Intentionally Running up the Bill…
A Tale of Two Bankruptcies
Bankruptcy helps relieve the burden of credit card and loan debts, medical bills, back utilities and rent, and so forth.
But there are some debts that bankruptcy does not affect; that are “immune” from a bankruptcy discharge – the word is “non-dischargeable”. This means that when the smoke clears and the bankruptcy is over, these debts will still have to be paid.
Previous blogs were about taxes, traffic fines, speeding tickets and their ilk, student loans and Intentional Debt – that is, lying to get a loan – either by preparing a false financial statement or otherwise.
Sometimes people get a loan or cash advance or purchase a luxury item just before filing bankruptcy. These kinds of debt are presumed to be dischargeable – you intentionally bought a luxury item or got a cash advance or loan with no intention of paying for it. I talk about that here.
I finished that blog saying that the non-dischargeability of those kinds of debts is presumed and a debtor can rebut or disprove that presumption.
Tell them your story …
Here are two examples. Let’s say both cases file in January. One was a married couple (I will call them the Smiths), the other a divorced man (Jones).
Although there were three people filing bankruptcy – I will refer to them as only two entities – Smith and Jones. Three people, two cases, two names.
In the middle of Smith’s bankruptcy I received a letter from one of his credit card creditors. I was expecting the call because I noticed the recent charges on his credit card.
He charged over $3,000.00 on this card during a vacation to London. Then he filed bankruptcy in January. (Once upon a time the limit for presumption of dischargeability was $500.00 in charges within 30 days of filing and $1,000.00 within 90 days of filing). The credit card company told me they were planning on filing a motion to make their debt non-dischargeable.
BUT, Smith had an intervening circumstance. True, he charged up his London vacation in November, but when he was fired from his job in December. I proved to the credit card company that 1) his vacation has nothing to do with his dismissal (he was not running out the clock) and 2) more importantly, I could show that had he not been fired, he would have paid the credit card. They did not file their motion to make the debt non-dischargeable. Remember that the loser paying the attorney fees in these issues … so there was no “we have nothing to lose by filing” from the credit card company.
In the middle of the Jones bankruptcy, I got a letter from one of his finance company loans. They were going to file a Motion to have their debt ruled non-dischargeable, too. He got a loan of $5,000.00 from July of the year before – seventeen MONTHS before filing bankruptcy.
How on earth were they going to accomplish that? Because he had not made a single payment on that debt in seventeen-plus months. Not. One.
He was still at the same job as when he got the loan. He was at the same pay rate. He did not marry, divorce, have a child, get sick, lose a family member or was hurt or injured at work or elsewhere. All he did was incur more debt. Also his demeanor was a bit … well, let’s just say the conversations about this issue contained a lot of “who cares” and “so what”s.
Nothing happened between the time he got the loan and the time he filed bankruptcy.
The odds were good that he had no intention of paying that loan – even though the loan was far past the time allowed by law. Remember one of the often-repeated phrases in this blog series: A good local bankruptcy attorney will have the experience and knowledge of your specific district to advise you how your bankruptcy judge views and reviews these issues.
There was very little chance the judge would rule in his favor – especially with Jones’ apparent lack of concern. Add to that he would likely have to pay for the loan company’s attorney fees (as well as mine). We agreed to allow the loan to survive the bankruptcy. He didn’t care about that too much, either.
The debt was too far in the past for me to know about it. Perhaps I could have delayed his bankruptcy filing – give him time to make a few payments on the debt.
Of course, that would have been obvious, too. “When did you see your attorney?” “December 17th.” “When did you make your first payment on this debt?” “December 18th.” A judge would see through that. But if the payments were made for six months or more … if he could have waited that long or longer; the debt might have discharged.
Intent is the key. Jones had no intent of running up the credit card without paying. On the other hand, Smith had no intent to pay HIS debt.
THAT is the difference.
More “Intentional Debts” next time …
Copyright 2016 Michael Curry
About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.
He is also the author of books on finance and bankruptcy available on Kindle through Amazon!
Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!
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