Reaffirmation Agreements in Bankruptcy

What is a reaffirmation agreement in a bankruptcy case?

A person who files for bankruptcy is called a “debtor”.

A debtor may wish to repay a debt, even though that debt would normally be discharged in bankruptcy case. For example, a debtor may wish to keep his/her car.  To do so, the debtor enters into a reaffirmation agreement with the creditor who holds the loan/title to the car.  Reaffirmations are voluntary and not required by law. It is recommended that the debtor carefully consider whether or not the agreed upon payments can be made before entering into a reaffirmation agreement. Even though the debtor is current on his/her car payments, the car lender may repossess the car if a reaffirmation agreement is not made.

Any agreement to reaffirm must be made before the order of discharge is entered in a bankruptcy case. If you are in the process of reaffirming a debt and feel it will not be filed with the bankruptcy court before the discharge order is entered, then you should consider filing a motion to extend the deadline to delay entry of the discharge until the reaffirmation agreement is filed.

Reaffirmation agreements are strictly voluntary. 

If you wish to reaffirm (agree to pay back) any particular debt, you must enter into a written agreement with the creditor, which legally obligates you to pay all or a portion of a dischargeable debt i.e. a debt that would otherwise be discharge or wiped out by the bankruptcy. The form for this is Form 240A Reaffirmation Agreement.  
Here's a link to the form. Click here: http://www.nhb.uscourts.gov/assets/reaffirmation_agreement.pdf

11 U.S.C. §524(K) tells you what is required to be covered in a reaffirmation agreement. 

The creditor and debtor must fully complete the form indicating the nature of the debt, the value of the collateral, and the reason for reaffirmation. Both parties to the reaffirmation must sign on the appropriate signature lines. If you are not represented by an attorney, the reaffirmation may be set down for a hearing where the bankruptcy judge will determine if it is in your best interests to reaffirm, based on your circumstances and the nature of the reaffirmation. For example, the court may not necessarily allow you to reaffirm a debt of $3,000 for a vehicle that may be worth only $1,000.

If a debtor reaffirms a debt and fails to pay it, the debt remains owed even though there was a bankruptcy case and the creditor can take action to collect the reaffirmed debt. This reaffirmed debt is not discharged or wiped out by the bankruptcy filing.

Is the bankruptcy court required to approve a reaffirmation agreement applicable to the home mortgage debt on my primary residence?

“No”.  The Court is not required to approve a reaffirmation agreement which applies to consumer debt secured by real estate. This applies to any mortgages on your home or other debts secured by your home. The court does not need to approve a reaffirmation agreement which applies to consumer debt secured by real estate per §524(c)(6)(B). This applies to any mortgages on the debtor's home or other debts secured by the home.

What about credit unions?

In addition, the bankruptcy court does not need to approve any reaffirmation agreements between debtors and credit unions. They are filed and become part of the record without a hearing.  See 11 U.S.C. §524(m)(2).

Do I need to be represented by a lawyer for reaffirmation agreements?                        

No, but do you really want to do this by yourself?  If you are not represented by a lawyer, the court may require that you personally appear in court regarding the filing of the reaffirmation agreement.  Further, you may wish to consult a lawyer to determine whether it is in your best financial interests to sign a reaffirmation agreement.

When do I make up my mind about reaffirmation agreements?

The Statement of Intentions in a bankruptcy petition requires the debtor to set forth whether he/she intends to retain or surrender the assets secured by property of the estate, and if the intent is to retain, the debtor must state whether he/she will redeem (which means to immediately pay the full loan balance, up to the value of the car, in a lump sum payment) or reaffirm pursuant to §524. 

11 U.S.C. §521(a)(2)(A) requires the debtor to file his/her statement of intentions within 30 days of the bankruptcy petition filing.  The bankruptcy court, for cause, may extend the time frames in § 521(a)(2)(A), but the motion to enlarge time must be made before the 30 days after the petition filing elapses.

11 U.S.C. §521(a)(2)(B) requires that the debtor perform his/her intentions within 30 days after the first date set for the §341 meeting. The bankruptcy court, for cause, may extend the time frames in § 521(a)(2)(B), but the motion to enlarge time should be made before the 30 days after the §341 meeting elapses.

Per 11 U.S.C. §521(a)(6), in a chapter 7 case for an individual holding personal property with a PMSI (purchase money security interest), the individual has 45 days from the first meeting of creditors to enter into a reaffirmation agreement under §524(c) or redeem under §722.

Now that I Have signed the reaffirmation agreement, when do I file it with the bankruptcy court?

Bankruptcy Rule 4008(a) requires the debtor to file the reaffirmation agreement within 60 days of the first meeting of creditors.  However, it is within the court’s discretion to at any time enlarge time to file a reaffirmation agreement.

If you definitely need to reaffirm a car loan and need more time to file it, consider filing a motion to extend the time pursuant to §521(a)(2)(B).

If you entered into a reaffirmation agreement and neglected to file it prior to discharge, you might be successful in bringing an application to reopen your Chapter 7 bankruptcy case after it closed (you pay the filing fee to reopen), to file it late, if the agreement was signed prior to the date of discharge. (Rule 4008 says the court at any time in its discretion may enlarge the time to file a reaffirmation agreement).

In many cases, with respect to a vehicle, it may not matter to a lender whether or not a debtor signs and files a reaffirmation agreement.  However, lenders such as Ford Motor Credit or Chrysler Financial have both been identified as lenders that require reaffirmation agreements for a debtor to keep his/her vehicle, even though the debtor is not in default on his/her car loan and has always made the payments on time.

What if I change my mind about reaffirming a debt?

Rescission per §524(c)(4): A reaffirmation agreement may be rescinded prior to discharge or within sixty (60) days of the reaffirmation agreement being filed with the bankruptcy court, whichever date is later, by giving notice of rescission to the holder of the secured claim. You should also consider filing a copy of the notice of rescission with the bankruptcy court so that your file is complete.

What if I don’t state my intentions or perform my intentions?

Per 11 U.S.C. §362(h)(1), the automatic stay as applicable to personal property secured by property of the estate is terminated if the individual debtor fails within the applicable time frames set by §521(a)(2)(A) to file the statement of intentions and §521(a)(2)(B) to timely take the actions specified in such statement of intentions.

