Tips And Guide For Debt And Loan Management

It is illegal for the government to discriminate against you because you went through bankruptcy. A debtor who feels he or she has been illegally discriminated against because of a bankruptcy can have the offender sanctioned by the bankruptcy court. For example, Francesco was a licensed general contractor who built office buildings. Forced to file Chapter 7 because of his wife’s illness, Francesco received his discharge about six months after he filed his case. A month after that, the State Contractors License Board wrote to him and said that it intended to revoke his contractor’s license because of the bankruptcy. Francesco hired an attorney to write a letter back, explaining that it is generally illegal to discriminate against a debtor because of a bankruptcy and specifically illegal to revoke, suspend, or refuse to renew a license or permit because of a bankruptcy. The board immediately dropped the matter. This protection from government discrimination based upon bankruptcy is fairly broad. Examples of impermissible actions include the following:

• Denying you a federally guaranteed student loan or grant because of a bankruptcy filing
• Refusing to issue a college transcript because of a bankruptcy
• Denying you accommodations in public housing
• Denying you any other government benefit or service, such as social security or welfare

Protection from discrimination also extends to private employers. You cannot be fired if the reason for the firing is your bankruptcy. Knowing this can be especially helpful for Chapter 13 debtors because the trustee’s payment is sometimes deducted from your paycheck. If an employer is unhappy about it, too bad. There is nothing he can do about it.

Despite what the Bible says, creditors sometimes try and collect a debt that was discharged in bankruptcy. This is completely illegal. In most cases, the attempt to collect the debt is simply a mistake. Maybe the creditor did not know about the bankruptcy or possibly did not realize that it applied to the money he is owed. A discharge is a federal court order. In it, all creditors are specifically told to cease all further collection activities. Like a violation of the automatic stay, violating this order also constitutes contempt of court and is illegal. When it happens, the first thing to do is to write a letter to the creditor explaining that you filed for bankruptcy. Attach a copy of your discharge (always keep the original in your files), explain what a discharge is, tell him that his debt was in fact discharged, and demand to be left alone. If that does not work, it is time to get nasty. For example, Beth owed a local department store $800; this debt had been included and was discharged in her bankruptcy. When the store still insisted on being paid after the case was over, Beth tried to explain nicely that she did not owe the money anymore. The store continued to harass her and finally sued her. Beth, having tried to explain politely that the debt had been discharged, had no choice but to file a contempt motion in bankruptcy court and was awarded $500. The store left her alone after that. Remember this though: debts not listed in your bankruptcy paperwork are debts not discharged. You must have listed the debt in order to receive a discharge as to that debt. Finally, some debts are nondischargeable, and those creditors do have a right to get paid back once the case is concluded. There is nothing illegal about the IRS garnishing your wages to get back taxes paid after your case is over. Nondischargeable debts include …

1. Taxes assessed within the last 3 years.
2. Debts arising from defrauding a bank.
3. Alimony, maintenance, or child support.
4. Debts resulting from injuries created by willful acts (You shot someone, for example.).
5. Government fines and penalties.
6. Most student loans.
7. Drunk driving debts.
8. Debts denied or waived in a previous bankruptcy.
9. Debts incurred to pay nondischargeable taxes (You used a credit card to pay off taxes before filing.).
10. Debts for various condominium and cooperative assessments.

Probably the worst possible thing that could happen to your case is to have your discharge denied, because the entire point of this exercise is to get the discharge. With a dismissal, you can normally file your case again fairly quickly. A denial of discharge is different. It means you had your chance, and you blew it; you don’t have a chance to wipe out your debts with a bankruptcy for at least six years. A discharge can be denied for any of the following reasons:

• Intentional concealment, transfer, or destruction of property. The most common reason, this occurs when a debtor knowingly hides or sells nonexempt assets.
• Dishonesty in connection with the bankruptcy case. People who commit perjury (either in their paperwork or at their hearing), who conceal or destroy important financial documents, or who withhold records, can be denied a discharge.
• Receipt of a discharge in the preceding six years. You can file bankruptcy only every six years. If you received a discharge within the last six years, another one will be denied. Denial of a discharge is a radical remedy used in only the most egregious of cases. Be honest, and all should go well.

