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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My wife filed for bankruptcy last year. Now we got notice from

Customer Question

My wife filed for bankruptcy last year. Now we got notice from the trustee that they want an 2004 exam. I looked up information on the internet about the 204 exam, but still don't understand the reasons and the scope of this exam. What could have triggered it? Is it a standard exam or is it unusual? What are the possible outcomes? and how long can it take to complete the exam?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  FiveStarLaw replied 2 years ago.

WebLaw :

*Due to rules of your state bar or mine, nothing herein is intended as legal advice, only intended as general information to better help yourself.*

WebLaw :

Welcome to JustAnswer,

So sorry to hear of this dilemma. If my answer is not clear to you or does not fully answer your question, please ask me for clarification by using the reply button.

WebLaw :

Did your wife received a discharge? Did she file a chapter 7 or chapter 13?

Customer :

no discharge, yet. she filed chapter 7

WebLaw :

I see.

Customer :

did you understand my question/problem?

WebLaw :

It is not typical that a 2004 occur. A 2004 is the equivalent of the deposition in state court. Typically a trustee would only schedule a 2004 if he believed that they were assets that were not disclosed on the petition or some type of fraud has occurred. I suggest that you retain local competent bankruptcy counsel.

Customer :

what are the possible outcomes out of a 204 exam?

Customer :

are you still there?

WebLaw :

I am still here.

WebLaw :

The possible outcome is that your wife is denied to discharge or is required to turn over assets. I must stress that you need to retain local counsel for her

Customer :

we have council, I just want to hear a second opinion on the various questions we have ...

WebLaw :

glad to hear that

Customer :

she had a huge amount of credit card debt on her business (sole proprietor) which has been lost in the stock market in 2008/2009. We have all records, but don't know if this kind of loss counts as business loss.

WebLaw :

I understand. I wish you the best of luck

Best wishes for a Happy and Healthy New Year!

Customer :

do you need more or more specifc information?

WebLaw :

I believe I have answered your question

Customer :

you only gave me information that I found on the Internet. I have more specific question about the kind of discharge she requested and whether the trustee would allow it under law.

WebLaw :

I will opt out without charge – perhaps another expert can give you more information

Customer :

alright, I'll wait then.

Expert:  cfortunato replied 2 years ago.

Hi JACustomer,

You said, "she had a huge amount of credit card debt on her business (sole proprietor) which has been lost in the stock market in 2008/2009". What was lost in the stock market?

If money was lost on stocks, who owned the stocks - your wife or her business?

Customer: replied 2 years ago.
There was no formal distinction between personal and business accounts, we knew which accounts were business and kept them seperate. As a matter of fact, she gave me the money (about $200K+) and I invested it in stocks through an Ameritrade account in my name. When the stock market crashed in 2008, all the money was lost.
Expert:  cfortunato replied 2 years ago.

If the money that was used for the stocks came from you wife's business credit cards, would you characterize the money that was used to purchase stocks as a loan from your wife's business?

Customer: replied 2 years ago.
I always saw it as me acting as an agent in my wife's name when I invested the money in stocks. If it is of legal advantage to present the stock purchase through me as a loan from my wife's business, I'm ok with that. Btw, we were not married at the time of the losses, if it matters.
Expert:  cfortunato replied 2 years ago.

You had asked if the debt counted as a business loss (that is the only question I see):

If the money was a loan from the business, it would be a business loss, but then the Bankruptcy trustee could look to you to try to get back some of the money that was loaned to you.

If the money was used for your wife - personally - it would not be a business loss.

I think this is what you wanted to know. If not, please let me know.

Thank you.

Customer: replied 2 years ago.

I guess that the business loan option applies most in our case.

 

I got my bk discharge about a year prior to my wife's bk application filing. I had included the loss of the money I got from my wife and my bk went through without questions asked. Can they question my bk discharge, which is more than 1 1/2 years ago now, regarding the monies I received as a loan from my wife's business? What would be a reason for such a questioning?

Expert:  cfortunato replied 2 years ago.

If you included this loan as a debt in your Bankruptcy filing, your wife's Bankruptcy trustee cannot look to you to try to get back some of the money you owed.

It is too late to look at your Bankruptcy - which must be done within one year after the case is discharged or closed. Bankruptcy Stat. 727(e).

Customer: replied 2 years ago.
Does it matter what kind of business my wife had? She is a realtor and the money loaned to me to invest into stocks was intended to be used to purchase real estate properties, fix them up and then flip them. So the loss was related to her business but one could argue that stock investment is too general. Is this an issue in law?
Expert:  cfortunato replied 2 years ago.

Was the money lent to your wife's business with the stipulation that the money would be used to purchase real estate?

Customer: replied 2 years ago.
Yes, but to I need (written) proof of this agreement?
Expert:  cfortunato replied 2 years ago.
Having proof of that agreement can hurt your wife's case, as the lender can claim the money was obtained with a "false representation". In other words, if your wife agreed to use the money to purchase real estate, and she instead lent the money to you, that debt can be deemed non-dischargeable. Bankruptcy Stat. 323(a)(2).
Customer: replied 2 years ago.
1. Alll the debt was incurred through unsecured credit card balance transfers. There was no commitment towards the credit cards for what purpose it would be used.
2. My wife loaned me the money in order to 'park' it, i.e. invest it in stocks for a few months/years until we would find investable properties, which never happened due to the real estate market downturn.
Expert:  cfortunato replied 2 years ago.

I must have misunderstood you.

If there was no agreement with the lender(s) to use the money for real estate purchases, there was no misrepresentation.

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