WEBER LAW FIRM: Houston Galveston Bankruptcy Lawyer / Attorney

1. Tax Debts. Most tax debts, including income taxes less than 3 years old, can not be discharged in a Chapter 7 bankruptcy. See Discharging Tax Claims in Bankruptcy for an in depth discussion of the discharge of tax claims in both Chapter 7 and Chapter 13 bankruptcy cases. Index

2. Debts Incurred to Pay Non-Dischargeable Federal Taxes. Any debt incurred to pay a non-dischargeable federal tax is likewise not dischargeable in a Chapter 7 bankruptcy case. If a debtor obtains a loan to pay off a non-dischargeable federal tax debt, the debt incurred to obtain the loan is not dischargeable in Chapter 7. Index

This rule only applies to federal tax debts. Debts incurred to pay non-dischargeable state tax obligations (such as sales and certain property taxes) are dischargeable in bankruptcy, although the underlying tax was not dischargeable. Index

Example. #1. Taxpayer files his federal income tax returns for the 1993 and 1999 tax years in a timely manner. He owes $10,000 for each of these tax years. He obtains a $20,000 unsecured loan from ABC Bank during January 2001 for the express purpose of paying the taxes, and pays off all prior taxes. Taxpayer files for Chapter 7 bankruptcy during August, 2001. The bankruptcy filing will discharge $10,000 of the $20,000 debt owed to ABC Bank because the 1993 income taxes were dischargeable in bankruptcy. The bankruptcy filing will not discharge the remaining $10,000 debt owed to ABC Bank because the 1999 income taxes were not dischargeable in bankruptcy. Index

Example #2. Taxpayer owes $10,000 to the State of Texas for unpaid sales taxes. These taxes are trust funds taxes and can never be discharged in bankruptcy. During January, 2001, he obtains a $10,000 loan from ABC Bank for the express purpose of paying the sales taxes. Taxpayer files for Chapter 7 bankruptcy. The $10,000 debt owed to ABC Bank is dischargeable in bankruptcy, although the underlying tax debt was not dischargeable. Index

3. Fraud Claims. Index

3.1. General Rule. Any debt for money, property, services, or credit obtained by fraud or the use of a false financial statement, can not be discharged in a Chapter 7 case. However, such debts might be dischargeable in a Chapter 13 case. See 14. Chapter 13 Cases for a discussion of debts excepted from discharge in Chapter 13 cases. Index

3.2. Fraud Defined. Fraud is generally defined as a misrepresentation (a lie) about an important fact which another person relies upon in deciding to enter into a transaction. A debt will be considered fraudulent if, at the time the debt was incurred, the debtor: Index

► did not intend to repay the debt (i.e. already decided not to pay); Index

► already formed an intention to file for bankruptcy; or Index

► did not have a reasonable possibility of repaying the debt (i.e. had an obvious inability to pay the debt). Index

3.3. 60 Day Fraud Presumption. Cash advances and credit card charges for luxury goods or services made within 60 days of a bankruptcy filing and exceeding $1,000 for a single creditor are presumed to be fraudulent. The 60 day presumption makes it easier for a creditor to prove that credit card charges or cash advances were fraudulent. The creditor has the burden to prove fraud if the charges are made more than 60 days before the debtor files for bankruptcy. The burden shifts to the debtor to give a reasonable explanation disproving the fraud presumption if the cash advances or charges were made within 60 days of the bankruptcy filing. Index

3.4. Credit Card Debts. The presentation of a credit card to a merchant constitutes an implied promise that the purchaser will repay the debt. Credit card debts and other loans are considered fraudulent if, at the time the debt was incurred, the debtor either:

► did not intend to repay the debt; or

► did not have a reasonable possibility of repaying the debt.

Credit card charges are normally considered fraudulent if the consumer makes charges knowing that he does not have a reasonable ability to repay the debt. The court will consider the following factors to determine if the charges were fraudulent: Index

3.4.1. Time Between Card-Use & Bankruptcy Filing. Many credit card issuers will review and scrutinize the account activity occurring within 6 months before the debtor files for bankruptcy to determine if the charges were fraudulent. The charges are more likely to be considered fraudulent if they are made within several months before the debtor files for bankruptcy. The charges are less likely to be considered fraudulent if a long time period passes between the date the debtor makes the charges and the date he files for bankruptcy. Index

