Tag Archives: Bankruptcy Code

Can DUI injury settlement be discharged in Chapter 7?

Recently on our legal forum a user asked, “I was arrested in 2015 and charged with driving under the influence (DUI). I injured the other driver severely. We live in Texas, and the driver filed a personal injury claim and sued me. I lost the case and now have to pay a DUI injury settlement worth $20,000. I am wondering if I have the legal right to discharge the personal injury settlement by filing a Chapter 7 bankruptcy?”

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Will Filing a Bankruptcy Discharge Homeowner Association Fees?

This personal bankruptcy question was posted on the internet in 2011 in a bankruptcy discussion: “I own a condo and owe approximately $13,000 in maintenance fees, will this debt be discharged by filing bankruptcy?”

The simple answer to the question the blogger has raised is yes, it is possible.

Unfortunately, with most bankruptcy laws, there can be complicated answers to even the simplest questions. Talk to a bankruptcy lawyer for more information.

Chapter 7 Bankruptcy, called liquidating your assets, is the simplest type of bankruptcy. It is this type of bankruptcy that maintenance fees, or homeowner association (HOA) fees as they are sometimes called, might be completely discharged if you do not have enough assets to liquidate and pay the debt. Discharging a debt means the debt is forgiven, but with any kind of HOA fees , the debt may be forgiven only up to the end of the bankruptcy discharge.

All HOA fees that become due post bankruptcy discharge cannot be discharged. As a matter of fact, you will be responsible for paying all HOA fees post bankruptcy discharge for as long as your name is on the title to the property protected by the HOA.

To get a layman’s glimpse at the complications of bankruptcy law, here is the exact language used in the bankruptcy code concerning HOAs:

The fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interestin such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case.”

Simply put in layman’s terms, you will owe all HOA fees that occur after your bankruptcy has discharged your debts.

A warning to those readers who are in an HOA: A title of a home or property is not transferred until a legal foreclosure has taken place. You can technically surrender a property and still own it. Just because you are not occupying the property, you have given up the keys, or you have told your lender you no longer want it does not mean you do not own it any longer. Only a legal transfer of title releases you from ownership and having to pay the HOA fees.

If you live in or around the metropolitan area of Sacramento, California, contact us at www.bankruptcyhome.com . We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.

An Inheritance During a Bankruptcy

What happens when you receive an inheritance during the bankruptcy proceeding? The answer to the question depends on timing and the type of bankruptcy filed.

If you inherit within 180 days of when you file or within 180 days after you file, you must report the inheritance proceeds to the bankruptcy court trustee who is handling your case. It does not matter whether you will receive anything from the inheritance for months or even years, you must report the possibility to the trustee. The date of death may determine how the trustee will handle the proceeds.

In Chapter 7 Bankruptcy, the inheritance assets will got to the bankruptcy estate, and the bankruptcy court will decide how the assets are to be liquidated. After liquidation, the proceeds will be dispersed to you and your creditors according to the priority order established by bankruptcy law.

In Chapter 13 Bankruptcy, a monetary value will be placed on the inheritance to determine how much you will pay in your reorganization plan. In either case, the addition of the inheritance will be considered when evaluating possible payment to creditors.

If the inheritance is received after the 180 days from when you filed, depending on which type of bankruptcy you filed, the affect will be handled differently. If you have filed Chapter 7 Bankruptcy, once the 180 days is past, you can keep the full amount of the inheritance proceeds and not have to share them with your creditors. The trustee can have no claim to it.

If you have filed Chapter 13 Bankruptcy, the inheritance assets might still be considered property of the bankruptcy estate and change the amount you have to pay to the reorganization plan. The trustee might contend that good faith requires devoting any excess assets obtained to the plan. Depending on which plan is chosen by the court, a three year or five year plan, you will have to report the inheritance until the bankruptcy plan has been discharged.

