a discharged debt. So what is included in your Chapter 7 discharge? The typical answer is “all debts incurred prior to the bankruptcy that are not excepted from discharge,” but that answer does not really explain what debts are included in the discharge. Let’s take a look at some categories of debts and how these debts are affected by the Chapter 7 discharge:

Unsecured debts are the easiest type to discharge during a Chapter 7 bankruptcy. Unsecured debts are not backed by collateral and include signature loans, credit cards, payday loans, medical bills, utility bills, old cell phone bills, and deficiency balances from repossessed cars and foreclosed homes. Identify all of your unsecured creditors during your bankruptcy case to ensure that all of your unsecured debts are discharged.

Secured debts are also discharged during Chapter 7 bankruptcy. Common secured debts are auto loans, mortgages, and personal loans backed by collateral. While a secured debt may be discharged by the Chapter 7 case, the secured creditor may still repossess the collateral. The general rule is that secured items must be either paid or the collateral surrendered back to the secured creditor. The most common method to keep secured property is to execute a reaffirmation agreement during the bankruptcy case. In this agreement, you keep the property and remain obligated to pay the monthly bill, and the creditor agrees to not repossess the collateral. If you do not desire to keep the collateral, you may surrender the property back to the creditor and discharge the debt.

The Bankruptcy Code lists 19 categories of special status debts that are automatically excepted from the bankruptcy discharge. Some of the more common of these debts are:
• certain tax debts
• debts not identified in the bankruptcy
• alimony, maintenance, or child support
• debts for willful and malicious injury to a person or property
• government fines and penalties
• student loans
• debts caused by DWI
In some cases the debts in the above categories can be discharged. If you have a special status debt, be sure to discuss your options with your bankruptcy attorney. Additionally, a debt may be excepted from the bankruptcy discharge if the creditor can show that the debt was incurred by fraud. A creditor is required to make the fraud complaint to the court within a certain time or the debt will be discharged.

A Chapter 7 bankruptcy discharge is a powerful legal tool that provides a financial fresh start. It is important to discuss the details of the bankruptcy discharge with your attorney before you file your bankruptcy to ensure that you understand how the Chapter 7 discharge will affect all of your debts. While most debts are discharged at the end of the Chapter 7 case, knowing which survive will allow you to plan your financial future.

 Certain debts have been given special status by the Bankruptcy Code and are generally excluded from the debtor’s bankruptcy discharge. Child support obligations, student loans, and income tax debts are three of the most common types of debts that are not dischargeable. However, each of these debts may be eligible for discharge in bankruptcy under certain circumstances.

The rules for discharging an income tax debt can be complicated, and the debtor’s ability to discharge all or a portion of the tax debt or penalties may depend on whether the case is filed under Chapter 7 or Chapter 13 of the Bankruptcy Code. An income tax debt arises from a tax return for a particular tax year. In general, an income tax debt for a particular tax year may be discharged if the following criteria are met:

1. The due date for filing the tax return was at least three years prior to the bankruptcy filing date. This due date includes any extensions.

2. The tax return was filed at least two years prior to the bankruptcy filing. This date is the time the return was actually filed with the IRS.

3. A tax assessment was made at least 240 days prior to the bankruptcy filing. The tax assessment is usually measured from the IRS proposed assessment sent to the taxpayer.

4. The tax return was not fraudulent, and the taxpayer has not attempted to evade the tax laws. Dishonest taxpayers do not receive the benefits of the bankruptcy laws.

Taxes that do not meet the above criteria are not included in the bankruptcy discharge. This includes income tax debts from unfilled tax returns. Even if the IRS assessed a tax many years ago, if the taxpayer failed to file a return, the debt is not dischargeable.

When an income tax debt is discharged in bankruptcy, any tax penalty is also discharged. However, in some cases the tax penalty may be discharged, even when the tax debt itself is not discharged. For instance, in a Chapter 7 case tax penalties are discharged if the penalty is associated with a tax debt more than three years old. In a Chapter 13 case all unsecured tax penalties are dischargeable, and receive the same treatment as all other unsecured debts during the term of the bankruptcy repayment plan. If the debtor is repaying a tax debt through the Chapter 13 bankruptcy case, no new tax penalties will accrue.

