“O” Is For Objections By Creditor

o48A creditor has a very small window of opportunity to object to the discharge of a debt in bankruptcy. When the bankruptcy case is filed, a notice is sent out which has the deadline date for a creditor or trustee to object to the discharge. In a Chapter 7, a creditor may file an objection to that creditor’s debt being discharged. In order to object, the creditor must file a complaint to determine the dischargeability of a debt. This complaint is called 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, for things such as the debtor’s 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 or fraud; failure to account for the loss of assets;  or filing a bankruptcy petition to soon after a previous filing.

A creditor may also ask for a debt to be excepted from discharge under section 523 of the Bankruptcy Code for things such as fraud; incurring debt with the intention of not paying it back and discharging it in bankruptcy, fraud while acting in a fiduciary capacity, embezzlement, or larceny; or for willful and malicious injury by the debtor to another entity or to the property of another entity.

There is a significant difference between an objection to discharge versus the dischargeability of a debt. An objection to a discharge, if sustained, kicks the debtor out of bankruptcy and the debtor will not get a discharge of his listed debts. Ever. The debtor remains personally liable for all debt. An objection to the discharchability of a debt, if sustained, only relates to a single creditor’s debt, not all of the debts.

It sounds like a lot can go wrong but in reality very few creditors file objections. What is even better, the creditor has a very limited time to file these objections. If they fail to do so, any objection is barred forever.

“O” also stands for:

Chris McAvoy is a Taylor,  Michigan attorney and consumer bankruptcy lawyer who helps people file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info. We help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, and the Downriver, Michigan area.

Creative Commons License photo credit: TooFarNorth


“H” Is For Harassment By Creditors

HCreditor harassment, obnoxious phone calls to your house and job, lawsuits and garnishments overwhelm and stress people out. Ripping open your paycheck to see if there is a garnishment is not a good feeling.  Creditor harassment and debt collectors make ridiculous threats to get you to pay. Creditors say harassing things like they will have you arrested or they will take money from your bank account if you don’t start making payments.

Lies, goddamn lies, and creditors.

Here are some of my favorites:

The threat:

  1. You will be arrested if you don’t start making payments.
  2. They will take the money from your bank account immediately.
  3. Your check will be garnished this week.

The truth:

  1. Debtor’s prisons no longer exist. I assure you a cop is not going to arrest you because Visa said so.
  2. Your bank will only allow a creditor access if you give them permission.
  3. Garnishment will only happen after you have been sued and there is a judgment. Even then it will be a lawyer, and not a debt collector, doing the garnishing.

Having said all of that, threatening calls and letters is a symptom of a much bigger problem: You can’t afford to pay your debt. That’s the real problem. Whether it is because of job loss, wage reduction, overwhelming medical debt, the result is the same. There are only two ways I know of that are guaranteed to work to stop the collections. Either pay off the debt or file for bankruptcy protection.

Bankruptcy and the automatic stay.

Once you file for bankruptcy, the “automatic stay” kicks in. Your creditors are no longer allowed to contact you, write you, call you, sue you, garnish you, seize your property, etc. When you file your bankruptcy petition, all of your creditors are listed. The bankruptcy court mails notices to the creditors to inform them of the bankruptcy. If the contact continues, the creditor is in contempt of court and can be sanctioned for violating the automatic stay. In some cases, a debtor will be awarded damages and attorney fees for having to enforce the stay against the willful violator.

“H” also stands for:

Christopher McAvoy is a Taylor,  Michigan attorney and consumer bankruptcy lawyer who helps people in the  Downriver area  file Chapter 7 and Chapter 13 Bankruptcy. To find out more about bankruptcy, click here for contact info.

Creditors May Recover Your Couch After Bankruptcy But It’s Not Likely.

Here in Michigan, a creditor could recover your couch, television, or other property after bankruptcy if that creditor holds a valid “purchase money security interest” (also called a PMSI) in those consumer goods. It’s possible but not likely. First off, the creditor has to have a valid, written security agreement. The creditor must then hire a lawyer, file a lawsuit, hire a court officer to pick it the property and then auction it off.  All of this costs money. How much is your used couch worth? Probably not as much as what the creditor has to spend to get it back which is why, in a nutshell,  it just isn’t likely.

The typical scenarios debtors experience is they buy jewelry at a jewelry store, electronics at an electronics store, or furniture at a furniture store. Sometime during the bankruptcy case, the lender (Best Buy, HSBC, Wells Fargo, etc.)  has a law office send a very official looking letter asking the debtor what they would like to do with that property. The debtor is asked to surrender the property or agree to pay off the balance by reaffirming the debt. The reaffirmation agreement renews the debt after bankruptcy and puts you back on the hook to pay it. My clients here in Downriver area here in Michigan typically panic at this point. They really want to keep that couch or television.

If the seller provides the financing and there is a security agreement, then the seller has a lien on the property. If that property is consumer goods, then the lien attaches automatically. Nothing needs to be filed. It just happens. If the buyer fails to pay and defaults, then the secured party can repossess the item. Note: They cannot breach the peace when they repo it. They can’t just walk in your house or take it against your will. Really all they can do is knock on your door and ask. You don’t have to let them take it if you don’t want to. The creditor’s only option is to sue. The creditor, who is already in the hole,  must now spend more money with the hope that the used furniture will get them even after it is sold.

I have never had this happen to a bankruptcy client. Not once. So if this happens to you, call your bankruptcy attorney right away and you just may find out that there really isn’t anything to worry about. If you would like to learn more about bankruptcy, please read my free, online book:  The Bankruptcy Book: The Truth About Ending Your Bill Problems And Getting Back The Good Credit You Deserve.

Bankruptcy and Tax Refunds: 5 Things to Know

Refund Poster

Tax refunds can be thousands of dollars which most people count on getting each year and if you want to keep your refund from the bankruptcy Trustee you must read this post.  My clients use this money to catch up bills or unpaid utilities; get caught on up the mortgage or rent; maybe a down payment on a car; or even home repairs or clothes for the kids. If you want to keep your tax refunds from, here are some things you need to know.

1. Federal tax refunds cannot be garnished from the IRS. They can be garnished from your bank account once you receive them. If you want to keep your federal tax refunds [Read more…]

The Living Trust and the Bankruptcy Estate.

Every person should have an estate plan. A good estate plan would have a financial power of attorney, medical power of attorney, and a will. A really good estate plan might also have a revocable living trust. A revocable living trust is an estate planning device which avoids probate by transferring ownserhip of assets to the trustee of a living trust. A common transfer is a house, vacation property, or a bank account to the trust. When the trustee of a trust is also the creator, or settlor, then that trust is called a self-settled trust which is for the benefit of the settlor initially and the heirs upon the settlor’s death. They can be complicated.

What happens when a person files for bankruptcy protection, at least in Michigan, when they have a living trustwhich owns assets? [Read more…]