Betty and Theo had their case dismissed. They came into Steve’s office one day explaining that they needed to file bankruptcy. He prepared all of the paperwork, had them sign it, filed the case, and waited for the first meeting of creditors. When they all went to the meeting a month later, the trustee asked Betty and Theo some seemingly very simple questions. Had they filed bankruptcy in the past two years? “No,” they replied. Did they list all of their assets in their paperwork? “Of course!”
They were lying, and the trustee knew it. They had filed five bankruptcies in the previous four years, abusing the system and trying to keep their house out of foreclosure. They also had a $10,000 car that they failed to disclose in their paperwork. The trustee dismissed their case, but not before seizing the car and selling it to pay back their creditors.
Dismissal of a case is an extreme circumstance that occurs very rarely. It only happens if your filing fees were never paid, if you fail to file all of your paperwork, if you fail to attend the first meeting of creditors, or if you filed your case in bad faith. Cases that are dismissed are usually dismissed “without prejudice,” meaning you can file again. Just do it right the next time.

Sometimes a creditor never requests relief from stay and continues to harass you as if nothing has happened. The collection agency keeps calling, or a creditor files suit.
For a contempt of court motion to succeed, the debtor must be able to
prove that the creditor knew of the stay, that the creditor intentionally violated the stay, and that the violation was serious. This is not an easy three-part test to meet.
Such actions constitute contempt of court; the creditor has broken the law and can be fined by a bankruptcy judge for the violation.
If this happens to you, you have a few options. You could call the creditor and explain that he is violating a federal court order, which he may not know, and he may just stop. This action is certainly easier and cheaper than the second option:
Your attorney may file a contempt of court motion against the creditor. A creditor, knowing of a bankruptcy, who continues to send the debtor a monthly bill will not get in trouble because that is not a significant violation. An auto repossession in the middle of the case, however, would be considered contempt of court.

When a creditor requests court permission to continue collection activities it is called a relief from stay. If the court grants the motion, the stay is lifted for this creditor only. A relief from stay motion cannot be sought just because a creditor is angry at being included in a bankruptcy. If that were true, then every creditor would file a similar motion. No, there are only a few, specific circumstances where a relief from stay will be sought and granted.
Normally, if you have no equity in a secured item, such as a car or house, and you stop making payments, the court will grant relief from stay because the lender’s interest in the property is not being protected. For example, Vicky was two months behind on her mortgage and on the verge of foreclosure when she filed her Chapter 7. She intended to catch up her mortgage with the extra money she anticipated having after filing, but she never did. A month after filing, she was three months behind on her mortgage. In that case, her mortgage company would probably go to court and request relief from stay so that it could continue to foreclose. Because Vicky was continuing to fall behind on her mortgage, the court would likely grant the motion, and the automatic stay would be lifted as to this creditor.
The stay stops all proceedings against you. If you are involved in a dispute unrelated to your bankruptcy, such as a divorce, the stay can be lifted as to that matter.

Most bankruptcies proceed without a hitch. If you are honest in your petition and schedules, your discharge will be granted. For most debtors, the process from filing to hearing to discharge is seamless and surprisingly simple. However, sometimes problems do arise, either during the case or soon after the discharge is granted. Most are fairly easy to deal with if you understand your rights. The automatic stay remains in effect for the duration of your case. Yet sometimes creditors want to continue collection activities despite the stay. Usually, they will request permission from the court to do so. That is legal. Sometimes, however, a creditor continues to proceed against a debtor, but it does so without court permission. Doing so is illegal. While this does happen, luckily it is a fairly rare occurrence.