3.4.2. Consultation with Bankruptcy Attorney. Any debt incurred after the debtor considers filing or bankruptcy, or consults with a bankruptcy attorney, will usually be considered fraudulent, regardless of the circumstances. Communications between an attorney and client are privileged. Neither the attorney nor client can be compelled to reveal what they discussed. However, a debtor can be compelled to reveal the bare fact that he met with a lawyer. If the lawyer practices bankruptcy law, most courts will infer that the attorney and client discussed a possible bankruptcy filing. Index

3.4.3. Number of Charges. The charges are more likely to be considered fraudulent if the debtor makes a large number of charges. Index

3.4.4. Dollar Amount of Charges. The charges are more likely to be considered fraudulent if the dollar amounts of the charges are large. Cash advances are also more likely to be considered fraudulent. Index

3.4.5. Debtor's Financial Condition at Time of Card-Use. This factor is very important. If the debtor is in good financial shape when he makes the charges, and has a good chance of repaying the debt, the charges are less likely to be considered fraudulent. A fraud finding is much more likely. if the debtor has few assets or financial resources when he makes the charges. Index

3.4.6. Exceeding Credit Limit. The charges are more likely to be considered fraudulent if the debtor exceeds his credit limit when he makes the charges. Index

3.4.7. Multiple Charges Within Short Time Period. Multiple charges made within a short time period may indicate that the debtor intended to go on a pre-bankruptcy spending spree. The charges are less likely to be considered fraudulent if they are spread out over a long time period. Index

3.4.8. Was Debtor Employed? The charges are more likely to be considered fraudulent if the debtor is unemployed at the time he makes the charges. Obviously, if the debtor is employed when he makes the charges, he will be able to argue that he intended to use his employment income to pay the debt, and the charges are less likely to be considered fraudulent. Index

3.4.9. Employment Prospects. The charges are more likely to be considered fraudulent if the debtor is unemployed at the time he makes the charges, and also has a poor chance of obtaining a new job. Conversely, if the debtor is unemployed but has good prospects for obtaining a new job, the charges are less likely to be considered fraudulent. Index

3.4.10. Sudden Changes in Buying Habits. The charges are more likely to be considered fraudulent if the debtor had a prior habit of making few charges over a long time period, and then suddenly started making large charges over a short time period. Index

Example #3. Debtor approaches ABC Bank for a $20,000 loan. He gives ABC Bank a financial statement stating that he owns land, stocks and other assets worth $50,000. ABC Bank relies on this financial statement and loans him the money. In fact, Debtor’s land and other property is worth only $10,000, and he does not even own some of the property listed on the financial statement. Debtor is guilty of fraud because he lied on the financial statement. The $20,000 debt is not dischargeable in a Chapter 7 bankruptcy case. Index

Example #4. Debtor is an airline pilot earning $100,000 per year. The airline industry collapses because of terrorist highjackings, and Debtor losses his job. He has no reasonable possibility of obtaining employment in the near future, except a minimum wage job at a fast food restaurant or convenience store. At the time Debtor lost his job, he had 8 credit cards with an available credit line of $50,000. He also had a $250,000 home, a $2,500 mortgage payment, 3 children and a wife that refuses to work. Debtor uses the credit cards to pay his mortgage and other living expenses over the next 6 months. At the time he makes the charges, he knows that he has no reasonable possibility of obtaining a decent job to repay the credit card debt. The credit card charges will be considered fraudulent and are not dischargeable in a Chapter 7 bankruptcy case because he knew that he would not be able to repay the debt when he made the charges. Index

4. Alimony & Child Support. Debts owed for alimony or child support are not dischargeable in any bankruptcy case (Chapter 7 or 13). Alimony and child support payments can not be discharged, regardless of whether the debt relates to arrearages (past due amounts) or an ongoing support obligation. Index

5. Divorce Decree Debts. Most spouses have debts to divide when the marriage ends in divorce. The divorce decree will usually allocate the payment responsibility between the spouses. The decree will typically award the house to one spouse and specify who is responsible to pay the mortgage. The decree will also divide the payment responsibility for the credit card debts or medical bills. It is very common for one spouse to seek bankruptcy protection in an attempt to discharge the debts he was ordered to pay in a divorce decree. The entry of a bankruptcy discharge can have the effect of reversing the debt payment obligations in the divorce decree. Index

