This is the process by which a creditor asks for an order deeming that the debt is not dischargeable. It is a lawsuit that is heard in the bankruptcy court. Often it involves allegations of fraud by the debtor which the creditor is claiming are not dischargeable under the bankruptcy code.
This is an injunction issued by the bankruptcy court immediately on the filing of your case. In other words, all of your creditors are ordered by the court to stop! Any actions taken after the automatic stay is implemented are null and void. This is particularly important in the context of the foreclosure. The foreclosure process is required to give a specific date and time for the sale. As long as the petition is filed before this time, any action by the foreclosing party is null and void.
Most unsecured debts, like credit cards, signature loans, deficiency judgments, medical bills, and other similar debts are dischargeable. Most secured debts, like home and car loans, are also dischargeable, but the lien on the property survives the bankruptcy. However, certain debts are NOT dischargeable. In other words, you can file bankruptcy, but the debt lives on. The bankruptcy court provides certain creditors with certain ways to keep your obligation alive. Section 523 of the bankruptcy code provides a laundry list of debts which survive the bankruptcy. For most consumers, the typical areas for concerns are:
- Student loans (only dischargeable if the debts would constitute and undue hardship).
- Government obligations including Taxes (which can be dischargeable).
- Fraudulently obtained benefits
- Willful and malicious injury to property or to person
- Alimony and child support
Disposable Monthly Income:
In a chapter 13 plan, the debtor completes Form 22C to budget for expenses and arrive at the amount of money left over after payment said expenses. The net amount is called the Disposable Monthly Income.
The law allows you to keep a modest amount of your assets. In California, you generally may keep those assets in Code of Civil Procedure section 703 OR 704. There is some overlap in each section but care should be taken in selecting which section to use based on the consumers’ assets. Generally, the exempt assets include clothes, household furniture and appliances, a small car allowance, homestead, small tools of the trade allowance, small jewelry allowance, and others.
Liens are security interests in certain collateral. The most common lien is the lien holder on title to a car or mobile home. The California Secretary of State records UCC-1 Financing statements to assert the liens held by lenders against personal property. Less common are the liens which by statute are granted on certain assets. For instance, when a judgment debtor examination in State Court is served on a debtor, all property of the debtor becomes subject to a lien. Further, a judgment can record an abstract of judgment against the debtor which creates a lien on property held by the debtor in the specific county. The IRS and FTB can assert liens for tax debt on property. Liens under certain circumstances can avoided.
This is the process by which the court appointed trustee sells your non-exempt assets. The money made from the sale is used to pay the trustee, estate attorneys, estate accountants, and finally your creditors.
The means test was added when Congress thought that people with the ability to pay back some amount to creditors were choosing to file chapter 7 without paying their creditors anything. In other words, these debtors were able to pay something but were choosing to not pay anything. Therefore, Congress crafted a law to determine if the debtor had the means to pay back some amount to creditors. These debtors with the means to pay something would be forced in to a repayment plan. The means test is two pronged. The first part is simply a comparison of your annualized income to the median income in your geographic region. For instance if you are a family of one, two, three or four, if you earn less than $49,983, $64,779, $68,917, $79,418, respectively, then you pass the means test. If you fail part one, then you go to the second prong. As easy as the first prong is, the second prong is difficult. If you make more than the median income, you may still be able to file Chapter 7, but you have to fill out an 8 page document to see. This link takes you to a functional means test on public service website. You are welcome to run it but beware it is difficult and far worse than IRS form 1040. Finding the means test on this website requires you scroll down to the lightly shaded green text.
These are assets that are NOT exempt under Code of Civil Procedure section 703 OR 704. In other words, these are assets that the trustee is NOT going to let you keep. These are typically investment properties and business interests.
Debtors with a car loan in a chapter 7 are subject to repossession of the vehicle unless the debtor agrees to reaffirm the debt. The creditor will prepare a reaffirmation agreement and the debtor and counsel must sign it. The reaffirmation process does definitely prejudice the debtor because the debt lives on despite the bankruptcy. In other words, the debtor went through all the trouble to get a discharge, only to agree that he or she still owes the money and in fact can be sued for the money in the case of a future default.
Occasionally, certain lenders demand collateral against a loan. You probably recognize this in the context of a home loan or car payment. The lender has the home and car as security in the event you don’t pay the loan. In a chapter 7, the personal obligation on the security instrument is discharged, but the lien on the property continues to exist.
This refers to debts which are not secured by collateral. As an example most credit cards are unsecured debts. The bank normally grants you credit but does not secure the items you’re purchasing with a lien or security instrument. Compare this to a secured debt which is where your lender does in fact take collateral for the debt. The most common is your house or car.