Can I voluntarily repay a debt that has been discharged by your bankruptcy case, or without a reaffirmation agreement?

“Yes”.  Per 11 U.S.C. §524(f), a debtor may voluntarily agree to repay any debt that has been discharged.  However, this is purely voluntary and not legally enforceable.  For example, mom may have lent you the $1500 you needed to pay your lawyer’s fees to file your bankruptcy petition, and that $1500 debt is discharged.  Mom is not happy since you promised to pay her back.  However, to keep the peace at home, you may voluntarily pay mom back although you are not legally obligated to do so.

Bankruptcy Basics

The New Hampshire Bar Association has recently published on their web site a pamphlet that summarizes answers to basic questions on bankruptcy.

I am providing the link here.

Click here: http://www.nhbar.org/uploads/pdf/PIPBankruptcy.pdf?utm_source=August+1%2C+2012+e-Bulletin&utm_campaign=Aug1Ebullet

Here's the full print out* below if you don't wish to access the link:

A decision to file for bankruptcy should be made only after determining that bankruptcy
is the best way to deal with your financial problems.
This booklet cannot explain every aspect of the bankruptcy process.  If you still have
questions after reading it, you should speak with an attorney familiar with bankruptcy.

What is Bankruptcy? 
Bankruptcy is a legal proceeding in which a person who cannot pay his or her bills petitions the
court to get legal protection from creditors and to obtain a fresh financial start. Although a
bankruptcy filing is a court proceeding and all documents are signed under oath.  However, in
most bankruptcy cases you do not need to go before a judge.

At the moment your bankruptcy is filed, the automatic stay goes into effect.  The automatic stay
immediately stops your creditors from attempting to collect debts from you in any way, including
phone calls, letters and pending court proceedings.  There are some exceptions to the
automatic stay including criminal or government proceedings or those related to most domestic
relations matters.

Part of the bankruptcy petition is the completion of a Means Test.  The Means Test averages
then annualizes your gross monthly income for the six months prior to filing to determine your
Means Test Income.  If your gross income varies from month to month, your Means Test
Income may not necessary be your actual annual income.  If your Means Test Income is over
the N.H. state median income for a comparable household, you may only be able to file a
chapter 13 reorganization and not a chapter 7.  Median income information can be found at
http://www.justice.gov/ust/eo/bapcpa/meanstesting.htm .  If your Means Test Income is over the
state median, you must complete second part of the Means Test which deals with your
expenses.  Based on the results, you may still be able to file a chapter 7.  Most consumers are
able to file a chapter 7 petition.

What Can Bankruptcy Do for Me? 
Bankruptcy may make it possible you to:
ƒEliminate the legal obligation to pay most or all of your debts. This is called a “discharge” of
debts. It is designed to give you a fresh financial start.
ƒ Stop or substantially delay foreclosure on your house or mobile home and allow you an
opportunity to catch up on missed payments.
ƒ In some cases, “strip off” a second mortgage if the value of your home exceeds the balance
on the first mortgage.  
ƒ Prevent repossession of a car or other property, or force the creditor to return property even
after it has been repossessed.
ƒ Stop debt collection calls, harassment, lawsuits, and similar creditor actions.
ƒ Restore or prevent termination of utility service.
ƒ Challenge the claims of creditors who have committed fraud or who are otherwise trying to
collect more than you really owe.
ƒ Actually improve your credit score, as your old debts, defaulted debts, and bad debts are
discharged. What Bankruptcy Cannot Do
ƒ Eliminate child support, alimony, other debts related to divorce, most student loans, court
restitution orders, criminal fines, and some taxes.
ƒ Protect cosigners on your debts. When a relative or friend has co-signed a loan, even though
the debt is discharges as to the debtor in bankruptcy, the cosigner may still have to repay all
or part of the loan.
ƒ Discharge debts that arise after bankruptcy has been filed.
Bankruptcy cannot solve all money problems. If your income is insufficient to pay your mortgage
and other regular bills you may need to consider making significant and painful choices, which
may well include a bankruptcy filing. In addition, there are restrictions upon filing another
bankruptcy proceeding after receiving a discharge.


What Different Types of Bankruptcy Cases Should I Consider? 
There are four types of bankruptcy cases provided under the law:

ƒ Chapter 7 is known as “straight” bankruptcy or “liquidation.” It requires a debtor to give up
property, which exceeds certain limits called “exemptions,” so the property can be sold to pay
creditors.  Under the current law, not everyone is automatically eligible to file for chapter 7.

One has to conduct an income-based test called a “Means Test” to determine eligibility for a
chapter 7 proceeding.  If you are not eligible to file chapter 7, you may file chapter 13.

ƒ Chapter 11, known as “reorganization,” is used by businesses and a few individual debtors
whose debts are very large.

ƒ Chapter 12 is reserved for family farmers and fisherman.

ƒ Chapter 13 is called “debt adjustment” or “personal reorganization”.  It requires a debtor to file
a plan to pay debts (or parts of debts) from current income.  Chapter 13 relief is available only
to individuals and married couples who have debts within the debt limits.

A Walk Through of a Typical Bankruptcy Case.
Most people filing bankruptcy will want to file under either chapter 7 or chapter 13.  If you are
married, you may but do not have to, file a joint petition.  If your income is above the median
income for a family the size of your household in your state, you may have to file a chapter 13
case (the 2011 median family income census data for a family of 4 in NH is approximately
$93,186.00; for a 2-person household is $65,751.00 and $55,766.00 for a single person).

All debtors must fill out a “means test” form requiring detailed information about income and
allowable expenses. If the Means Test determines you have income left over at the end of the
month to pay creditors, you may not file a chapter 7 case, and must proceed under chapter 13.

Of course there are always exceptions to this general rule.    
Chapter 7 (Liquidation)
Chapter 7 is what most people are thinking of when the term “bankruptcy” is used. In a
bankruptcy case under chapter 7, you file a petition listing all of your assets and all of your
liabilities.