5.1. Non-Binding Effect of Divorce Decree on Creditors. A divorce decree is merely a contract between the spouses which is enforceable by the family court. The division of debt made in a divorce decree is not binding on creditors. If one spouse fails to pay a debt as ordered in a divorce decree and the other spouse was liable on the debt prior to divorce, the creditor is legally entitled to collect from the other spouse. Index

5.2. General Rule Re: Discharge of Divorce Decree Debts.

5.2.1. Chapter 7 Cases. All debts allocated between spouses in a divorce are not dischargeable in a Chapter 7 case unless: Index

(a) the debtor can prove that he does not have the ability to pay the debts from his available income or property; and Index

(b) the benefit to the debtor of receiving a discharge outweighs the detrimental consequences that the ex-spouse and children might suffer if the debts are discharged. Index

This law was enacted during 1994 in an attempt to strengthen the integrity and enforceability of divorce decrees. Index

5.2.2. Chapter 13 Cases. In Chapter 13 cases, there is no exception to the discharge of debts allocated between spouses in a divorce decree. Divorce decree debts can be discharged in a Chapter 13 case if all plan payments are completed Index

5.3. Lawsuit Required to Contest Discharge. The non-bankrupt spouse must file a discharge contest (a lawsuit) against the bankrupt spouse to prevent the divorce decree debts from being discharged. The lawsuit will request the bankruptcy court to rule that the divorce decree debts should not be discharged. The non-bankrupt spouse must file the discharge contest within 60 days after the creditor’s meeting was first scheduled to begin. If the non-bankruptcy spouse does not file the contest within this time period, she will lose her right to force the bankrupt spouse to pay the debts and the divorce decree debts will be discharged. Index

5.4. Divorce Decree Debts Are Discharged in Most Cases. In most cases, the bankrupt spouse will successfully discharge all divorce decree debts and escape the debt repayment obligations in the divorce decree. The non-bankrupt spouse will usually never pursue a discharge contest, for several reasons. Index

► First, when the non-bankrupt spouse receives notice of the bankruptcy filing, she may not know her rights or consult an attorney. If the 60 day time period passes before she contacts an attorney, her right to contest the ex-spouse’s bankruptcy discharge will expire and the divorce decree debts will be discharged. Index

► Second, even if she does consult an attorney, she will normally first consult her family lawyer. Many family lawyers do not know that the non-bankrupt spouse has a right to contest the bankrupt spouse’s discharge. Index

► Third, even if the family lawyer properly advises the non-bankrupt spouse, she will then need to retain a bankruptcy lawyer to file the discharge contest. A competent bankruptcy attorney will advise the non-bankrupt spouse that she could lose the lawsuit, and will need to pay a substantial legal fee to pursue the discharge contest, regardless of the outcome. In most cases, the non-bankrupt spouse will not have the funds to pursue such a lawsuit. Index

► Finally, the bankruptcy lawyer will (or should) also advise the non-bankrupt spouse that instead of filing a discharge contest, she can file her own bankruptcy case and discharge her liability on the divorce decree debts without the cost or risk of litigation. He will also tell her that the cost of filing her own bankruptcy will be much less than the cost involved in pursing a discharge contest, and the result will be much more predictable. Index

Because of these factors, only very sophisticated and financially able ex-spouses will choose to file a discharge contest. Index

6. Student Loans. Index

6.1. General Rule. Student loans are not dischargeable in either a Chapter 7 or 13 case unless the debtor can prove that he will suffer an "undue hardship" if the debts are not discharged. A non-dischargeable educational debt is defined as any:

(a) educational benefit overpayment or loan insured, guaranteed or funded by any governmental unit or non-profit institution; or

(b) obligation to repay funds received as an educational benefit, scholarship or stipend. Index

6.2. Benefit Overpayment. An "educational benefit overpayment" is an overpayment from a government program such as the GI Bill where the student receives a payment after leaving school. This type of debt can not be discharged in bankruptcy and must be repaid. Index

6.3. Loan Requirement. Not all educational debts are considered "loans." Most courts state that the transaction will not be considered a "loan" unless the school extends credit to the student. In other words, the school and student must agree in advance that the school will allow the student to attend classes and pay the fees at a later time. An unpaid debt for tuition or fees will constitute a non-dischargeable student loan only if the school and student agree in advance that the student can repay the debt at a later time. Index