The federal bankruptcy laws contain specific provisions for discharging income tax debt. Bankruptcy can provide you with time to repay your obligation, without the threat of IRS seizure or garnishment; or, in some circumstances, can permanently discharge your tax debt. Your bankruptcy attorney can explain your legal rights and the available opportunities to free yourself from your income tax burden.

 Individuals file bankruptcy cases for many reasons. For many Chapter 13 debtors and nearly all Chapter 7 filers, the primary goal is to receive a bankruptcy discharge. The bankruptcy discharge is a court order which discharges your legal obligation to pay a creditor for a debt incurred before your bankruptcy filing. Your discharge is a permanent injunction prohibiting creditors from collecting pre-bankruptcy debts from your personally. The bankruptcy discharge is very powerful and is the cornerstone of the financial fresh start promised by the federal bankruptcy laws.

It is important to recognize that the bankruptcy court’s discharge order only discharges your legal responsibility to pay a creditor. The debt is not forgiven, eliminated, or otherwise erased. It still exists, but is no longer legally enforceable against you. The creditor is forbidden from suing you, or contacting you in any way. The discharge injunction also applies to any subsequent collection agency or attorney who purchases or is assigned the discharged debt.

While the discharged creditor cannot get its money from you, the creditor is not prevented from collecting from any other person legally responsible for the debt. For instance, if your mother co-signed for a personal loan, and the debt is discharged during your bankruptcy case, the creditor may still collect from your mother.

Likewise, a discharged creditor may be able to collect from property subject to a legal lien. For instance, if you discharge a car loan, the lien holder may repossess the vehicle after the bankruptcy case. This collection action is against the property, not against you individually.

Some debts are excluded from your bankruptcy discharge. Certain types of obligations are excluded from the discharge, like child support; and other debts, like taxes, can only be discharged under certain conditions. Debts that arise after your bankruptcy is filed are called “post-petition debts” and are not included in the discharge.

While your bankruptcy discharge is a powerful legal protection, it is important to understand the extent of the discharge order. Be sure to have your attorney identify any debt that is not discharged and your continuing financial obligation.

You should obtain a copy of your credit report immediately after receiving your bankruptcy discharge. Federal law entitles you to one free credit report from the “big three” credit reporting agencies, Experian, Equifax, and TransUnion, every twelve months. The easiest way to obtain your free credit report from each of these agencies is by visiting AnnualCreditReport.com.

After receiving your free credit reports, check each report for errors. First, any debt discharged by your bankruptcy should be listed as “Discharged in Bankruptcy” with a “Zero Balance.” Second, there should not be any negative activity reported after the date that you filed your bankruptcy case. This includes any new collection agency report after your filing date. Third, any debt that was reaffirmed should not be listed as “Discharged in Bankruptcy,” and should list your on-time payments. Finally, in some cases inaccurate information will be reported. For instance, a car voluntarily surrendered back to a creditor during a bankruptcy is not a “repossessed vehicle” and should not be reported as such.

Correcting any errors on your credit report is simple and easy. Each reporting agency has procedures from contesting erroneous information, either by mail or on-line. Once the credit agency has updated its records, it must issue you a free corrected report. Review this new report for errors; do not assume that the report has been correctly amended. You may need to correspond with the agency several times and supply documentation regarding your bankruptcy case. It is your responsibility to ensure that your credit report is accurate. Neither the bankruptcy court, nor your attorney, nor your creditors are responsible for sending the credit reporting agencies information regarding your bankruptcy case.

Updating and correcting your credit reports is the first step on the road to rebuilding your credit after bankruptcy. Fortunately, this step is free and takes very little effort. Be sure to correct your credit reports and then closely monitor your credit regularly for the first two years after your bankruptcy discharge. With timely payments and by carefully protecting your credit file, your credit score will increase quickly.
 

The Bankruptcy Code is a set of federal laws first enacted by Congress in 1979. The Bankruptcy Code is divided into chapters that provide specific legal protection for debtors experiencing serious financial difficulty. Chapter 7 of the Bankruptcy Code is the most commonly filed bankruptcy. Chapter 7 is often called a “liquidation” bankruptcy and is used by individuals, partnerships, or corporations who have no hope for repairing their financial situation and repaying their creditors. During a Chapter 7 case, the debtor's property is liquidated in accordance with the rules of the Bankruptcy Code and the proceeds are used to pay creditors.

