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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34458
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My attorney filed 2 of my private TERI loans into a chapter

Customer Question

My attorney filed 2 of my private TERI loans into a chapter 7 bankruptcy in 2009 leaving my Federal School loan out of it in the unsecured priority claims. The TERI were under unsecured non-priority claims. When the discharge came through in Jan 2010 in the voluntary petition it said just that. In March 2010 we pulled my Consumer Liabilities report and everything was shown with a 0 balance except the Federal loan. The company from my Federal loan wasting no time and setting up an expensive repayment schedule which I am currently paying on time. Now, 3 years later I was applying for a mortgage and they said these other 2 loans popped up on my credit. I have not been contacted by anyone and I have checked my credit the past 2 years and there was no info posted on them before. Please help I wanted to know if the SOL would able to be used in this situation at the very least. I have no letters or phone calls or I would of got this squared away before I was going to buy my first home. Now I am probably going to lose the house and a bunch a money I received as a gift for the downpayment

I am in New York, Thank you
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 1 year ago.
Hello,

A student loan, under Bankr. Code 523(a)(8) may not be discharged in bankruptcy, without commencing an adversary proceeding/lawsuit in bankruptcy court against the creditor, so as to prove that the debtor will suffer an "undue hardship" unless the loan is discharged.

However, in United Student Aid Funds, Inc. v. Espinosa, ___ U.S. ___, 130 S.Ct. 1367, the U.S. Supreme Court ruled that a student loan provided for in a debtor's Chapter 13 plan was discharged by the final order of the court, because even though it was legal error to do so, the creditor had actual notice of the debtor's bankruptcy plan, and the creditor waited too long to move to set aside the court's final discharge order.

Because your Chapter 7 was discharged along with your student loan debt, the court effectively committed the same legal error as occurred in Espinosa. And, since more than one year has passed since the discharge was entered, the creditor can no longer claim that you committed a fraud in scheduling the debts as dischargeable. This leaves the creditor in exactly the same position as the debtor in Espinosa, i.e., the only available option is to try to set aside the judgment as void.

In Espinosa, the creditor made no effort to set aside the judgment for six years. Your facts suggest that only three years have passed. I don't know if the creditor in your case had actual notice, however, I assume that if the creditor was listed in the schedule matrix, that it was notified by the clerk of the bankruptcy court, and therefore it had notice of the claim for discharge in your Chapter 7. On balance, it seems that you are entitled to enforce the discharge against the creditor, its assignee debt collection agencies, if any, and the various credit reporting agencies (Equifax, Experian, Transunion, etc.). In order to do this you must file a motion for enforcement in bankruptcy court, and allow the creditor to try to have your bankruptcy discharge set aside.

This is not an exercise for a layperson. If your original bankruptcy attorney won't return your calls (which, frankly, and regrettably, is rather typical of consumer bankruptcy lawyers), then you need to hire a new lawyer to determine if there are any additional risks, that I may have missed, and if not, then to enforce your rights under the Chapter 7 discharge order.

For a competent referral in your jurisdiction, see this link. Note: You don't want just any bankruptcy lawyer. You want someone with appellate court experience, because this could turn into a bit of a "snowstorm."

Hope this helps, and good luck to you.

For a
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34458
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.

Thank you for the great information. I will look for an attorney. It will probably be too late on purchasing my house because the bank won't wait. The account was with a different agency at the time of chapter 7 and it looks like someone else bought it up and I was wondering if that matters.I did get one phone call like 6 mos ago saying.g I owed money and I stated that I filed chapter 7 and I would have to contact my attorney and they never called back so I assumed that they saw that and figured it was a closed case

Expert:  socrateaser replied 1 year ago.
You can file a written dispute, under the Fair Credit Reporting Act, with each of the credit reporting agencies (CRAs), send them a copy of your bankruptcy schedule and discharge order, and tell them that unless they remove the negative entries that you will be forced to sue them in bankruptcy court for contempt.

Each CRA explains its dispute process on its website (equifax.com; experian.com; transunion.com). You'll have to search around for the precise link, but unless you submit your dispute in writing and provide evidence, the CRA can ignore you.

The agencies may decide on their own that they are at extreme risk of being sanctioned by the bankruptcy court, which can levy unlimited penalties to vindicate its jurisdiction. If not, then you would have to file the motion for enforcement/contempt in bankruptcy court.

Hope this helps.
Customer: replied 1 year ago.