Example #5. Student enrolls at Pay Me Now University. Pay Me Now policy requires all students to prepay all fees before classes begin. Student does not have the money to pay his fees. Pay Me Now lets Student attend classes anyway. Student withdraws from Pay Me Now before the semester ends, never pays the fees, and files for bankruptcy. Most courts would rule that the tuition debt does not constitute a "loan" and is dischargeable in bankruptcy. The tuition debt is not a "loan" because Student and Pay Me Now never agreed in advance that Student could pay the tuition at a later time. Index

6.4. Benefit, Scholarship or Stipend. Debts for an educational benefit, scholarship or stipend are not dischargeable only if funds were advanced. If no funds were advanced, a debt to repay an educational benefit, scholarship or stipend can be discharged in bankruptcy. Index

Example #6. The unpaid tuition debt in Example #5 also fails to qualify as "funds received as an educational benefit, scholarship or stipend." Although Pay Me Now provided an "educational benefit," no funds were advanced. Most courts would rule that the tuition debt is dischargeable in bankruptcy. Index

6.5. Seven Year Age Exception. Index

6.5.1. Old Law. Before, October 1998, student loans were dischargeable in bankruptcy if the debtor filed for bankruptcy more than 7 years after he was obligated to start making loan repayments. Index

6.5.2. Current Law - 7 Year Exception Removed. On October 7, 1998, the law was changed and the 7 year age rule was removed. Under current law, all student loans are not dischargeable in bankruptcy, regardless of the age of the debt. Index

6.6. Hardship Discharge Exception. Index

6.6.1. General Rule. The "undue hardship" exception is the only exception to the general rule preventing discharge of student loans in bankruptcy. A student loan can be discharged only if a failure to discharge the debt would "impose an undue hardship on the debtor and the debtor’s dependents." Index

6.6.2. Standards for Defining Undue Hardship. The words "undue hardship" are not defined by the Bankruptcy Code. Index

(A) Brunner Test. The Fifth Circuit Court of Appeals (the appeals court which controls all cases filed in Texas, Louisiana and Mississippi) has adopted the standards set forth in Brunner v. New York State Higher Educ. Servs. Corp. In Brunner, the court stated that a debtor can establish "undue hardship" only if: Index

► the debtor has made a good faith effort to repay the loan; Index

► the debtor and his dependents can not maintain a minimal standard of living; and Index

► the debtor’s state of affairs is likely to continue for a significant portion of the repayment period. Index

(B) Gerhardt. The Fifth Circuit Court of Appeals recently issued an opinion in In Re: Gerhardt. The Gerhardt case expressly adopts the Brunner test as the prevailing standard in the Fifth Circuit. However, by any measure, Gerhardt is an extremely conservative interpretation of the already difficult Brunner test. Gerhardt actually adopts additional requirements which are much stricter that the Brunner test. In the Fifth Circuit, the debtor must additionally prove that: Index

► The circumstances that impacted the debtor's future earning potential were not present when the debtor applied for the loans or have since been exacerbated. Index

► The debtor must specifically prove a total incapacity in the future to pay the student loan debts for reasons not within his control. Index

Example #7. In Gerhardt, the debtor obtained $77,000 in student loans to finance his music degree. He became a professional cellist. At time of trial he was 43 years old, healthy, well educated, and had no dependents. The evidence tended to show that he could not obtain a position at a higher paying orchestra. However, he could obtain additional steady employment in a number of different arenas. For instance, he could attempt to teach full time, obtain night school teaching jobs, or work as a music store clerk. Under these circumstances, the court held that:

(a) there were no reasons out of Gerhardt's control that perpetuated his inability to repay his student loans; and

(b) a debtor may not choose to work only in the field in which he was trained, obtain a low paying job, and then claim that it would be an undue hardship to repay his student loans. Index

Example #8. In another recent case, Ward v. U.S. Dept of Education, a married couple in their their 30's (married for over 5 years) decided to start a family. At trial, the couple had two children and were expecting the birth of their third child. The expenses related to the children made it impractical for the wife to work for the foreseeable future. The Houston bankruptcy court, feeling "haunted" by the Gerhardt decision, observed that the couples' decision to start a family, although normal and understandable, was within their control. The wife would have been able to work and continue to pay her student loans if the couple had abstained from having any children. The court ruled that the couple failed to satisfy the second prong of the Brunner test because their decision to start a family contributed to their financial problems. The court essentially ruled that the married couple, saddled with over $250,000 in student loans, should have completely abstained from having any children for the rest of their natural lives so that the wife could work at a minimal job to earn the funds necessary to pay her student loans into her elderly years. Index