Even though you are filing bankruptcy, the law allows you to protect certain types of
property through “exemptions.”  If you have property that is not exempt, it may be sold and the
proceeds will be distributed to creditors.  Although every case is different, most cases are “no
asset” cases meaning that all of your property is exempt or protected from the claims of creditors.   If you have a “secured loan”, such as an automobile loan, you may “reaffirm” the
debt.

When you reaffirm a debt, it passes through the bankruptcy unaffected.  If however, you
are behind on your mortgage or the value of your automobile is significantly lower than the
outstanding principal on your car loan, a chapter 7 may not be the best option for you and you
should consider a chapter 13.

Chapter 13 (Reorganization)
In a chapter 13 case you file a petition and a “plan” showing how you will pay off some of your
past-due and current debts over three to five years. Importantly, the bankruptcy plan is based
on your available income not the amount of the outstanding debt.  The most important thing
about a chapter 13 case is that it will allow you to keep valuable property—especially your home
and car, as long as you are able to make the payments which the bankruptcy law requires to be
made to your creditors. In most cases, you will be required to make your regular monthly
payments on your mortgage or car loan, plus an extra payment to get caught up on the amount
you have fallen behind. These extra payments are made monthly to a Bankruptcy Trustee as
part of a “plan".

You should consider filing a chapter13 if you:
ƒ Own your home and are in danger of losing it because you are behind on your mortgage;
ƒ Are behind on debt payments, but can catch up if given some time;
ƒ Have valuable property that is not exempt, but you can afford to pay creditors from your
income over time.
ƒ Have income which is above median as determined by the “means test”.
You will need to have enough income in chapter 13 to pay for your necessities and to keep up
with the required payments as they come due, as well as to make payments under the plan.

What Does it Cost to File for Bankruptcy?
The court filing fee for a chapter 7 is $306.  The court filing fee for a chapter 13 is $281.  The
cost is the same for an individual or a married couple.  The court will allow you to pay the
chapter 7 filing fee in up to four installments. If you are unable to pay the filing fee in
installments, and you meet certain financial requirements, you may request that the court waive
the filing fee. If you hire an attorney, you will have to pay the attorney’s legal fees in addition to
the court’s filing fees.

What Must I Do Before Filing Bankruptcy? 
Every debtor petitioning for bankruptcy must receive two budget and credit counseling sessions
from an approved credit-counseling agency.  You must take one of these within the 180 day period before your bankruptcy case is filed. The credit counselor will review possible options
available to you and assist in reviewing your budget. Different agencies provide the counseling
in-person, by telephone, or over the Internet.  To file bankruptcy, you will need to file a
certificate with the court from the agency stating that you received the counseling.  A list of
approved agencies can be found at www.usdoj.gov/ust. Using any service other than an
approved agency will not be allowed in the bankruptcy process.

It is usually a good idea for you to meet with an attorney before you receive the required credit
counseling. Unlike a credit counselor, who cannot give legal advice, an attorney can provide
counseling on whether bankruptcy is the best option. If bankruptcy is not the right answer for
you, a good attorney will offer a range of other suggestions.

What Property Can I Keep? 
In a bankruptcy case, you can keep all property which the law says is “exempt” from the claims
of creditors. You can choose between state law exemptions or federal law exemptions.
Federal exemptions include:
•  $15,000 equity in your home;
•  $2,400 in equity in your car;
•  $400 per item in any household goods up to a total of $8000;
•  $1,000.00 in jewelry;
•  $1,500 in things you need for your job (tools, books, etc,);
•  $800 in any property, plus part of the unused exemption in your home, up to $7,500;
•  Your right to receive certain benefits such as social security, unemployment compensation,
veteran’s benefits, public assistance, and pensions—regardless of the amount.
You must have lived in New Hampshire for the last two years to use the New Hampshire
exemption laws. New Hampshire exemptions include:
•  $100,000 in equity in your home
•  $4,000 equity in you car
•  Up to $3,500 in household furnishings
•  $5,000 in things you need for your job (i.e. tools, books, etc.)
•  $1,000 in any property plus up to $7,000 of unused other exemptions
•  $500 in jewelry
•  Most retirement plans, social security, unemployment and other public assistance benefits
•  New Hampshire law also protects up to 6 sheep, one hog, one pig, and either a horse a cow
or a yoke of oxen.

The exemption amounts are doubled when a married couple files together.
In determining whether property is exempt, you must keep a few things in mind.   First, property
value is not the amount you paid for it, but what it is worth today. Especially for furniture and
cars, this may be a lot less than what you paid or what it would cost to buy a replacement.

Further, you only need to look at the equity in your property. This means that you count your
exemptions against the full value minus any money that you owe on mortgages or liens. For
example, if you own a $50,000 house with a $40,000 mortgage, you have $10,000 of equity in
your property.  Under New Hampshire exemptions, if the equity is under $100,000, the property
is fully protected.  In this case, the property is fully protected.

What Will Happen to My Home and Car if I File Bankruptcy? 
Although bankruptcy protects the equity in property, you must stay current or propose a plan to
get current on any secured loan such as a mortgage or an automobile loan.  If you file chapter 13, you can take up to five years to catch up on your mortgage or car loan.  In a chapter 7 case,
if you want to keep your secured property, you can reaffirm the loan.  If you reaffirm the loan,
you make an affirmative statement that you will continue to make the monthly payment until the
debt is paid in full.  In both a chapter 13 and a chapter 7, if you do not want to keep your
secured property, you may return it to the lender as full satisfaction of the debt.

Can I Own Anything After Bankruptcy? 
Yes!  Many people believe they cannot own anything for a period of time after filing for
bankruptcy. This is not true. You can keep your exempt property and anything you obtain after
the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life
insurance benefits within 180 days after filing for bankruptcy, that money or property may have
to be paid to your creditors if the property or money is not exempt.

Will Bankruptcy Wipe Out all My Debts? 
Yes, with some exceptions. Bankruptcy will not normally wipe out:
ƒ Money owed for child support or alimony, fines and some taxes;
ƒ Loans obtained by knowingly giving false information to a creditor, who reasonably relied on it
in making you the loan;
ƒ Debts resulting from “willful and malicious” conduct;
ƒ Most student loans, except if the court decides that payment would be an undue hardship;
ƒ If you incur debt shortly before the filing of a bankruptcy, it may be non-dischargeable.
   (Examples of such debts would include a large cash advance or a luxury purchase made with
a credit card, or many large charges to a credit card account);
ƒ Any debt you “reaffirm” will not be dischargeable.

