Bankruptcy

Congratulations on Receiving Your Discharge! No, Your Chapter 7 Case isn't over yet!

By Joseph McDaniel, Esq.

When debtors, even very intelligent debtors, receive their long-awaited Discharge Order from the U.S. Bankruptcy Court for the District of Arizona, it's pretty normal for them to breathe a sigh of relief and say, "Whew! Now THAT'S over!"

And, of course, they're wrong.

And, of course, that's why I'm writing this post.

The Discharge is a permanent injunction (a permanent Court Order) that indicates that creditors who have been discharged are forbidden by the Bankruptcy Court to pursue collection activities against the debtor in connection with the debtor's personal liability.

On the other hand, it doesn't apply to debts that were not discharged, like most tax debts, and child support, and alimony, and debts incurred by getting drunk and squashing people, and student loans, and so on.

There are exceptions to those rules (for instance, if you're on a heart-lung machine, and don't have a head, you MIGHT get a discharge from your student loans. If you file the right papers. On a timely basis. In front of the right Bankruptcy Judge. With a tailwind).

By the same token, the Discharge Order doesn't affect properly-perfected liens, which survive the bankruptcy process, so that if you don't keep making payments on your car, eventually (and sooner rather than later) Big Lou will put the Hook to the Bumper, and away it will go! And then there are judgment liens, and you MUST tell your bankruptcy lawyer about those so he can take special action to scrape them off, or they will survive your bankruptcy, and when you go to sell your house, there they are!

And if you don't make payments on your homesteaded house, which the bankruptcy trustee didn't want to take away from you because the equity was within the homestead exemption in Arizona, the bank will run a trustee's sale, and 90 days later, you need to be elsewhere.

BUT YOUR BANKRUPTCY ISN'T CLOSED YET, even though you got a Discharge Order!

So tell your Arizona bankruptcy lawyer when you move, so he or she can get your change of address form into the Court.

So if the Trustee wants to know about the antique hookah that you listed, and tries to contact you, she can find you!

Otherwise, it gets ugly. Really ugly.

SUMMARY: there are two timelines in a Chapter 7 consumer bankruptcy case. One timeline leads the debtor to a Discharge, which is the major reason most debtors file. One timeline relates to how long it takes the Trustee to collect non-exempt assets (if any), sell them, work the proofs of claim, and file a closing report, which is a two or three YEAR process.

Most debtors don't know beans about what happens in their case after they receive their discharge, because not a lot is going on. But a debtor MUST keep counsel informed of their contact information, so change of address forms can be filed.

Because I've looked at exemptions all over the country, and the antique hookah is fair game for the Trustee, and if she wants it, make sure that she can reach you to collect it and sell it.

Otherwise you have an angry, cranky or irritable trustee on your hands, and nobody wants that.

Really.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on July 08, 2009 (boomark / email).