6.6.3. Compelling Circumstances Necessary. The bottom line: It is very difficult to obtain a hardship discharge of a student loan. To obtain a hardship discharge, the debtor must commence a lawsuit, in bankruptcy court. The lawsuit process can be very expensive, and will almost always involve a large legal fee. Most debtors will not have the financial resources to pursue such a lawsuit. Even if the debtor can afford the lawsuit, most courts will want to see a very compelling case before granting a hardship discharge. The only cases that have a strong likelihood of succeeding are cases where the debtor is disabled or crippled. At best, all other cases are very difficult. Index

7. Fines, Penalties & Criminal Restitution. Index

7.1. Civil Fines & Penalties. All civil fines and penalties owed to governmental units are not dischargeable in a Chapter 7 case, but can be discharged in a Chapter 13 case. Index

7.2. Criminal Fines & Restitution. All fines and restitution obligations issued in criminal cases can not be discharged in any bankruptcy case (Chapter 7 or 13). Index

7.3. Tax Penalties More Than 3 Years Old. The only exception is for tax penalties more than 3 years old. A debtor can discharge a tax penalty in a Chapter 7 or 13 case if it relates to a transaction or event that occurred more than 3 years before he files for bankruptcy. See 5.2 Penalties at the article on Discharging Tax Debts in Bankruptcy for a discussion of discharging tax penalties in bankruptcy. Index

8. Unlisted Creditors. Index

8.1. General Rule. Index

8.1.1. All Creditor Names & Addresses Must Be Listed. The creditor’s name and address is the most important information on the bankruptcy schedules. A Debtor must list the proper name and address of every creditor. If the creditor’s name is improperly spelled or the address is incorrect, and the creditor never receives notice of the bankruptcy filing, the debt may not be discharged in bankruptcy. Index

8.1.2. Debt Amounts Not Important. The debtor should make a good faith effort to list the approximate amount owed to all creditors. However, the debtor does not need to determine or list the exact amount of the debt. If the creditor’s name and address is correctly listed so that he receives notice of the bankruptcy filing, the debt will be discharged regardless of whether he incorrectly lists the debt amount. Index

8.2. Actual Knowledge Exception. If the creditor obtains actual knowledge of the bankruptcy filing in time to file a discharge contest, the debt will be discharged even if the debtor fails to list the creditor on the bankruptcy schedules. Index

Example #9. Debtor owes $100,000 to ABC Bank. He does not list ABC Bank anywhere on the bankruptcy schedules. ABC Bank never receives any formal written notice of the bankruptcy from either Debtor or the bankruptcy court. About 60 days before Debtor receives a bankruptcy discharge, Jane Doe, a Vice President at ABC Bank, telephones Debtor and demands payment. Debtor informs Jane that he filed for bankruptcy. He gives her the case number, the bankruptcy court location, and the name and phone number of his bankruptcy attorney. Jane writes a memo to the loan file reciting that Debtor filed for bankruptcy, and records the case number, court location and other information given by Debtor. The debt owed to ABC Bank will be discharged because ABC Bank had actual knowledge of the bankruptcy filing in plenty of time to file a discharge contest. Index

8.3. No-Asset Cases. Approximately 99 percent of all consumer bankruptcy cases filed under Chapter 7 are "no asset" cases. A "no asset" case is a case in which all of the debtor’s assets are either exempt from seizure under federal or state law, or are of such minor value that the bankruptcy trustee abandons the assets. The 5th Circuit Court of Appeals has stated that in "no asset" cases, a debtor may receive a discharge of unlisted debts if: Index

► the failure to schedule the creditor was not intentional but was due to negligence or inadvertence; Index

► the bankruptcy court’s docket will not be unduly disrupted; and Index

► the creditors right to file a discharge contest has not been prejudiced. Index

At best, this area of bankruptcy law is very grey, and a debtor should never rely on it. First, the process of obtaining a discharge of an unlisted debt is very expensive and cumbersome. Under current practice in this circuit, the debtor must attempt to reopen his bankruptcy case and ask permission to add the unlisted creditor to the bankruptcy schedules. Second, the debtor would then have the difficult burden of presenting evidence in court proving all three elements listed above. The most recent two case opinions on this subject ruled against the debtor, and did not allow him to add the unlisted creditor under circumstances suggesting that the debtor was merely negligent in failing to list the creditor. Finally, if the creditor has any possible means of claiming that the debt was non-dischargeable because of fraud or other misconduct, the court will usually deny the debtor permission to add the unlisted creditor. Index

