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Posts Tagged ‘Discharge’

Your Credit Score: When to Stop Fighting the Rapids

Tuesday, May 24th, 2011

“But won’t bankruptcy destroy my credit?!” We have heard it time and time again and are sure you have had that thought once or twice, especially if you are contemplating filing. The truth is bankruptcy actually acts as a repair for your credit.

Think about it, if you are having thoughts of filing bankruptcy, you probably aren’t in the best of financial situations at the moment anyways. The piling of bills and never ending debt aren’t looking so good on your credit report. If you’re trying to repair your credit score without bankruptcy, it may be like trying to swim up a white water rapid. No matter how hard you swim, the waves are too strong and will only push you back.

All of your bills and large amount of debt will keep pushing you back from achieving the credit score you want. Instead of fighting the rapids, you should think of exiting the river and walking up the stream.

With Bankruptcy, you discharge all of your stressful debt and are given a fresh start. Yes, your credit score will decrease when you initially file, but think of how easy it will be to reestablish an excellent credit score without having all of the baggage on you. You can walk up that river with ease; nothing will push or hold you back.

You can achieve that credit score you once had or always dreamed of once you rid yourself of everything that is holding you back and keeping you from what you financially desire.

Should a Husband and Wife File Jointly?

Friday, July 23rd, 2010

We are often asked if a husband or wife can file bankruptcy separately.  The short answer is yes, the longer answer lies in what you hope to accomplish.

By way of background, each debt is the responsibility of the person that took on the debt.  For most married couples, that is both the husband and wife.  If only one spouse has responsibility for a debt discharged in bankruptcy, responsibility for the debt remains with the other spouse; the entire debt, not half of it.  For this reason, it’s generally best to have both spouses file so both can receive a fresh start.

To add a layer of complexity, if all the debt lies with only one spouse, California’s community property laws come into play.  Assets acquired during marriage are generally community property (to oversimplify a complicated family law concept).  As a result, a creditor can collect a judgment against a community property asset like a bank account or a piece of property.  This is a more sophisticated level of collection, but depending on the creditor and/or the amount of the debt it does happen.

Student Loans and Bankruptcy

Friday, June 18th, 2010

Student loans are difficult, but not completely impossible to discharge in bankruptcy.  It’s like getting your teenager to pick up his room.  You might get lucky, but then again it might be easier to get out the leaf blower and work it that way.

The official standard is to show that paying off the student loans will impose an “undue hardship” on you and your family.  Since the Bankruptcy Code does not define “undue hardship”, a lot of discretion is left to each individual judge – and there are over 300 of them around the country.  One person’s undue hardship can be another person’s slight inconvenience.  This holds true for judges as well.

Here in the picturesque 9th Circuit, which includes California, the court uses the Brunner Test and holds a tough line.  After retaining a bankruptcy attorney in Los Angeles or Orange county, to have your student loans discharged you must prove the following in a special hearing:

  1. You cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for you and your dependents if forced to repay the loans;
  2. Additional circumstances exist indicating that this state of financial affairs is likely to persist for a significant portion of the repayment period of the student loans; and
  3. You made good faith effort to repay the loans.

There are a few other circumstances under which the loans can be cancelled outside bankruptcy:

  1. You die or become totally and permanently disabled;
  2. Your school closed before you could complete your program; or
  3. You work in certain designated public school service professions (including teaching in a low-income school).

You can get more information about these situations on the Federal Student Aid Office website.

Even if you don’t reach the high standard to have your student loans discharged in bankruptcy, discharging all your other debt leaves you in a much better position to attack them with the skill and fervor you applied in your teenager’s room.

Party Hearty Pre-Bankruptcy?

Wednesday, April 14th, 2010

It’s a tall tale, a myth if you will, that if you plan to file for bankruptcy, you should find the absolute limit of your credit cards.  The logic is there – waste not, want not, right?  Just like you eat the last bit of crème brulee on the plate, pick up the $10 bill on the sidewalk, sleep an extra hour during daylight savings time, you shouldn’t leave any available credit when you file for bankruptcy.

Nope, the Bankruptcy Code is ahead of you.  Incurring debt you don’t intend to pay off is fraud and the court can deny discharge of the debt.  This means your last few months of living the high life can follow you for years to come, with or without the help of an Orange County or Los Angeles bankruptcy law firm.  Legitimate debt is dischargeable in bankruptcy (with some exceptions like taxes, child support, student loans, etc), but the trustee always has his/her eye open for recent Hawaiian vacations.

Willful and Malicious: What the Dukes of Hazzard teaches us about bankruptcy discharge.

Wednesday, April 7th, 2010

The Bankruptcy Code at 11 USC 523(a)(6) says that debts arising from willful or malicious injury to person or property cannot be discharged in bankruptcy.  Defining willful or malicious is like trying to get Daisy Duke to cover up, it’s darn near impossible.

It can be argued that every act a person takes is willful.  Let’s say you slide into the driver’s side window of the General Lee and in so doing kick Bo in the head.  Bo gets a judgment for the damage to his pearly whites.  Is that judgment dischargeable in bankruptcy since you jumped in the driver’s side window on purpose even though you’d never harm an icon like Bo on “purpose”?  The U.S. Supreme Court has held that willful and malicious requires a “specific intent” to invoke harm on a person or his property.  Specific intent is a matter generally left to the trier of fact, i.e., the court that tries the case of Bo v. You.

After we clear the willful or malicious hurdle, like jumping over the river in the General Lee, we need to show injury to person or property.  We all know what a person is; Bo, Luke, Boss Hogg, Sheriff Rosco P. Coltrane, but what is property?  Is a credit score property?  What about cash money?  What about future income? Are these property for purposes of 523(a)(6)?

For example, if because of a transaction gone awry, Luke harmed Daisy’s credit score or caused her a financial loss that is not directly related to one of the intentional torts identified by most courts, i.e., battery, conversion, trespass to chattel, Daisy cannot successfully argue that she was injured under (a)(6) and have Luke’s debt to her survive Luke’s bankruptcy.  Your Los Angeles or Orange County bankruptcy lawyer will tell you that the debt would still be dischargeable under the Bankruptcy Code.  That is a nugget of good news for Luke and is enough to make anyone want to race around Hazzard County in a 1969 Dodge Charger with the doors welded shut.

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