However, liquidating everything that a person owns is not practical. State and federal laws exempt certain property from creditor collection, and the truth is that only about one case in twenty-five has an asset that can be converted to cash and distributed to creditors, according to a report from the United States Trustee Program. Obviously, if you own a very expensive luxury item like a grand piano or expensive art, that property is at risk. On the other hand, if you own “Average Joe” type property necessary for day-to-day living, your property is likely protected from creditors.

The instant a Chapter 7 case is filed an “automatically stay" against creditor action is imposed. This stay arises by operation of law and requires no judicial action. Creditors may not initiate or continue lawsuits, garnish wages, or even place telephone calls demanding payment. This provides a “breathing spell” for the debtor to develop a strategy for eliminating or repaying debts. The bankruptcy clerk sends notices of the bankruptcy filing to all creditors listed in the debtor’s bankruptcy schedules.

One of the main objectives of Chapter 7 bankruptcy is to give an honest debtor a "fresh start." The bankruptcy court will issue a discharge to the Chapter 7 debtor near the end of the case  which acts as a legal injunction against the collection of debts. A discharge is only available to individual debtors, not to partnerships or corporations.

Chapter 7 is an “erase-your-debts-start-fresh” bankruptcy. Unlike Chapter 13 or Chapter 11, the debtor does not pay anything to creditors from future income. The vast majority of debtors lose nothing during the Chapter 7 process. However, there are income restrictions and some debtors may have equity issues in property. An assessment from an experienced bankruptcy attorney will inform you of your eligibility and whether Chapter 7 bankruptcy is right for you.

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Some people think that you lose everything when you file bankruptcy. That is simply false. In fact, you do not lose anything if you file a repayment plan Chapter 13 bankruptcy. During Chapter 13 you pay your unsecured creditors (e.g. medical bills and credit cards) what you are able over three to five years, and the remaining balance is discharged.

A Chapter 7 bankruptcy is a liquidation bankruptcy and your property may be at risk to be takenand sold to pay creditors. However, the bankruptcy laws provide three ways to protect your property during bankruptcy: (1) when the property is not part of the bankruptcy estate; (2) when there is no equity in the property; or (3) when the property is exempt under state or federal law.

Some property cannot be taken from you because you do not own it. For instance, if you drive your mother’s car, it cannot be taken and sold during your bankruptcy. Property that is owned by another person and is in your possession must be disclosed in your bankruptcy schedules.

Secured property, like a home or vehicle, that is “upside-down” in value (not worth more than what is owed) cannot be taken during a Chapter 7 bankruptcy. There is nothing left after paying the secured creditor. For instance, if you owe $10,000 on your car, and it is worth $8,000, your car cannot be taken and sold during the bankruptcy.

Typical bankruptcy debtors own clothing, furniture, household goods, jewelry, and other personal items. While individually these items are not worth much, collectively they may be worth thousands of dollars. State and/or federal laws allow bankruptcy debtors to keep items reasonably necessary for day-to-day living through the use of exemptions. However, many exemptions are capped by a dollar amount to prevent abuse. For instance, while a $1,000 family piano may be exempt under state law, a $100,000 Steinway grand piano is not. Modest equity in vehicles, clothing, reasonable jewelry, retirement accounts, some savings, and even home equity are commonly exempt and protected during bankruptcy.

If you need the benefits of a bankruptcy discharge, but are worried that you will lose everything you own, speak with an experienced bankruptcy attorney and get the facts. Over 90% of Chapter 7 bankruptcy debtors keep everything, so call today and discuss your situation.
 

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Your bankruptcy discharge prohibits certain creditors from collecting from you personally after your bankruptcy case. So what happens when a creditor contacts you after your discharge? The answer depends on the situation and first involves answering three questions: (1) “Was the debt discharged in bankruptcy?” (2) “Is the collection directed at the discharged debtor?” and (3) Was the creditor notified of the discharge?”

Discharged debts are no longer legally enforceable against the debtor. The discharge injunction is a court order from a federal bankruptcy judge prohibiting creditors from filing lawsuits, sending collection notices, or making collection phone calls. Substantial sanctions may be imposed on a creditor that violates this order. However, some debts are not discharged. It is important to discuss your discharge with your bankruptcy attorney and understand which debts are included in the discharge and which are not. For instance, taxes, student loans, and family support obligations  may not be subject to the discharge. In other cases a debt may be excepted from discharge by the court.