9. Embezzlement, Theft or Breach of Fiduciary Duty. Any debt for embezzlement, theft, conversion, fraud or misuse of funds by a fiduciary can not be discharged in a Chapter 7 case. However, such debts might be dischargeable in a Chapter 13 case. See 14. Chapter 13 Cases for a discussion of debts excepted from discharge in Chapter 13 cases. Index

Example #10. P.I. Joe is a personal injury lawyer. He settles a $50,000 personal injury claim for Client. He is in financial difficulty when he settles the case and uses the settlement funds to pay his personal bills. Unfortunately, P.I. Joe’s financial problems get worse. He contemplates filing for bankruptcy. P.I. Joe is guilty of converting (stealing) Client’s settlement funds. He can not discharge the $50,000 debt owed to Client in a Chapter 7 case, but might be able to discharge the debt in a Chapter 13 case. Index

10. Willful Injury to Persons or Property. Debts related to a debtor's conduct in willfully and maliciously injuring another person or that person’s property are not dischargeable in a Chapter 7 case. This exception prevents the discharge of civil damage awards for assault, rape, murder, arson, vandalism, burglary or theft in a Chapter 7 case. However, damage awards related to willful and malicious injury might be dischargeable in a Chapter 13 case if the total amount of the damage award and all other unsecured debts are less than $307,675, and you otherwise qualifies to file under Chapter 13. See 14. Chapter 13 Cases for a discussion of debts excepted from discharge in Chapter 13 cases. Index

Example #11. O.J. Juice, an ex-football player, viciously murders his wife and a male companion. The wife’s parents bring a lawsuit against O.J. seeking damages for the wrongful death of their daughter. The jury issues an 8.5 million dollar damage award in favor of the wife’s parents. O.J. can not discharge the debt in a Chapter 7 case. O.J. might be able to discharge the damage award in a Chapter 13 case, but only if the total amount of the damage award and all other unsecured debts are less than $307,675, and he otherwise qualifies to file under Chapter 13. Index

11. Drunk Drivers Causing Death or Injury. A person can not discharge debts relating to death or personal injury inflicted on another person while he was driving a motor vehicle intoxicated on alcohol, drugs or other substances. This rule prevents the discharge of civil damage awards for death or personal injuries inflicted by drunk drivers and applies in both Chapter 7 and 13 cases. This rule is known as the "Madd Mom" rule because the organization known as "Mothers Against Drunk Driving" lobbied Congress to enact this law. Index

12. Welfare Payment Reimbursement Claims. Index

13. Preserving Non-Dischargeable Debts in Chapter 7 Cases. Index

13.1. Automatic Non-Discharge. In Chapter 7 cases, most of the non-dischargeable debts discussed above are automatically not discharged by the bankruptcy filing. This means that the entry of a discharge order will not release any debt of the type that are automatically not dischargeable, and the creditor does not need to file a lawsuit or take any other action to preserve the debt. The following types of non-dischargeable debts are automatically excepted from discharge: Index

► non-dischargeable tax claims (see Discharging Tax Claims in Bankruptcy); Index

► debts incurred to pay non-dischargeable taxes (see 2. Debts Incurred to Pay Non-Dischargeable Federal Taxes); Index

► child support (see 4. Alimony & Child Support); Index

► student loans (see 6. Student Loans); Index

► fines, penalties and criminal restitution (see 7. Fines, Penalties & Criminal Restitution); and Index

► unlisted debts (see 8. Unlisted Creditors); Index

13.2. Discharge Contest Required. The creditor must file a discharge contest (a lawsuit) in bankruptcy court to preserve the following types of non-dischargeable debts: Index

► fraud claims (see 3. Fraud Claims); Index

► divorce decree debts - debts divided between spouses in a divorce decree (see 5. Divorce Decree Debts) ; Index

► debts related to theft, conversion or breach of fiduciary duty (see 9. Embezzlement, Theft or Breach of Fiduciary Duty); and Index

► debts for willful and malicious injury to another person or his property (see 10. Injury to Persons or Property). Index

The creditor must prove that the debt falls within one of these four categories of non-dischargeable debts. The creditor must file the discharge contest within 60 days after the creditor’s meeting was first scheduled to take place. If the creditor fails to file the discharge contest within the 60 day time period, his right to contest the discharge will expire and the debt will be released. Index