Why were bankruptcy laws written to include the 180 day provision for the handling of inheritances? To discourage those who anticipate an inheritance from filing bankruptcy when they think death is imminent. Death is not easily predicted outside of six months.

There are suggested solutions for the problem of an inheritance happening during a bankruptcy. Some accountants and lawyers suggest using a “spendthrift” trust to protect heirlooms and the family’s wealth from creditors. Before attempting to protect family wealth, make sure you fully understand the consequences of such actions. If you create a “self-settled trust,” a type of spendthrift trust that allows you to be beneficiary as well as creator, this might be viewed as trying to defraud the creditors. Bankruptcy fraud is a serious crime. State laws also influence which trust you can use to protect your inheritance after filing bankruptcy. One poplular spendthrift trust is the Domestic Asset Protection Trust (DAPT).

The 2005 changes to the Bankruptcy Code created a 10-year limitation period for transfers to self-settled trusts which are meant to hinder, delay or defraud creditors. This means that transfers to DAPTs will be suspect for the 10 years prior to the date that a bankruptcy petition is filed.

Inheritance and bankruptcy laws are complicated. Contact a bankruptcy lawyer if you have received an inheritance and you are considering filing for bankruptcy protection. If you need relief from the stress of debt and you live in or around the metropolitan areas of Albuquerque or Santa Fe, New Mexico, contact us at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

Individuals File Involuntary Bankruptcy Against Bank

There are two forms of bankruptcies- voluntary and involuntary. Although rare, an involuntary bankruptcy occurs when a creditor legally forces a debtor into bankruptcy. A creditor can petition a U.S. Bankruptcy Court to place a debtor into bankruptcy but certain criteria has to be met or the case will be dismissed by the court.

Recently 25 individuals petitioned the District of Colorado bankruptcy court to place Bank of America into involuntary bankruptcy. The petitioners claimed the bank owed them more than $60 million.

Michael E. Romero, a bankruptcy judge for the District Bankruptcy Court of Colorado, received the petition, heard responses from both sides, and made a ruling to dismiss the bankruptcy case on June 21, 2011. Judge Romero also ruled that Bank of America had until July 8, 2011, to file a motion requesting an award of costs, fees, and damages pursuant to bankruptcy code 303 (i)(1).

What does this ruling means to the 25 filing individuals who filed the petition Pro Se?  Bank of America was not forced into bankruptcy, and they may now be responsible for Bank of America’s legal fees and damages.

Bank of America raised four questions in its defense: 1) Whether or not the Court had jurisdiction to hear the case; 2) Whether or not the petitioning creditors were eligible to file an involuntary petition; 3) Whether or not Bank of America was eligible to be a debtor under an involuntary filing for a Chapter 7 or Chapter 11 bankruptcy; and 4) Whether or not the petition was filed in good faith.

Judge Romero made no ruling on the question of jurisdiction since he found other grounds to dismiss the case. He found the petitioners were ineligible to file the petition based on lack of documentation.  He ruled they provided no evidence that Bank of America owed them money.

Judge Romero also found Bank of America could not be a debtor under either Chapter 7 or Chapter 11 of the Bankruptcy Code. Finally, he postponed his decision on whether or not the petitioners acted in good faith, an issue which can be decided later if Bank of America files a motion for damages.

It will be interesting to learn the effect Judge Romero’s ruling will have on the 25 individuals. According to court documents, Bank of America researched the group and found they had business relations with only some of them, either currently or in the past. Some had owned homes which had been foreclosed by Bank of America, while others were debtors whom filed bankruptcies listing Bank of America as creditors.

Certain actions taken by a creditor, like a foreclosure, can force you into a voluntarily bankruptcy filing, but if a creditor has a legitimate reason to file an involuntary bankruptcy against you, they will normally do so to protect the assets you currently own. Historically, when creditors file an involuntary bankruptcy, debtors will respond by voluntarily filing their own bankruptcy.

If you need relief from the stress of debt and you live in or around the metropolitan areas of New Haven or Meriden, Connecticut, contact us at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.