Painfully Long Question, thanks in advance

[Braxter114]

I filed a no asset (At least what I understand it to mean) Chapter 7 and it was discharged in 2009. It was initially a Chapter 13 and then converted to Chapter 7. I had a loan for a vehicle that I thought was included in the Chpater 7. I continued to make voluntary payments on the vehicle. About a year ago I signed a loan rewrite to make it affordable. It was very high intrest 25% but it was the only thing I could get at the time. Needless to say the vehicle had very high mileage when I purchased it and it died. I was forced to give it back on a voluntary repossession. I had contacted my Bankruptcy Attorney and he had told me that it was okay because the loan rewrite was signed on an original debt that was discharged.

I thought nothing about this for some time until I was served with a letter for a law suit. I sent my intial pleading into the court and spoke with the Plantiff's attorney. He informed me that the debt was not on the matrix. I looked, and he was correct, it was not on the matrix.

I have been looking on the internet for some time and did find case law relative to a loan rewrite on a discharged debt to be unenforceable (Charles Artzt v. Lindale National Bank, 145 B.R. 866) but is this debt considered discharged. Under certain posts here I see that debt the was not listed on a non asset discharge is still considered discharged although I can not actually find any case law to back it up. I have an intial pre-conference meeting and am trying to get my ducks in a row and would greatly appreciate any help in advance

[scorpion35]

I filed a no asset (At least what I understand it to mean) Chapter 7 and it was discharged in 2009. It was initially a Chapter 13 and then converted to Chapter 7. I had a loan for a vehicle that I thought was included in the Chpater 7. I continued to make voluntary payments on the vehicle. About a year ago I signed a loan rewrite to make it affordable. It was very high intrest 25% but it was the only thing I could get at the time. Needless to say the vehicle had very high mileage when I purchased it and it died. I was forced to give it back on a voluntary repossession. I had contacted my Bankruptcy Attorney and he had told me that it was okay because the loan rewrite was signed on an original debt that was discharged.

I thought nothing about this for some time until I was served with a letter for a law suit. I sent my intial pleading into the court and spoke with the Plantiff's attorney. He informed me that the debt was not on the matrix. I looked, and he was correct, it was not on the matrix.

I have been looking on the internet for some time and did find case law relative to a loan rewrite on a discharged debt to be unenforceable (Charles Artzt v. Lindale National Bank, 145 B.R. 866) but is this debt considered discharged. Under certain posts here I see that debt the was not listed on a non asset discharge is still considered discharged although I can not actually find any case law to back it up. I have an intial pre-conference meeting and am trying to get my ducks in a row and would greatly appreciate any help in advance

it was discharged until the day u refinanced it.
now u are responsible for the loan

[tcreegan]

Hi Braxter,

Look closely at the loan rewrite paperwork....did you close the old loan and open a new one? If I was the lender that is what I would be angling for

Of course, that takes the loan out of BK protection. Go over the loan rewrite paperwork w/ a fine tooth comb.

If in fact the lender was not on the creditors matrix, you might have to reopen your case and amend your schedules to add them in.

Hope you find a good attorney who can straighten this out for you!

Tom in Colo

[despritfreya]

The two above posts may very well be correct.

1. If you entered into a new loan (new consideration) you may have taken it out of the protection of the bk. When answering the law suit you must raise the "affirmative defense" that it was discharged in bk and then wait for the response. You can do this either by filing a Motion to Dismiss the Complaint or as part of the Answer. Personally, I would file a Motion to Dismiss the Complaint. A judge will have to decide if there was sufficient consideration to raise the debt to a post petition debt.

2. If a judge determines that the loan is pre petition AND your bk was a no-asset case AND there can be no allegation of fraud on your part, the debt was discharged. See 11 USC 523(a)(3).

Des.

[Braxter114]

The two above posts may very well be correct.

1. If you entered into a new loan (new consideration) you may have taken it out of the protection of the bk. When answering the law suit you must raise the "affirmative defense" that it was discharged in bk and then wait for the response. You can do this either by filing a Motion to Dismiss the Complaint or as part of the Answer. Personally, I would file a Motion to Dismiss the Complaint. A judge will have to decide if there was sufficient consideration to raise the debt to a post petition debt.

2. If a judge determines that the loan is pre petition AND your bk was a no-asset case AND there can be no allegation of fraud on your part, the debt was discharged. See 11 USC 523(a)(3).

Des.

Thanks for the replies. I did find case law talking about unless the lender filed a reaffirmation with the court that it would be unenforceable but your right I am not sure if this would be considered a new loan. The form is very generic although I have emails that I traded with them with them talking about it being a rewrite from the original loan.

I did file the BK as an affirmative defense and asked for it to be dismissed as part of my response. I guess I am just trying to find case law reference a debt being discharged when not shown on the original matrix.

[Braxter114]

it was discharged until the day u refinanced it.
now u are responsible for the loan

Scorpion: I respectfully disagree with you on that part. They are several cases, one which I listed under my original posts, that say that if it is a loan rewrite, which is what they referred to it as, that it is unenforceable unless the complete a reaffirmation with the court on the original debt. What I was looking for was court cases stating that if a debt is not listed on the original matrix that it is considered discharged.