14. Chapter 13 Cases. Index

14.1. Super Discharge. The rules concerning the discharge of debts in bankruptcy are much more liberal in Chapter 13 cases. A Chapter 13 debt discharge is commonly known as a "super discharge" because the scope of the discharge is much broader than the discharge given in Chapter 7 cases. In Chapter 13 cases, all debts are dischargeable, potentially without any payment, except for the following. If a debtor successfully completes his Chapter 13 plan, the following types of debts will not be discharged (released). Index

► child support and alimony obligations (both arrearages and ongoing obligations (see 4. Alimony & Child Support); Index

► student loans (see 6. Student Loans); Index

► restitution or a criminal fine included in a sentence on the debtor’s conviction for a crime (see 7.2 Criminal Fines & Restitution); Index

► debts not listed on the bankruptcy schedules or otherwise provided for or dealt with in the Chapter 13 plan (see 8. Unlisted Creditors); Index

► debts for death or personal injury inflicted while the debtor was driving drunk (see 11. Drunk Drivers Causing Death or Injury); and Index

► welfare repayment obligations (see 12. Welfare Payment Reimbursement Claims). Index

All other debts will be released, including debts related to: fraud (see 3. Fraud Claims); all divorce decree debts (see 5. Divorce Decree Debts); civil fines and penalties (see 7.1 Civil Fines & Penalties); embezzlement, theft or breach of fiduciary duty (see 9. Embezzlement, Theft or Breach of Fiduciary Duty) and malicious injury to another person or his property (see 10. Injury to Persons or Property). Index

14.2. Absurd Results in Some Cases. The super discharge given in Chapter 13 cases can present several strange (and perhaps even absurd) results. For example, a person can possibly discharge small (under $307,675) civil damage awards for fraud or malicious conduct such as assault, rape, murder, arson, vandalism, burglary or theft, possibly with little or no payment, if he otherwise qualifies to file under Chapter 13. However, a person guilty of unintentionally causing minor personal injuries while driving slightly intoxicated can never discharge a damage award related to the auto accident in a Chapter 13 case. Index

Example #12. Assume that Mike Bruiser, a heavy weight boxer, is convicted of date raping Ms. Cutie Pie, a female companion he brought to his hotel room. Bruiser is sentenced to two years in prison. Ms. Pie sues Bruiser for assault. The jury issues a $250,000 judgment against Bruiser. Bruiser has several other debts, such as unpaid mortgage and car payments, and unpaid credit cards or medical bills. Bruiser could never discharge the damage award in a Chapter 7 case, but might be able to discharge the entire amount of the damage award in a Chapter 13 case, possibly with little or no payment. However, if the damage award against Bruiser was instead related to an auto accident where Bruiser was driving drunk and the occupants suffered minor whiplash injuries, he could never discharge the damage award in either a Chapter 7 or 13 case. Index

Page Last Updated: January 23, 2006

Terms Associated with this website: houston bankruptcy attorney, houston attorney bankruptcy, bankruptcy houston attorney, bankruptcy attorney houston, attorney bankruptcy houston, attorney houston bankruptcy, houston bankruptcy lawyer, houston lawyer bankruptcy, bankruptcy houston lawyer, bankruptcy lawyer houston, lawyer bankruptcy houston, lawyer houston bankruptcy, bankruptcy lawyer houston texas, lawyer bankruptcy houston texas, houston texas bankruptcy lawyer, bankruptcy attorney houston texas, attorney bankruptcy houston texas, houston texas attorney bankruptcy, houston, bankruptcy, attorney, lawyer, attorneys, lawyers

houston bankruptcy attorney, houston attorney bankruptcy, bankruptcy houston attorney, bankruptcy attorney houston, attorney bankruptcy houston, attorney houston bankruptcy, houston bankruptcy lawyer, houston lawyer bankruptcy, bankruptcy houston lawyer, bankruptcy lawyer houston, lawyer bankruptcy houston, lawyer houston bankruptcy, bankruptcy lawyer houston texas, lawyer bankruptcy houston texas, houston texas bankruptcy lawyer, bankruptcy attorney houston texas, attorney bankruptcy houston texas, houston texas attorney bankruptcy

William D. Weber

Board Certified,

Consumer Bankruptcy Law,

Texas Board of Legal Specialization

►

6666 Harwin Drive, Suite 220

Houston, TX 77036

Phone: (713) 789-3300

Fax: (713) 893-6004