Will I Have to Go to Court? 
In most bankruptcy cases, you only have to go to a proceeding called the “meeting of creditors.”
Although the meeting is at the courthouse and you are under oath, the meeting is not in a
courtroom and not before a judge.  The meeting is conducted by a bankruptcy trustee.  All
creditors are invited to the meeting although creditors rarely attend.  These meetings typically
last under five minutes.  During the meeting, you will be asked about your assets and your
current financial situation.

Occasionally, if complications arise, or if you choose to dispute a debt, you may have to appear
before a judge at a hearing. If you need to go to court, you will receive notice of the court date
and time from the court and/or from your attorney.

What Else Must I Do to Complete My Case? 
After your case is filed, you must complete an approved course in personal finance.  This
course will take approximately two hours to complete. Your attorney can give you a list of
organizations that provide approved courses, or you can check the website for the United States
Trustee program office at www.usdoj.gov/ust. In a chapter 7 case, you should sign up for the
course soon after your case is filed. If you file a chapter 13 case, you should ask your attorney
when you should take the course.

Will Bankruptcy Affect My Credit?
Yes, but not for as long as you may think.  Unfortunately, if you are already behind on your bills,
your credit may already be bad. Bankruptcy will probably not make things any worse.
A credit reporting agency (Experian, TransUnion and Equifax) can report a bankruptcy filing on
your credit report for 7-10 years and it is ultimately up to each creditor whether or not to extend
credit to you.  It is important to take the step of updating your debts with all three credit reporting
agencies once you have received your bankruptcy discharge as that will make it easier to begin
rebuilding your credit. And since bankruptcy wipes out your old debts, you are likely to be in a
better position to pay your current bills, and you may be able to get new credit.


What Else Should I know? 
Utility services—Public utilities, such as the electric company, cannot refuse or cut off service
because you have filed for bankruptcy. However, the utility can require a deposit for future
service and you do have to pay bills that arise after the bankruptcy is filed. The deposit can be
up to two months of normal billing; it may be cheaper to pay the utility bill.

Discrimination—An employer or government agency cannot discriminate against you because
you have filed for bankruptcy.

Driver’s license—If you lost your license solely because you couldn’t pay court-ordered
damages caused in an accident, bankruptcy will allow you to get your license back.

Co-signers—If someone has co-signed a loan with you and you file for bankruptcy, the cosigner may have to pay your debt. If you file a chapter 13, you may be able to protect cosigners, depending upon the terms of your chapter 13 plan.

Can I File Bankruptcy Without an Attorney? 
Although it is possible to file a bankruptcy case without an attorney, it is not a step to be taken
lightly.   If you do not understand the law or if you fill out the forms incorrectly, you may
unnecessarily lose property or jeopardize your discharge.  If you start a bankruptcy case and
fail to complete it or if you make material mistakes in completing your petition, it may
result in denial of your discharge.

Can I Update my Credit Report without an Attorney after Bankruptcy? 
Yes, all you need to do is send letters to all three major credit reporting bureaus (Experian,
TransUnion and Equifax) alerting them of your bankruptcy and discharge. This step is frequently
overlooked as it is not typically completed by the bankruptcy attorney.  There may be a credit
report updating service in your area that will handle this part of the process for you for a fee.

REMEMBER:
The law often changes. Each case is different. This pamphlet is
meant to give you general information and not to give you specific legal advice.
Portions of this booklet were adapted from the National Consumer Law Center’s
website at www.nclc.org.
Revised 6/2012

*It was authored by two colleagues, Mary Stewart and Raef Granger, kudos for their good work!

Keeping your home in bankruptcy.

The first question many people is, is "What will happen to my house or car if I file for bankruptcy?"  The answer is, "you probably can keep both".

First, if you are current in you paying your mortgage payments, the bank cannot (repeat, cannot) take your home (in New Hampshire, where I practice).  Your home is unaffected by a bankruptcy filing, as applicable to the bank when you are timely paying the mortgage payments.  Many people face mounting credit card debt and/or medical bills but wisely keep paying for their home.  Bankruptcy can rid you of credit card and medical debt while you keep the home.

If you file Chapter 7, a Chapter 7 bankruptcy trustee will look at your house to see what it is worth, to determine if there is enough equity in the house to justify selling it and paying your debts. In most cases this does not happen, because due to the real estate market a great many homes are worth less than the mortgages on them.  In New Hampshire, where I primarily practice, the state allows an exemption of $100,000 in equity in your home which covers just about everyone. For example, if your house is worth $250,000 and you owe $150,000 on the mortgage, that would leave $100,000 in equity in your house; then, you apply the $100,000 NH state exemption to the $100,000 equity in the home and there is $0 left for creditors.  So, if the house has $100,000, or less in equity, the house is safe.

If you are behind in your mortgage payments, a Chapter 13 proceeding may help you keep your home because it allows you up to five years to pay the bank back the missed payments.  Also, if your home is worth less than the first mortgage on it, and you have a second mortgage or equity line, you can probably remove that second mortgage and never pay it again in a Chapter 13 bankruptcy proceeding.

As for your car or your personal belongs, in most cases the "exemptions" under your state or federal law allow you to keep them from the reach of your creditors.  A bankruptcy lawyer can do an exemption analysis of your property to determine that.  The average person's belongings are covered by most exemptions.

So, when it comes to protecting that roof over your head and your other property, and you are drowning in debt, don't despair - find out how Chapter 7 or Chapter 13 can help you.

Worried about what it will cost to talk to a bankruptcy lawyer? Don't - most good bankruptcy lawyers provide an initial free consultation, as does my firm.

