Short answer: revocation of discharge (this is bad).
Nearly every bankruptcy trustee asks you to send to him/her a copy of your tax return. If you do not send the trustee a copy of your tax return then the trustee can, and usually will, motion the Court to revoke the discharge of your debts. You do not want this to happen.
Trustees have to put on a tough face because debtors are always forgetting to hand over their tax refunds. As I mentioned two weeks ago, collecting tax refunds is low hanging fruit for trustees.
Just last week one of the trustees here in Utah implemented a new policy. At the 341 Meeting of Creditors the trustee will schedule a 2004 Examination with you for next year sometime in January to April. This is an extended Meeting of Creditors but the trustee is given great powers to demand that you hand over documents and information. The trustee said that if you get a copy of your tax return before the date you decided on then you will not have to attend the 2004 Examination.
If you filed for chapter 7 bankruptcy then please, PLEASE talk to your bankruptcy attorney before you spend your tax refund.
Answer: your debt is gone; no one pays your creditors.
It’s a good question and one that I had when I was first introduced to bankruptcy law. This is a question that many of my clients ask me. Often they ask “who pays my creditors after bankruptcy?” It makes sense that people would think that someone, whether it’s the government or the trustee, will pay the creditors the debt that is owed to them.
Unfortunately for creditors (but fortunately for debtors) if the case is a “no-asset” chapter 7 (where the trustee does not take and sell any of your property), that debt is money they will never see again. Legally your debts are discharged at the end of a bankruptcy and the creditor cannot try to collect that debt ever again.
If there are assets that are sold in the bankruptcy case then the trustee will return to creditors a pro rata share of whatever is collected. This amount is always less than the original amount that is owed.
In many cases the debt being discharged is owed to a company, often times a credit card company or a hospital. These companies build into their business models the reality that they will not collect some debts. And despite having hundreds of thousands of dollars owed to credit card companies being discharged every day, everyone still gets credit card offers from credit card companies in the mail.
I don’t want to diminish the pain that many creditors feel, particularly individuals. While these big companies are able to absorb these losses, individuals feel the hurt a lot more when a debt is discharged. Not infrequently, these creditors had sympathy for someone and lent them money to help them overcome a problem.
Lesson to creditors: be careful who you lend to. If you cannot afford to lose that money, then don’t lend it. There is a good chance if a debtor files a bankruptcy you are not going to see that money again.
Fisker has been sold for $149.2 million to Chinese carmaker Wanxiang. Fisker experienced financial troubles which eventually led to the company filing for chapter 11 bankruptcy. While the sale seems to be fairly certain it still needs to be approved by US Bankruptcy Judge Kevin Gross.
While Fisker has failed to gain traction in the market, Tesla has proven to be a viable competitor in the automotive world, paying off its Department of Energy loan of $465 million and watching its stock price rapidly.
The Utah Legislative Session is up and running and the bills are passing. One of the bills of interest to me is HB127. This bill is designed to reform many of the practices of Payday loan companies. Today it sailed through the House Business and Labor Committee by a vote of 12-0.
Why is this of interest to bankruptcy attorneys you ask? Just the other day I was talking to an individual who was telling me about her debts and she proceeded to list off seven payday loan companies that she hadn’t repaid. What I see happening are people obtaining payday loans in desperation to pay off debt hoping to be able to pay off the payday loan in a couple of weeks only to realize that they don’t have the money. Seeing that big interest is going to hit (the average interest being 474% for payday loans) they decide to get another payday loan to pay off the previous loan which then cannot be repaid. The cycle repeats itself. Wash, rinse, repeat. Soon they find themselves in a financial avalanche that they will never recover from.
Here are some of the more important provisions of the bill:
-Payday loans, usually for two weeks, currently can be renewed or “rolled over” for up to 10 weeks, after which no more interest may be paid. The bill would then give borrowers 60 days to pay off the loan before lenders could take any action against them.
-The bill would require lenders to file any default lawsuits where borrowers live or obtained the loan. Many lenders now make borrowers waive that right, and lenders do such things as sue people living in St. George in an Orem court — making cases difficult to defend.
-The bill would require lenders to do at least minimal checking to see if borrowers can afford the loans and rollovers, including looking at pay stubs, doing a credit check or looking at repayment history of previous loans.
-The bill would require the industry to report to the state how many loans go the full 10 weeks, how many end up in default, and the amounts involved. Advocates now claim that default rates are high while the industry claims it is low, and the data should show what is true.
What do you think? Is more regulation of payday loans good policy?