In chapter 7 cases, the debtor does not have an absolute right to a discharge. An objection to the debtor's discharge may be filed by a creditor, by the trustee in the case, or by the U.S. trustee. Creditors receive a notice shortly after the case is filed that sets forth much important information, including the deadline for objecting to the discharge. To object to the debtor's discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts a lawsuit referred to in bankruptcy as an "adversary proceeding."

The court may deny a chapter 7 discharge for any of the reasons described in section 727(a) of the Bankruptcy Code, including failure to provide requested tax documents; failure to complete a course on personal financial management; transfer or concealment of property with intent to hinder, delay, or defraud creditors; destruction or concealment of books or records; perjury and other fraudulent acts; failure to account for the loss of assets; violation of a court order or an earlier discharge in an earlier case commenced within certain time frames (discussed below) before the date the petition was filed. If the issue of the debtor's right to a discharge goes to trial, the objecting party has the burden of proving all the facts essential to the objection.

In chapter 12 and chapter 13 cases, the debtor is usually entitled to a discharge upon completion of all payments under the plan. As in chapter 7, however, discharge may not occur in chapter 13 if the debtor fails to complete a required course on personal financial management. A debtor is also ineligible for a discharge in chapter 13 if he or she received a prior discharge in another case commenced within time frames discussed the next paragraph. Unlike chapter 7, creditors do not have standing to object to the discharge of a chapter 12 or chapter 13 debtor. Creditors can object to confirmation of the repayment plan, but cannot object to the discharge if the debtor has completed making plan payments.

(Excerpt from the US Bankruptcy Court website)

Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor's drunken driving).

There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13.

Generally speaking, the exceptions to discharge apply automatically if the language prescribed by section 523(a) applies. The most common types of nondischargeable debts are certain types of tax claims, debts not set forth by the debtor on the lists and schedules the debtor must file with the court, debts for spousal or child support or alimony, debts for willful and malicious injuries to person or property, debts to governmental units for fines and penalties, debts for most government funded or guaranteed educational loans or benefit overpayments, debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated, debts owed to certain tax-advantaged retirement plans, and debts for certain condominium or cooperative housing fees.

The types of debts described in sections 523(a)(2), (4) and(6) (obligations affected by fraud or maliciousness) are not automatically excepted from discharge. Creditors must ask the court to determine that these debts are excepted from discharge. In the absence of an affirmative request by the creditor and the granting of the request by the court, the types of debts set out in sections 523(a)(2), (4) and (6) will be discharged.

A slightly broader discharge of debts is available to a debtor in a chapter 13 case than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property, debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. Although a chapter 13 debtor generally receives a discharge only after completing all payments required by the court-approved (i.e., "confirmed") repayment plan, there are some limited circumstances under which the debtor may request the court to grant a "hardship discharge" even though the debtor has failed to complete plan payments. Such a discharge is available only to a debtor whose failure to complete plan payments is due to circumstances beyond the debtor's control. The scope of a chapter 13 "hardship discharge" is similar to that in a chapter 7 case with regard to the types of debts that are excepted from the discharge. A hardship discharge also is available in chapter 12 if the failure to complete plan payments is due to "circumstances for which the debtor should not justly be held accountable."

(Excerpt from the US Bankruptcy Court website)

 

A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

Although a debtor is not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

(Excerpt from US Bankrtupcy Court website)

If you are married, a key question arises as to whether it makes sense to file a Joint petition (both you and your spouse), or a separate petition just on your behalf.  One of the most common questions our office receives is whether there is a way to “SAVE” one spouse’s credit, while eliminating all debts by filing bankruptcy for only one spouse.  Because each case is unique, we always evaluate these scenarios carefully, to determine whether it makes more sense to file a joint petition as husband and wife, or whether it is indeed unnecessary to file a joint petition, thereby saving one spouse’s credit standing.

Here are the key considerations in making the evaluation above:

1. GENERAL LIABILITY ISSUES – The key consideration is whether the spouse of the Debtor will be exposed to liability for the debtor’s debts.  If the spouse is also liable for the debts--as a co-obligor or under community property law-- it may be advisable to file for both spouses. Otherwise, the nonfiling spouse may remain liable despite the debtor spouse's bankruptcy discharge. On the other hand, if the spouse's assets are all separate property that would not be liable for the client's debts, it may be unnecessary to file for the spouse.

2. COMMUNITY PROPERTY – California is community property state.  That means that generally speaking, all debts and assets incurred and gathered, respectively, DURING marriage, are community property and BOTH spouses are liable for the community debts, and have claims to the community assets.  However, if debts and assets are clearly separate property of the filing spouse, then it may be unnecessary to file for both.  Determining if debts or assets are indeed separate property depends on a variety of factors such as:  how the debts were incurred, who benefited from the debt, were certain assets gifted as separate property to only one spouse, etc.

3. DISCHARGE OF COMMUNITY CLAIMS – In a community property state (as in California), a discharge in the filing spouse’s bankruptcy petition may be all the protection the other spouse needs in order to be absolved from future liability and claims from creditors.  With some exceptions, a bankruptcy discharge bars action on account of a "community claim" (a prepetition debt for which community property of the bankruptcy estate is liable), against community property acquired after commencement of a bankruptcy case.  However, the non-debtor (non-filing) spouse may still be liable for certain community debts such as “necessities of life.”  If such “necessities of life” debts are significant, it might make sense to file a joint petition in order for the spouse to protect his or her separate property.

4. BENEFITS OF FILING A JOINT PETITION – Filing a joint petition may offer the “umbrella” protection that many debtors may need.  Once a bankruptcy discharge is obtained on a joint petition, both community property and separate property should enjoy the protections post-bankruptcy discharge.  In addition, filing a joint petition only requires one filing fee.  Once a separate petition is filed, it cannot be amended to a joint petition.  The only other remedy would be for the other spouse to file as well, and seek consolidation for joint administration.

A large portion of calls our firm receives comes from callers wanting to know whether DEBT SETTLEMENT is a better option than BANKRUPTCY.  Most callers have seen advertisements that claim that 90% of your debt can be wiped out through debt settlement programs without declaring bankruptcy.  Furthermore, these advertisements also claim that you can make low monthly payments to settle these debts over 2-4 years.  Wow – that all sounds great, but what is the TRUTH regarding these so-called debt settlement programs?

What is Debt Settlement?

Simply put, Debt Settlement is the process of settling your debt (primarily unsecured credit card debts) for LESS than the amount you owe.  For example, if you owe $20,000 in credit card debt, you are seeking to SETTLE that debt for LESS than that amount, usually for much less.  So, for instance, if you settle $20,000 for $10,000, you have settled that debt for 50% of what you owe, and if done properly, the remaining 50% is forgiven, or wiped out.

QUESTION:  I WANT TO RENT A PRIVATE HOUSE OR CONDO, BUT I HEARD THERE ARE MANY SCAMS OUT THERE – HOW CAN I PROTECT MYSELF AS A RENTER?

Many home and condo owners these days are trying to rent-out their properties, NOT because they want to keep it as an investment, but because they are not able to sell it and have no other choice.  In fact, many homes and condos for rent may seem like great deals, but renters BEWARE – they may be scams.

I want to share with you a recent event that occurred to a friend of mine that illustrates the importance of investigating the property you are planning on renting, including its owner(s).  To protect my friend’s privacy, we’ll call him Mr. Lee.  Mr. Lee, his wife and children were looking to rent a house in La Canada, a great suburb just north of Koreatown - an area where crime rate is very low, and an area where one would expect no real estate related scams.