Common Myths about Bankruptcy

1.   Bankruptcy is for dead beats.

NO!  Most people I deal with are honest but unfortunate debtors.  They really want want to pay their bills.  But, with the loss of a job, lowered income, retirement, loss of a spouse, divorce,  or other financial issues, hard times can hit anyone.  Bankruptcy is a perfectly legitimate way of handling financial hard times - Congress enacted the Bankruptcy Code to give the honest but unfortunate debtor a "fresh start". 

2.   Bankruptcy is only if I am broke.

 No, bankruptcy can be a tool to keep your house, catch up on mortgage arrears when the bank won't work with you, a way to get rid of credit card debt or high medical bills, and in many instances a way to get rid of a second (or third) mortgage for which there is no equity.  In fact, in most of the bankruptcy Chapters (like Chapters 11, 12 and 13) you cannot be "broke" and you need sufficient income or assets to make your plan payments.

In Chapter 7, you may be without income or assets.

3.   Bankruptcy will take way all of my assets.

NO!  The Bankruptcy Code has a schedule of exemptions, which allow the debtor in bankruptcy to reasonably keep his or her belongings.  (click onto my articles on "exemptions")

4.   I will never have good credit again.

 That is up to you.  Anyone can rebuild their life, their credit.  You need to pay your bills on time and only obtain the amount of credit you can handle. 

5.    Bankruptcy will make me lose my job. 
The most common answer is "no".

The Bankruptcy Code says that "no private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title".  There are a few cases where an employer has been allowed not to hire someone because of bankruptcy status. The Code also says that "a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title."      

Ask yourself, have you ever met a person who got fired or not hired for filing bankruptcy?

6.   All debts are discharged in bankruptcy.

Most are discharged, a few are not - (click onto my articles regarding "discharge").

7.   The IRS will never go away.

Well, depends on how you look at it.  Stale taxes, meaning most income taxes that are many years old, may be discharged - this requires a closer look to make a determination.

8.    Once I file for bankruptcy, I can never file again. 

Incorrect! click onto my article under "bankruptcy" regarding "timing". 

Credit Scores and Bankruptcy

Most people are concerned that filing a bankruptcy can affect their credit score. 

However, your credit is affected by many things, such as late payments, judgments against you, delinquencies, high credit balances on multiple accounts, number of recent credit inquiries, etc. 

No one single item will determine your credit score.  Your credit report and credit score take into account positive as well as negative factors. 

Anyone who has faced temporary difficulties, such as losing their home to a foreclosure, a bankruptcy, or late payments when they were out of a job can rebuild their credit. 

It is important to keep all payments current, namely pay your bills on time once you have solved your financial difficulties.  And, do not take on more credit that you can handle!

Go to:

Click here: AnnualCreditReport

which is one of the sources from which to order your free credit report online.

Can I keep my house if I file for bankruptcy?

What you can keep in a bankruptcy case depends on what Chapter you file and where you live.

In many, many instances, bankruptcy allows you to keep your house and is the only tool to allow you to keep your house.

CHAPTER 7
Normally, in a Chapter 7 case, you can keep whatever you can exempt under the allowed "exemptions". 
An "exemption"  is something that you may keep, regardless as to how much money you owe to creditors. 
There is a State Exemption scheme in many states and there is a Federal Bankruptcy Code exemption scheme applicable to all states. 

If you live in New Hampshire, where I practice, you can choose either (1) the State Exemptions or the (2) Federal Exemptions.  If you go to my prior articles, click on "exemptions", and it will tell you what you can exempt under the Federal or State Exemption schemes.

Under the New Hampshire State Exemptions, you have a homestead exemption of $100,000.  Under the Federal Bankruptcy Code exemptions, you can exempt $21,625 in value of your home.

So, if you own a home worth $250,000 and owe $150,000 on the mortgage, you have an equity cushion of $100,000.  Under the New Hampshire State Exemptions, you could protect all of the equity in your home (remember, there is a $100,000 homestead exemption) and go through Chapter 7 without the bankruptcy trustee touching your home.  You can keep it.  The only issue is then between you and the mortgage holder on your home.  If you are current in your mortgage payments, then regardless as to whether you file Chapter 7, the mortgage holder cannot foreclose on your home as long as you are current in all of your obligations under the mortgage. Many people who are overwhelmed by credit card debt or medical bills, stay current on their home mortgage payments, and file Chapter 7 to get rid of the credit card debt and medical bills - and still keep their home. 

If you are not current on your mortgage payments, then the lender may foreclose - but you still get to keep the surplus proceeds over and above what you owe on the mortgage on any foreclosure sale of your home.

CHAPTER 13.
In Chapter 13, you would still choose either the State or Federal Exemption scheme. However, as long as you make the Chapter 13 payments under your Chapter 13 re-payment plan, you can normally keep ALL of your assets. 

The reason you list the exemptions in Chapter 13 is to figure out how much equity you have in your assets after application of exemptions.  Why? Because, in Chapter 13, under your repayment plan you should pay your unsecured creditors (nomrally credit card debt or medical bills) the same percentage they would receive if you liquidated all of your assets after application of the exemptions - essentially, pennies on the dollar spread over the life of your Chapter 13 re-payment plan.

Many people file Chapter 13 because they are behind in their mortgage payments and just cannot catch up, but they want to keep their home.   Chapter 13 gives the home owner the opportunity to keep their house. 

Let's say Mrs. X pays $1000 monthly to her bank for her mortgage but she was out of work for a few months and fell behind 4 payments - she now owes the bank $4000 in past-due payments, called "mortgage arrearages".  She tries to get a loan modification, but the bank just will not work with her.  Mrs. X tells the bank she can still make her $1000 monthly mortgage  payment if they would just let her spread out the $4000 she owes in mortgage arrearages over time.  Mrs. X says to the bank, if you just let me spread the $4000 I owe in back payments over 36-months, I can catch up.  The bank says "no". They tell her they are going to foreclose on her house.

[When a bank says the "f" word ("foreclosure") - take action.  Please click on the articles under "foreclosure" on my blog to learn more about foreclosure - because in New Hampshire, the bank normally does not have to take you to court to foreclose on your home and you can be on the street in a matter of months.]

Mrs. X can force the bank to take her deal by simply filing Chapter 13 and sucessfully completing  the same 36-month re-payment plan!