How can I tell if they did dispute it within that one year period? As far as I know they did not do so. I will be searching for a lawyer to help me with this but fear this could cost me as much as the loan. I know you don't know what it will cost but do you think it will be fairly expensive to follow through with this.


Thanks again for the good advice

Expert:  socrateaser replied 1 year ago.

The creditor would have had to file a motion to set aside in bankruptcy court, and you would have been served notice. You can check the bankruptcy court file to see if a motion was filed and the creditor claimed to have served you with notice. But, if nothing was filed (and I doubt that it was, because TERI has also been a debtor in Chapter 11 bankruptcy reorganization, so it probably had more important things to deal with), then it's way too late now to try to set aside your discharge.

 

Re cost, I have no idea, but the court can order the creditors to reimburse your attorney's fees.

Hope this helps.

Customer: replied 1 year ago.

Do you think in your Opinion, and only you opinion that I should share this info with the mortgage company since they have all my chap 7 filings? Also which of the suggested avenues you explained should I travel first. I wouldn't mind doing some of the "legwork" myself before going to a professional attorney so that I don't have to break the bank and they can review what i have already done.


 


Thanks,


I will try to make this my last question..lol.

Expert:  socrateaser replied 1 year ago.

I don't see any harm in showing our conversation to your lender. However, given that your mortgage rep isn't a bankruptcy lawyer or judge, he/she will not be able to rely on any of this in making a favorable decision. You're going to have to get your credit report cleaned up, and the only way that can happen is to force the CRAs to remove the negative entries.

That may require a court order (if I were the loan underwriter, rather than a lawyer, that's what I would require).

 

As far as which road to travel first, if it were me, I would check the court record to see if there have been any orders made since your discharge. If not, then I would send a dispute to the CRAs with a copy of your discharge and the schedule showing the student loans. If that fails, I would hire a lawyer and file for contempt against each CRA and each debt collection organization that has made a negative credit report against you (including the original creditor, if that's on your credit report, too).

Hope this helps.

Customer: replied 1 year ago.

How would go about checking the courts to see if anything was made since the discharge? And is there a specific time frame for which they have to do so? I know you mentioned within a year for the claim of fraud but I didn't know if they were the same thing


 


Thanks

Expert:  socrateaser replied 1 year ago.
Register with PACER. Search using your case number. Review any entries into the court docket which appear after your discharge order. All of the documents are scanned -- so, if it's not there, then it doesn't exist.

Hope this helps.
Customer: replied 1 year ago.

Is there a limit to how long they can dispute the discharge after the court discharge date?


Thanks for all your help and I will not reply anymore. If you could just answer that last question I would Appreciate it and I just wanted to say thanks again

Expert:  socrateaser replied 1 year ago.
One year.
Customer: replied 1 year ago.

Hello again,


I am very stuck with this situation, I called the local numbers they gave me and they tried referring me to bankruptcy lawyers and when I explained my situation they said they could not help me and to call my original lawyer or file a complaint against him. I didn't know if I was looking in the wrong place because those ones I did call only said they could help me with current filings. I don't know what to do but it seems to me this is going to screw up everything for me and this creditor can just do whatever they want. Do you have anymore advice?


Thanks you

Expert:  socrateaser replied 1 year ago.
Although I can't be certain, I suspect that you are being referred to "consumer" bankruptcy attorneys -- most of whom are only interested in simple cases where they can get in and out with a definite amount of money, and the 341 creditor's meeting as the only required appearance.

You need someone who handles business bankruptcy matters (Chapter 11), or someone who usually represents creditors (creditor's bankruptcy attorney), because that type of lawyer is more accustomed to charging by the hour and actually pleading a client's position in court.

Re filing an ethics complaint against your original attorney, you can certainly do that, but I don't know if that will get the attorney to help you. Your original attorney may not be sufficiently competent in pleading unusual positions to be able to enforce the discharge injunction against your creditors -- so, getting him/her to help, may end up being a mistake.

However, you lose nothing by making a complaint, because if the grievance committee contacts your lawyer, then you will likely get a phone call from your attorney, if only to try to keep the grievance from putting his/her license at risk of suspension/revocation.

To file a complaint, you must first determine the "department"in which your attorney is a member. See this link. To actually make the complaint, see this link.

Hope this helps.

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socrateaser
socrateaser
Bankruptcy Lawyer
34458 Satisfied Customers
Attorney and Real Estate Broker -- Retired (mostly)