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Are One Shot Deals Dischargeable in Chapter 7?

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  • Are One Shot Deals Dischargeable in Chapter 7?

    Are one shot deals dischargeable in Chapter 7? I live in NY, but plan to file for Federal Chapter 7. One shot deals are (from what I understand) federally granted programs that one can apply for locally. They have them for rental arrears, utilities, even moving.

    They treat it as a loan sometimes and a few months after you get the money, start sending you letters for you to start paying back, interest free, in very small amounts. In my case they didn't do so and more than six months has passed.

    My question is are these one shot deals dischargeable in Chapter 7?

    If I were to apply for a one shot deal right before (say 5 days before) filing for Chapter 7, and had it approved by the local agency for say $1500 (in other words they would pay $1500 for either a utility or a rental arrear), can I then list it as a debt in chapter 7 and have it wiped out just as credit card debt, even though they might not even bother to collect it back from me, as sometimes they dont?

    Thank you

  • #2
    It would be very questionable for anyone to apply for a loan that they didn't intend to pay, on the eve (just days before) filing bankruptcy and expect a discharge. While purchasing a secured item, such as a car, on the eve of filing combined with the intent to keep the car, is not such an issue. You're talking about an unsecured loan with a specific intent to never pay the loan.

    By design, that's fraudulent under the bankruptcy code. The bankruptcy code presumes that anything within 90 days is non-dischargeable. If you actually know that you're not going to pay, that's simply fraud.

    Under normal situations, the debt would be dischargeable because it is not protected (such as student loan debt and most tax debts within the last 3 years of filing).

    If you're filing bankruptcy, the utility company(s) would need to discharge your debt anyhow, and you would then need a deposit. Using the "one shot" loan afte4r filing to pay a deposit for the utility, is likely the better route since that would not have any appearance of fraud.

    Bottom line, I can't condone the scenario that you presented, but the scenario that I presented may be the better option. I hope some others chime in here with more ideas. I'm assuming that you utility service is shutoff or about to be shutoff and you're not otherwise ready to file? You could always file a barebones (skeleton) Chapter 7 and provide all the necessary (remaining) forms within 14 days of the skeleton filing.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog

    I am not an attorney. Any advice provided is not legal advice.


    • #3
      Wow justbroke, thanks for responding, but you are almost making me feel like a criminal here, without actually thinking through this and assuming things. How is it simply fraud, if the utility agency said they will disconnect service in next 2 days and I have children living with me? My motivation is to keep the lights on, so my children can do their homework, not trying to avoid paying back the one shot deal after I got it.

      But since I have decided to file for Chapter 7, I wanted to know if this would be dischargeable like other credit card debt.

      I guess what it comes down to is whether The One Shot Deal is considered a loan or not?

      On the one hand its presented as a Grant, but on the other hand they make it seem like a loan. And I still cannot get the answer to this question. I do know someone else who got it
      more than 4 years ago for about $2500 and they never tried to get that money back.


      • #4
        In bankruptcy, the term fraud is used in places where there may be no intent, and it's not something that's prosecuted. However, to knowingly use credit on the even of bankruptcy with no intent of repaying is fraud by definition. What usually happens in cases where a debtor obtain "credit" on the eve of bankruptcy without intent to pay it back, the debt is generally non-dischargeable if, and only if, the creditor files a complaint within the bankruptcy.

        Having wrote that, maybe I was a little more direct with how the concept of that works.

        If you need energy assistance and the agency does not become a creditor, then it would not be bankruptcy fraud to accept the assistance. If it is more like credit where you have to pay back the amounts provided, then they are likely a creditor and that would make it different. In some cases, it appears that the One Shot payments may need to be repaid which makes it interesting.

        Since you say that this is to support your dependents and it's for an immediate need, it is probably less likely that the agency would complain when you filed bankruptcy. Most bankruptcy courts do not fault debtors for necessities up to the date of filing (within reason), and probably not in cases where it's for energy costs related to keeping shelter for dependents. Even if it came down to the worse case and they complained that you filed bankruptcy almost immediately, either option may work for you.

        The reasons I listed were whether or not it may be non-dischargeable. My suggested approach was made without knowing that you had dependents, but I'm still leery... but supportive. If they don't require it to be repaid, all this is moot.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog

        I am not an attorney. Any advice provided is not legal advice.


        • #5
          If your immediate concern is to keep the lights on, there is no need to take out this loan. Filing for Chapter 7 bankruptcy will bring the protection of the automatic stay, preventing the utility company from terminating your service. Any balance owed on the filing date will be discharged. I would focus on getting all my documents ready ASAP so I could file and get my case number--not on trying to take out a loan from a nonprofit organization.


          • #6
            The thing is I might need a few more days to get my papers in order to file. The more important thing is to figure out if a one shot deal is a loan or not.
            It is distributed by the HRA (Human Resources Administration), which is not a nonprofit organization, but a city government agency.

            Now, as I understand the funds they get to help the public who qualify based on income come from the federal funds and is really a grant.

            In fact, it is advertised as a one time grant to pay rental arrears or utility arrears by some court personnel. They have in office in all housing courts in nyc.

            But when you go to their main place and apply for this grant they make it look as if its a loan, and make you sign a bunch of papers. As I said before I do know
            someone who got a grant/loan from them more than 4 years ago and they never sent him a letter asking him to start paying back.
            But there are also people who got this grant/loan and a few months later started receiving papers asking them to start paying back.
            Some people chose not to, telling the agency that their income is so low that they just can't afford it. The agency then left them alone, never sending another
            letter asking to pay back.

            So the question is - Is a One Shot Deal a Grant or is it a Loan, or is it a grant that they try to get money back but only from those who they think can afford to
            pay back?

            Because if it is a Grant, even if one were to get it just a day before bankruptcy, it can be discharged, or doesn't even need to be listed, as it is not even a loan.
            When I questioned them for a copy of all the papers last time they helped me, they refused to give them to me.


            • #7
              NewStart6357 I hope everything is going okay. Just checking on you and your family.
              Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
              Status: (Auto) Discharged and Closed! 5/10
              Visit My BKForum Blog: justbroke's Blog

              I am not an attorney. Any advice provided is not legal advice.


              • #8
                Yes, thanks, I will respond to the other posts you maid.


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