Bankruptcy and the above/below median debtor in Chapter 7

When you are contemplating a Chapter 7 bankruptcy filing, you look first to your income to determine if you are above or below your state's median income average.  If you are below the median, it qualifies you to file a Chapter 7 case.  If you are above the median, you must complete a series of complicated forms to determine if after applying a legal "means test" you still qualify for Chapter 7.

In a Chapter 7 case, a below median income bankruptcy filer is not "home free" to stay in Chapter 7. Although the Bankruptcy Court may not dismiss a Chapter 7 case filed by a below median income debtor because he or she is simply below the state's median income average, the Bankruptcy Court may also look at the totality of the circumstances to determine if the case still belongs in Chapter 7.

The Court of Appeals for the Fourth Circuit, in Calhoun v. United States Trustee (4th Cir. May 3, 2011) affirmed the decision of the District Court (which District Court affirmed the Bankruptcy Court's decision) to dismiss a Chapter 7 case filed by below-median income debtors under the "totality of the circumstances."  In that case, the debtors were a retired couple whose retirement income was below median but certainly capable of a repayment plan in a Chapter 13 case. Pre-bankruptcy, they had been paying creditors with their excess income, but became discouraged when they had no money left over at the end of the month and so explored bankruptcy in Chapter 7 as an option.  The debtors in that case had extravagant amounts deducted for food and cable bills for only two people -  and even including the payment of such extravagant amounts of expenses, these two people had more than $2000 left over at the end of every month with which to pay creditors.  

Thus, the court of Appeals for the Fourth Circuit affirmed that it was an abuse for them to file Chapter 7.

They probably should have filed a Chapter 13 bankruptcy repayment plan. So, rather than face dismissal, these two debtors could have converted their Chapter 7 case to a Chapter 13 bankruptcy case for a three-year repayment plan.   In Chapter 13, they would dedicate their disposable income left over at the end of the month after payment of expenses, to repay creditors, and then at the end of three years they would be done, meaning, at the end of three years whatever unsecured debt had not been repaid would be discharged through the bankruptcy case.

A below median income debtor in Chapter 13 is subject to a 36-month repayment plan (three years).  An above median income debtor in Chapter 13 is subject to a 60-month repayment plan (five years).

Lessons Learned:  The Fourth Circuit left unanswered whether or not they should consider inclusion of social security income in their analysis of "totality of the circumstances".  In New Hampshire, where I practice, the cases are governed by decisions from the First Circuit, not the Fourth Circuit Court of appeals.  However, other appellate cases are instructive and may be used for support in a legal argument, so it is good to know where courts outside of this jurisdiction are trending.

BANKRUPTCY TIMING

If I filed bankruptcy before, can I file again?
The answer is yes. 

The more important question is, how soon do you have to wait in between bankruptcy cases?

Chapter 7 to another Chapter 7 (8 years): 
If you filed a Chapter 7 case and received a discharge of debt , then you must wait 8 years in between filing another Chapter 7 case.  See 11 U.S.C §727(a)(8).

Chapter 13 then Chapter 7 (6 years): 
You must wait six years.  See 11 U.S.C.§727(a)(9).  However, if you paid 100% of your debts in the prior Chapter 13 case or paid at least 70% of your debts in the prior Chapter 13 case and the Bankruptcy Court found that this was your best effort then the 6-year rule does not apply.  See 11 U.S.C.§Section 727(a)(9),  provided you otherwise qualify (see my blog article on the "means" test)

Chapter 7 then Chapter 13 (4 years): 
If you previously filed a Chapter 7 case and received a discharge of debt, then you would wait four years in between the prior Chapter 7 case and the new Chapter 13 case.   See 11 U.S.C.§1328(f)(1).  But, if after filing a Chapter 7 case you file a Chapter 13 case and you do not need a discharge of debt in the new Chapter 13 case, then you do not wait.

Chapter 13 to another Chapter 13 (2 years): 
If you received a discharge of debt, meaning you completed your repayment plan in a prior Chapter 13 case, then you must wait two years before filing another Chapter 13 case or you will not receive a new discharge of debt in the new Chapter 13 case.  See 11 U.S.C.§  1328(f)(2).  But, if you are not looking for a discharge of debt in the new Chapter 13 case, then you can file another one without waiting. 

NO time (0 years): 
If you are going to pay your creditors back 100% and do not need a discharge of debt, then you do not need to wait to file a Chapter 13 case. Why would you file a bankruptcy case and not care about discharging debt?  A common answer is that you have fallen behind on your mortgage payments, or other types of payments, and you want to catch up and a Chapter 13 repayment plan would allow you to do that.  For example, if you fall behind in your mortgage payments for several months, it is nearly impossible to catch up quickly and you do not want to lose your house, and a Chapter 13 payment plan would allow you to spread those arrearages over a repayment plan of 3-5 years.

"Good Faith Rule": 
All cases must be filed in good faith to receive protection under the Bankruptcy Code, regardless as to timing.

Am I a failure because I filed for bankruptcy protection?

Will people think poorly of me because I did so?  A question that often bubbles to the surface in client meetings, even if never asked, it is there.

Inflation, rising property taxes, trying to help the kids, well you know what's next - use the credit cards to make ends meet.  Then there are the school bills, kid's activities, medical bills, and you have run out of money.  Retirement is no longer the "golden years" because social security payments just don't cover the bills.

There are a lot of reasons people need protection under the bankruptcy code, one of the most important being people just do not want to lose their home and they don't have to, because bankruptcy gives them a way of staying in their home and catching up on past due mortgage payments, while ridding themselves of credit card debt.  Bankruptcy, because of the "exemptions", (please read my blog article on exemptions) allows you to keep a reasonable level of assets, which in most homeowner’s cases is all of the assets they have.

When you decide to address your difficult financial position, you succeed.  The solution may be a credit consolidation loan, or it may be a loan modification program with the lender who holds your home mortgage.  You may use Chapter 13 of the bankruptcy code to catch up on your overdue car and home loan payments.  In any event, when you face the problem and decide to find a solution, you are never a failure.  Sometimes, bankruptcy is simply the answer.

You have decided that you will control the outcome of a difficult situation, rather than letting it control you.