Your discharge only protects you from collection efforts. It does not protect a co-debtor who did not also file bankruptcy, and, as a general rule, it does not protect property that is subject to a lien. Therefore, it is important to understand how your property is affected by the bankruptcy discharge and whether a creditor can seize, repossess, or foreclose on the property after your bankruptcy.

As a practical matter, if a collector does not know about your bankruptcy discharge, the bankruptcy court is not likely to impose sanctions against it. Often a collection attempt can be resolved by informing the collector of the discharge and either providing a copy of the discharge or referring the collector to your attorney. Buying and selling debt is big business, and debts often get passed from collector to collector – even uncollectible debts like those discharged in bankruptcy!

Your bankruptcy discharge injunction applies to the original creditor, collection agencies, attorneys, and any other subsequent collector. Don’t let creditor harassment disturb your peace of mind. If the answer to the above three questions is “Yes, Yes, Yes,” the collector has violated the bankruptcy court’s discharge order. Contact your attorney and discuss the best course of action to stop the harassment.
 

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Once you have received a Chapter 7 discharge and your bankruptcy case has closed, the financial recovery can begin. Good financial habits should become part of your daily life, like living within a budget, paying cash instead of credit for purchases, and contributing to your future with retirement funds and cash savings. But what happens if you need a car loan shortly after completing a Chapter 7 bankruptcy case?

Obtaining an auto loan after a Chapter 7 bankruptcy requires some work and patience. A good first step is to contact the finance manager at a large auto dealer in your community. Large dealerships have special relationships with local banks and credit unions and are more likely to find you financing. You will have a better chance at finding financing through a large auto dealer rather than a small auto dealer or even a local bank.

Primarily, the lender wants assurances that the loan will be repaid. The easy answer is to obtain a co-signor or guarantor with good credit. If you fail to pay the auto loan, the loan company can try to collect from you, your co-signor, or both. In some cases, an auto finance company will not approve a loan which includes a borrower with a recent bankruptcy – despite the assurances of a co-signor. That is not the case for every lender, so do not get discouraged if you are denied.

If you are unable to obtain a co-signor, in many cases a large down-payment may persuade a lender to take a chance with you. Cash on the table also means that the dealership has a greater incentive to make the deal happen. Ordinarily a 20% down payment is a minimum amount to get this type of result.

Large dealerships may also provide financing or other in-house opportunities for buyers with damaged credit. Some lenders may offer high interest rate loan programs that will step down the interest rate with timely payments. Large dealers also have access to promotions and special financing from the manufacturer.

Be wise and careful when using credit! Because the large dealership is under a great incentive to sell new vehicles, recently discharged debtors are often offered new vehicle financing. This may mean buying a car you don’t want at a price you can’t afford. Be careful in this situation and do not be blinded by the offer of credit and the thought of a new car.

Most bankruptcy cases end with a discharge order from a federal bankruptcy judge. The discharge is a permanent injunction that prohibits pre-bankruptcy creditors from collecting against the debtor, and is a “fresh start” for the debtor. It effectively eliminates many debts and allows the debtor to start over with his or her finances.

Taking care of your finances after receiving your bankruptcy discharge is extremely important. The bankruptcy law requires that you complete a financial management course prior to your discharge which teaches basic management techniques. While this course is helpful, the first step in managing your finances after your bankruptcy is to identify any post-discharge debts.

First, what personal debt survived your bankruptcy case? Post-discharge personal debt generally falls into one of three categories: (1) debt automatically excepted from discharge; (2) debt excepted from discharge by court order; and (3) post-petition debts. Debts automatically excepted from discharge include student loans, most taxes, and child support obligations. Debts excepted from discharge by court order include debts involving fraud or other bad conduct. Post-petition debts are debts that first arise after the day you file your bankruptcy case. Post-petition debts are not included in your bankruptcy case and are not discharged.

Second, do you have property debt that survived the bankruptcy? In certain cases the personal obligation to pay a debt may be discharged, but the property lien survives. Although you owe nothing to the creditor, items secured by a property lien may be repossessed. Consult with your attorney and determine what, if any, property may be at risk of repossession after your bankruptcy.

Finally, did you agree to any new financial obligation during your bankruptcy case? Be clear about any new or changed financial obligation that you agreed to during your bankruptcy case. If you executed a reaffirmation agreement, redemption loan, or modification, make sure you understand the terms and obligations contained in that agreement.