[despritfreya]

Braxter,

I will find you a couple of cases and will post the cites here (unless someone beats me to the punch) but it may not be until tomorrow. It is well settled law, based upon 523(a)(3) that in a no asset case an ommited creditor is subject to the discharge unless that creditor had some sort of non-dischargeable claim against the debtor. In the meantime read 11 USC 523(a)(3).

Des.

[HHM]

Take gun, shoot self in foot.

It will be circuit specific on the rewrite issue. It's a grey area. The answer will turn on hyper-technical points of contract law (e.g. new consideration).

Desp is right, in a no assets case, failure to list a creditor does not circumvent discharge. HOWEVER, in nearly all those cases, we are talking about unsecured creditors. Here, we are talking about a secured creditor. I don't know off hand if the courts will be as lenient. In any event, sounds like you may need to reopen the BK to find out. But I can certainly see an argument that a secured creditor's debt is not discharged if not notified because its position was materially affected by the BK without notice. (one possible defense, pull your credit report, how does the car loan report your account...if possible, do you have a copy of a credit report from right after you filed BK; if the report shows IIB - included in bankruptcy, you can argue constructive notice).

[despritfreya]

Baxter:

Here is your binding 6th Circuit authority that
1. If you are a no asset case an omitted creditor is discharged. (For a secured creditor the debt is discharged but the lien survives)
2. You do not have to reopen your case to list a forgotten creditor.
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In re Madaj, 149 F.3d 467 (6th Cir. 1998)

“Before us on appeal are a husband and wife ("the Creditors"), who have felt the bite of their thankless foster child. With his wife, this foster child ("the Debtors") borrowed a substantial sum of money from his foster parents, promising to repay the loan within a few months out of anticipated insurance proceeds from a fire loss. Instead of repaying the loan, however, the Debtors filed a petition in bankruptcy under Chapter 7 and failed to include the foster parents in the list of creditors filed with the petition. Their no-asset case was duly administered, the Debtors eventually obtained a discharge pursuant to 11 U.S.C. § 727, and their case was closed. The Creditors, unaware of the bankruptcy proceeding,. . .filed suit in state court and obtained a judgment against the Debtors for the unpaid balance of the loan. . . (The Debtors filed a Motion to Reopen the Case so they could amend Schedule F). The parties agree that if this debt had been timely scheduled, it would have been dischargeable under 11 U.S.C. § 523, and that even if the debt had been listed and a proof of claim had been filed, because this was a no-asset case, there would have been no payment on the debt. The Bankruptcy Court denied the Debtors' motion to reopen, but held that the debt to the Creditors was nonetheless discharged, and the District Court affirmed. The Creditors timely appealed. We now AFFIRM.

The confusion in the district and circuit courts concerning unlisted Chapter 7 debts in a no-asset case, including the dischargeability of such debts, the effect of an order of discharge on such debts, and the efficacy of reopening a bankruptcy case to include them, is widespread. This confusion is due, in part, to a line of cases that perpetuates the erroneous view that once his case is closed, the debtor must have his case reopened in order to discharge a pre-petition debt not listed in the bankruptcy petition; once the case is reopened, the debtor amends his schedules to list the debt, and the now-scheduled debt is covered by the discharge. But this is not the law.

In a Chapter 7 no-asset case such as this, "reopening the case merely to schedule [an omitted] debt is for all practical purposes a useless gesture”. . . A discharge under 11 U.S.C. § 727 discharges every prepetition debt, without regard to whether a proof of claim has been filed, unless that debt is specifically excepted from discharge under 11 U.S.C. § 523. Section 523(a)(3) contains the only exceptions for unlisted and unscheduled debts. . . Section 523(a)(3)(A) excepts a debt from discharge if the debt was not scheduled in time for a timely filing of the proof of claim, but not if, despite the debt's not having been scheduled, the creditor nevertheless received notice of the bankruptcy in time to file a timely proof of claim. Put another way, the debt is discharged so long as it is scheduled in time for the creditor to file a proof of claim or the creditor finds out about the bankruptcy case in time to do so. Scheduling the debt enables the bankruptcy court to provide the creditor with notice. Where the creditor, through some other means, finds out about the bankruptcy in time to assert his right to a portion of the proceeds of the estate, there is no reason to except an otherwise dischargeable debt from the effect of the discharge. But where the creditor is not aware of the bankruptcy, he cannot assert his right. Without the exception in § 523(a)(3)(A), the debtor could simply deny his uninformed creditors the opportunity to recover from the bankruptcy estate by omitting their debts from the schedule. . .In a Chapter 7 no-asset case, however, the creditors cannot recover from the estate because there is nothing to recover. For this reason, there is no deadline for filing a timely proof of claim in a no-asset case. Technically speaking, therefore, no matter when the creditor learns of the bankruptcy, he is able to file a timely claim. Because § 523(a)(3)(A) excepts the unscheduled debt from discharge "unless such creditor had notice or actual knowledge of the case in time for such timely filing," the moment the creditor receives notice or knowledge of the bankruptcy case, § 523(a)(3)(A) ceases to provide the basis for an exception from discharge. Consequently, the debt is at that point discharged.”
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So, the only real question is "Did you enter into a post petition loan when you re-wrote the contract". That will be a question of fact for the Judge to decide.

Hope this helps.

Des.