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JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience:  Attorney in the practice of Bankruptcy Law since 1996
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Need answers to several questions. If someone files for Cha

Customer Question

Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 8 years ago.
Hi Jason:

Here's some answers.

If someone files for Chapter 7 and the creditors contest the case, what happens if the judge decides that the debt was fraudulent and cannot be dismissed in Chapter 7. Can the person filing then re-file for Chapter 13 at that point, or are you just stuck with not being able to file at all?

You can still file bankruptcy on other debts, but the debts related to fraud are not dischargeable in either Chapter 7 or Chapter 13 if the creditor objects to discharge and prevails on their objection. There is some confusion about this on the web, so here's the skinny: Debts incurred by fraud are not usually dischargeable in Chapter 7 (see 11 USC 523(a)(2)) if the creditor objects and prevails on their objection. Before the law changed on October 17, 2005, however, fraud of this sort was dischargeable by Chapter 13 since those types of debts were not excepted from discharge pursuant to 11 USC 1328(a)(2). However, according to the post-Oct. 17, 2005 law, those types of debts are also now non-dischargeable in Chapter 13 as well since 523(a)(2) has been added to the list of debts which are not discharged in Chapter 13 (see 11 USC 1328(a)(2)).

If you file for Chapter 13, how much do you have to be earning for your case to be considered? In other words, if you are earning some money but only have $50 a month in disposable income, would that still be eligible for Chapter 13 if you had $30,000 in debts?

This can vary from district to district, but strictly speaking as long as you have some income stream and you have some disposable income to send to the Trustee, you can file Chapter 13. I have filed cases with payments as low as $20/mo. So, yes, you could theoretically file a Chapter 13 and pay $50/mo with debts totaling $30,000.00. The amount above the $30,000 which is unpaid at the end of the Chapter 13 would be discharged.

If you do qualify for Chapter 13, I have seen where there are payment plans of both 3 and 5 years. How does the court determine if your debt is to be repaid over just 3 years or stretch it to 5 years?

Different things can influence the length of the Plan. Most notably, if the Means Test says you make more than a maximum amount allowed in your district, then you are required to go 5 years. If you make less than the maximum amount (i.e. if you qualified for Chapter 7 but opted to file 13 instead) then you can go less than 5 years, but never less than 3 years.

Obviously I don't know the details of your case, and I couldn't give legal advice online even if I did, but here are some thoughts: If the court says you have, say, $10,000 in fraudulent debts, then you could possibly convert to Chapter 13 and set up your Chapter 13 Plan to pay the $10,000 back through your Chapter 13 Plan in full plus pay some minimal amount to the other creditors. If the amount of fraudulent debt is $15,000, then you could possibly convert to Chapter 13 and pay the $15,000 back in full through the Plan plus some minimal amount to the other unsecured creditors, etc. If you wanted to stay in Chapter 7, you could possibly discharge all the non-fraudulent debt and then enter into some type of agreement to pay back the fruadulent debt. Of course this is something you would want to discuss with your attorney!

I hope this helps and a positive feedback is always appreciated if this was useful to you.

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