You and your attorney should discuss the impact of your bankruptcy discharge on your debts. Be certain that you understand which obligations are discharged and which survive the bankruptcy case. Your bankruptcy attorney is happy to discuss your options for managing any debt that survives the bankruptcy discharge.

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The goal of a Chapter 7 bankruptcy is to relieve the debtor from the burden of debts he cannot afford to pay and provide a fresh financial start.  This goal is achieved through the Chapter 7 bankruptcy discharge.  The Chapter 7 discharge is a court-ordered permanent injunction that prohibits discharged creditors from taking any collection action against the debtor.  While the discharge order is very broad, certain debts are excluded from the discharge order. 

 Below are debts that are commonly included in a Chapter 7 bankruptcy discharge:

·         Credit cards

·         Medical bills

·         Unsecured personal loans

·         Old utility bills

·         Certain income tax debts that are more than three years old

·         Payday loans

Below are debts that are commonly excluded from a Chapter 7 bankruptcy discharge:

·         Recent income tax debts

·         Domestic support obligations (child support and alimony)

·         Student loans

·         Government fines or criminal restitution

·         Any debt resulting from an intentional injury

·         Any debt resulting from a DWI

·         Any debt incurred by fraud

Debts that are excluded from the bankruptcy discharge will survive the bankruptcy and, once the bankruptcy is over, the creditor may take any legal action to collect against the debtor.  For this reason, it may be beneficial for some debtors to file Chapter 13 and use the power of the automatic stay during the pendency of the bankruptcy case to pay a non-dischargeable debt, especially in cases involving income tax debt or a child support arrearage. 

If you have bills you cannot pay, speak to an experienced attorney and discuss your options under the federal bankruptcy laws.  A Chapter 7 bankruptcy discharge can provide peace of mind and start you on a path for financial recovery.

The word bankruptcy is derived from two Latin words, bancus, meaning “bench,” and ruptus, meaning “broken.”  The term was used to describe the breakup of a tradesman’s business (often resulting in physically breaking the tradesman’s table or bench, signifying the end of the business).  Early bankruptcy laws were concerned with protecting creditors from insolvent businesses.  Usually this meant total liquidation of the business.  In some cases a creditor could have the tradesman imprisoned for non-payment of a debt. 

Modern bankruptcy law in the United States is more forgiving and promises the individual creditor a fresh start.  The United States Bankruptcy Code is enacted by Congress via authority granted by Article I, Section 8 of the United States Constitution.  United States bankruptcy laws have evolved to protect the honest, but unfortunate debtor and provide a discharge of overwhelming debts.  Debtor’s prisons were abolished in the United States. 

The cornerstone of the bankruptcy fresh start is the bankruptcy discharge, a permanent court injunction that prohibits creditor collection against the debtor.  The bankruptcy discharge is available to individual debtors and is generally ordered at the end of the bankruptcy case.  A discharge is not available to a non-individual, like a businesses or corporation.  The discharge order forbids creditors from contacting the debtor to collect on a debt, or taking legal action against the debtor personally.  The bankruptcy discharge is very broad and is enforced through a contempt action with the bankruptcy court. 

Certain debts are not affected by the bankruptcy discharge including child support obligations, debts obtained by fraud, criminal fines or restitution, most student loans, and certain taxes.  While these debts are non-dischargeable for policy reasons, other common debts like medical bills and credit card debts are discharged by the bankruptcy.  The Bankruptcy Code offers certain protections to the debtor to repay non-dischargeable debts during a bankruptcy case. 

If you are struggling with debts and need a fresh start, discuss your options with an experienced bankruptcy attorney.  The modern bankruptcy law offers many legal options for paying or discharging personal debt.  Learn how a bankruptcy discharge can start you on a path to a fresh financial start.

Generally, in order to discharge a tax debt during bankruptcy, the tax debt must meet all four of the following criteria: (1) the tax must be income taxes or “gross receipt taxes;” (2) the tax must be over three tax years old; (3) your tax return must have been filed on time; and (4) the tax debt must not be amended or challenged by the IRS as inaccurate. 

There are four different types of tax debts that are automatically excluded from your bankruptcy discharge: 

1. unpaid taxes due within three years of the bankruptcy filing;
2. unpaid taxes for returns filed late, but within two years of the bankruptcy filing;
3. unpaid taxes for tax years when the debtor did not file a return; and
4. unpaid taxes due when the debtor filed a fraudulent return or tried to evade the tax obligation.