Chapter 7 Bankruptcy: Above and Below Median Debtors and the “Presumption” of Abuse.

A "presumption of abuse" may prevent you from filing Chapter 7.  There are two prongs to determine a "presumption of abuse".  The first prong asks, "is your income above or below your state's median income?"  If you are below, then the presumption of abuse does not arise as you are a "below median debtor".  The second prong asks, "even if your income is above the state's median, do you pass the "means test"?"  If you "pass" the means test, then under application of the second prong, the "presumption of abuse" does not arise to allow you to file a Chapter 7 petition.

Below is the link to the table of state median incomes.

http://www.justice.gov/ust/eo/bapcpa/20110315/bci_data/median_income_table.htm

Let's use some examples to see how the presumption works:

Mr. and Mrs. X – family of 4

The above web link is a chart of the median income by state and family size.  For example, Mr. and Mrs. X have two children, and even though Mr. X is the only one filing for bankruptcy , we look for New Hampshire on the state chart for a family of four to determine that the state’s median income is $89,990 for a family of four. 

Mr. X earns a gross income of $35,000 as manager of a local grocery store.  Mrs. X works at a day care center and earns $25,000.  Their combined gross income is $60,000.  The amount of $60,000 falls below the NH state median income average for a family of four ($89,990 is the median), so Mr. X may file for Chapter 7 bankruptcy as the presumption of abuse does not arise by virtue of his family's income falling below the state's median.  Mr. X had previously been out of work for about a year and was very ill, with no medical insurance.  So, the medical bills piled up and the credit card balances increased.  Mr. X intended to repay all of this debt once he got back on his feet, but because he could not find a job paying more than $35,000, he just can’t do it and is overwhelmed with the debt.

Because Mr. and Mrs. X earn below the median, a “presumption” of no abuse arises, and allows Mr. X to file for Chapter 7. 

A case may not be dismissed or converted to another chapter for the sole reason that Mr. X is a “below median debtor”.  Each bankruptcy petition has a box that must be checked off as to whether or not the “presumption” of abuse arises.

However, the inquiry does not end here.  Mr. X still must provide information about his family income and expenses on his bankruptcy paperwork, at the portion called Schedules I and J.   Even though Mr. X is a “below median debtor”, if he has substantial excess monthly income after paying his monthly expenses, which shows he has the ability to pay back a good portion of his debts, it may still present a problem for Mr. X to stay in Chapter 7, the substantial excess monthly income providing a separate basis for the Bankruptcy Court to consider dismissing his Chapter 7 bankruptcy petition or converting it to Chapter 13. 

Mr. X fills in the information on the bankruptcy schedules about his family’s combined monthly income and combined expenses to ascertain just how much money is left over at the end of the month.  He has nothing left over at the end of the month.

The way the Bankruptcy Code determines Mr. X’s average monthly income is to look at the prior six months and add up all of his family’s income from any source (here, it would be Mr. X’s pay checks for the past six months, Mrs. X’s pay checks for the past six months, an income tax refund they received last week, and six $100 monthly checks from Mrs. X’s mom who helps them out every month).  Mr. X adds up all of this income from all sources for the past six months, then divides the total by the number six, which gives Mr. X the average monthly income for the X family.  On the bankruptcy schedules, Mr. X then deducts his family’s monthly expenses in the categories allowed (such as mortgage, taxes, utilities, food, etc.) to arrive at his net monthly income.  In Mr. X’s case, after doing this, he has no money left at the end of the month. As such, it does not appear to be a problem for him to file a Chapter 7 case and stay in Chapter 7 and receive his discharge of debt.  The Chapter 7 bankruptcy case normally would discharge all of Mr. X’s unpaid credit card debt and all of his unpaid medical bills.

Mr. and Mrs. Z – family of 4

Mr. Z has pretty much the same situation as Mr. X above.  Mr. Z was out of work for quite a while, but Mr. Z now has a job and has been working for the past six months.  However, Mr. Z just cannot get out from under the debt that accumulated while he was out of work – it is mainly medical bills and credit card debt.

Mr. Z is married, his wife does not have an income and they have two children.  They also live in NH and their gross annual income is now $99,000.  On the NH median income chart (above web link), for a family of four, the median income is $89,990.  So, Mr. Z is an “above median debtor".  While he has failed the first prong of the test, he still has a chance to avoid the "presumption of abuse" under application of the second prong, namely taking the “means test".  Thus, because Mr. Z's family income falls above the median, he must fill out the paperwork called the “means test” to determine if after deducting certain expenses allowed by the Bankruptcy Code, his net monthly income now qualifies him for Chapter 7.

http://www.justice.gov/ust/eo/bapcpa/20110315/meanstesting.htm

The above web link is the list of allowed expense deductions (called the National and Local Standards) as appicable to an “above median debtor” – so, the above median debtor is not necessarily able to deduct all of his family’s monthly expenses, but rather only those expenses allowed by statute in these Standards.  The means test was designed by Congress to see if Mr. Z has the “means” to pay back a portion of his debt after comparing his monthly family expenses to his monthly family income, under the allowed formula.  If the formula determines that Mr. Z has the “means” to pay back a portion of his debts, then normally Mr. Z would not qualify for Chapter 7 but could still file a bankruptcy case under another chapter, normally a Chapter 13 case.  Chapter 13 bankruptcy still allows Mr. Z to discharge his unpaid medical bills and credit card debt, but only after he has completed a repayment plan which normally pays back a percentage of these debts.

Back to Chapter 7:  After filling out the means test form, Mr. Z learns that he has passed the "means test".  He may file a Chapter 7 bankruptcy petition.

Mr. and Mrs. A

Mr. A is in the same situation as Mr. Z – Mr. A is back to work after losing his job.  He now has an annual gross income of $99,000 with two children and Mrs. A has no income.  However, unlike Mr. Z, after applying the Standards for expenses to his income, Mr. A still has monthly income in excess of that allowed under the "means test" and his income still does not fall below the median.  Because of this, he cannot file a Chapter 7 case.

Discharge of Debts through Bankruptcy

The end result of bankruptcy is to discharge the debts you cannot pay.  Most debts are dischargeable.