If you have any question whether your tax debt can be discharged during your bankruptcy, consult with your attorney.  Some tax penalties can also be discharged, so be sure to discuss exactly what portion of your tax debt will be discharged, and what portion will survive.

Tax liens can be stripped off during a Chapter 13 bankruptcy to the extent that the lien is more than the equity in property.  Tax liens cannot be stripped or otherwise avoided in Chapter 7. However if the tax is dischargeable in a Chapter 7, the bankruptcy court should determine the extent of the tax lien against your property.

Property taxes are treated differently after bankruptcy.  Your personal obligation to pay property taxes can be discharged if the tax was last payable without penalty more than one year before you file bankruptcy.  However, property taxes are secured with a lien which will generally survive the discharge.  If you keep the property, you must pay the tax debt after the bankruptcy.  If the property is surrendered during the bankruptcy, you will owe nothing. 

The intersection of tax and bankruptcy is a complicated area of the law.  It is important to address any tax issues early in your case and have a clear understanding of how you and your attorney will deal with your tax debt during your bankruptcy.

A bankruptcy discharge is an order from the United States Bankruptcy Court.  The discharge is a court injunction prohibiting any attempt to collect on a discharged debt.  Creditors are strictly prohibited from contacting the debtor by mail, phone, or otherwise; filing or continuing a lawsuit; attaching wages or other property; or taking any other action to collect a discharged debt.  A creditor that violates this order is subject to contempt of court and may have to pay damages and attorney's fees. 

A creditor that contacts you in an effort to collect a discharged debt is in violation of the bankruptcy court’s discharge injunction.  Usually such contact is a mistake and the creditor is unaware of your bankruptcy discharge.  While claiming ignorance is not a valid excuse for violating the bankruptcy court order, informing the creditor that you have filed bankruptcy and received a discharge of the debt is often enough to stop future collection actions.  The creditor may want to know certain information about the bankruptcy (case number, date of discharge, chapter, etc.) to update their records and stop further collection efforts.  You can answer these questions or simply refer the creditor to your attorney. 

It is good practice to document any post-discharge collection action by creditors.  While these collection attempts are often mistakes, a main purpose of the bankruptcy discharge is to allow you to live your life free from creditor harassment.  The bankruptcy discharge applies to the debt and enjoins any collection of the debt.  Consequently, the discharge injunction applies to the original creditor, collection agencies, attorneys, and any other subsequent collector. 

Your bankruptcy discharge is legal protection against creditor harassment concerning discharged debts.  If you are repeatedly contacted by a creditor after your bankruptcy discharge, document the creditor contact and report it to your attorney.  The law is on your side and will protect your right to a fresh start free of creditor harassment.

Bankruptcy is a federal legal process for declaring an inability of an individual or organization to pay its creditors. The United States Constitution authorizes the bankruptcy laws and federal laws govern all bankruptcy cases.

One stated purpose of the federal bankruptcy laws is to give the debtor a financial "fresh start." At the end of most cases the bankruptcy judge will discharge certain debts and release the debtor from personal liability.

The bankruptcy laws are meant to give the honest debtor a fresh start, but not a head start. Therefore, Congress has identified certain debts that cannot be discharged in a bankruptcy. Many debts that would ordinarily qualify for discharge may be determined as non-dischargeable if a debtor has committed a crime or fraud in acquiring the debt. Other debts are deemed generally non-dischargeable based on public policy reasons (like taxes or child support).

Generally, the following are non-dischargeable debts:

1. child support or alimony obligations, and debts considered in the nature of support;
2. student loans, unless repayment would cause you undue hardship;
3. criminal fines or restitution;
4. debts listed in a prior bankruptcy where debtor was denied a discharge;
5. recent income taxes less than three years past due; and
6. auto accident claims involving intoxication.

Additionally, there are circumstances which may make a debt non-dischargeable:

1. debts incurred on the basis of fraud;
2. debts from willful or malicious injury to another or another's property;
3. recent purchases with credit cards;
4. debts from larceny (theft), breach of trust or embezzlement; and
5. most federal, state and local taxes and any money borrowed on a credit card to pay those taxes.

All of the categories of non-dischargeable debts in bankruptcy have specific rules and exceptions and each situation has its own challenges. If you have a debt that may fall into a non-dischargeable category, discuss your situation with a qualified bankruptcy attorney and learn your options. Your attorney can provide options for managing, repaying, or discharging the debt.