If you successfully complete the Chapter you have filed in the Bankruptcy Court, then you should receive an order of discharge (available only to persons, not businesses) often called the “debtor’s discharge”. 

Once a debt is discharged, the person or entity to whom you owe that debt (called a "creditor") cannot continue any collection efforts against you to collect it, they cannot contact you, they cannot call you, they cannot “dun” you and they cannot sue you on that discharged debt.

The Bankruptcy Code tells you what debts are not dischargeable, such as domestic support obligations, certain taxes, and a few other instances (see below).

Click on or read on (materials from US Court’s site reprinted below for ease of reference).  The US Court’s web site is a great source of basic information on bankruptcy related topics.

http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/DischargeInBankruptcy.aspx

Discharge In Bankruptcy

The bankruptcy discharge varies depending on the type of case a debtor files: chapter 7, 11, 12, or 13. Bankruptcy Basics attempts to answer some basic questions about the discharge available to individual debtors under all four chapters including:

·What is a discharge in bankruptcy?

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.

·When does the discharge occur?

The timing of the discharge varies, depending on the chapter under which the case is filed. In a chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting). Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. In individual chapter 11 cases, and in cases under chapter 12 (adjustment of debts of a family farmer or fisherman) and 13 (adjustment of debts of an individual with regular income), the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing. The court may deny an individual debtor's discharge in a chapter 7 or 13 case if the debtor fails to complete "an instructional course concerning financial management." The Bankruptcy Code provides limited exceptions to the "financial management" requirement if the U.S. trustee or bankruptcy administrator determines there are inadequate educational programs available, or if the debtor is disabled or incapacitated or on active military duty in a combat zone.

·How does the debtor get a discharge?

Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee's attorney, if any. The debtor and the debtor's attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.

·Are all of the debtor's debts discharged or only some?

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."

·Does the debtor have the right to a discharge or can creditors object to the discharge?

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.

·Can a debtor receive a second discharge in a later chapter 7 case?

The court will deny a discharge in a later chapter 7 case if the debtor received a discharge under chapter 7 or chapter 11 in a case filed within eight years before the second petition is filed. The court will also deny a chapter 7 discharge if the debtor previously received a discharge in a chapter 12 or chapter 13 case filed within six years before the date of the filing of the second case unless (1) the debtor paid all "allowed unsecured" claims in the earlier case in full, or (2) the debtor made payments under the plan in the earlier case totaling at least 70 percent of the allowed unsecured claims and the debtor's plan was proposed in good faith and the payments represented the debtor's best effort. A debtor is ineligible for discharge under chapter 13 if he or she received a prior discharge in a chapter 7, 11, or 12 case filed four years before the current case or in a chapter 13 case filed two years before the current case.

·Can the discharge be revoked?

The court may revoke a discharge under certain circumstances. For example, a trustee, creditor, or the U.S. trustee may request that the court revoke the debtor's discharge in a chapter 7 case based on allegations that the debtor: obtained the discharge fraudulently; failed to disclose the fact that he or she acquired or became entitled to acquire property that would constitute property of the bankruptcy estate; committed one of several acts of impropriety described in section 727(a)(6) of the Bankruptcy Code; or failed to explain any misstatements discovered in an audit of the case or fails to provide documents or information requested in an audit of the case. Typically, a request to revoke the debtor's discharge must be filed within one year of the discharge or, in some cases, before the date that the case is closed. The court will decide whether such allegations are true and, if so, whether to revoke the discharge.

In chapter 11, 12, and 13 cases, if confirmation of a plan or the discharge is obtained through fraud, the court can revoke the order of confirmation or discharge.

·May the debtor pay a discharged debt after the bankruptcy case has been concluded?

A debtor who has received a discharge may voluntarily repay any discharged debt. A debtor may repay a discharged debt even though it can no longer be legally enforced. Sometimes a debtor agrees to repay a debt because it is owed to a family member or because it represents an obligation to an individual for whom the debtor's reputation is important, such as a family doctor.

What can the debtor do if a creditor attempts to collect a discharged debt after the case is concluded?

If a creditor attempts collection efforts on a discharged debt, the debtor can file a motion with the court, reporting the action and asking that the case be reopened to address the matter. The bankruptcy court will often do so to ensure that the discharge is not violated. The discharge constitutes a permanent statutory injunction prohibiting creditors from taking any action, including the filing of a lawsuit, designed to collect a discharged debt. A creditor can be sanctioned by the court for violating the discharge injunction. The normal sanction for violating the discharge injunction is civil contempt, which is often punishable by a fine.

May an employer terminate a debtor's employment solely because the person was a debtor or failed to pay a discharged debt?

The law provides express prohibitions against discriminatory treatment of debtors by both governmental units and private employers. A governmental unit or private employer may not discriminate against a person solely because the person was a debtor, was insolvent before or during the case, or has not paid a debt that was discharged in the case. The law prohibits the following forms of governmental discrimination: terminating an employee; discriminating with respect to hiring; or denying, revoking, suspending, or declining to renew a license, franchise, or similar privilege. A private employer may not discriminate with respect to employment if the discrimination is based solely upon the bankruptcy filing.

·How can the Debtor obtain another Copy of the Discharge Order?

If the debtor loses or misplaces the discharge order, another copy can be obtained by contacting the clerk of the bankruptcy court that entered the order. The clerk will charge a fee for searching the court records and there will be additional fees for making and certifying copies. If the case has been closed and archived there will also be a retrieval fee, and obtaining the copy will take longer.

The discharge order may be available electronically. The PACER system provides the public with electronic access to selected case information through a personal computer located in many clerk's offices. The debtor can also access PACER. Users must set up an account to acquire access to PACER, and must pay a per-page fee to download and copy documents filed electronically.

POST PUBLISHED BY PATRICIA S. GARDNER, ESQ.
GARDNER LAW FIRM
1 New Hampshire Ave, Suite 125
Pease International Tradeport
Portsmouth, NH 03857
Phone: 1-603-766-4933
Fax 1-603-292-5207
email:
GardnerBusinessLaw@gmail.com
web site:
http://www.gardnerbusinesslaw.com/