Car Accidents and Bankruptcy, Part III

The last situation to discuss regarding the dischargeability of debts related to auto accidents is the situation in which the debtor's conduct was considered to be "willful and malicious".

"Willful" denotes the idea that the act was done with motive, on purpose. It could involve a level of premeditation or planning by the actor. The act must be more than merely negligent to be willful. There must be a clear intention to cause harm.

"Malicious" is defined by Merriam-Webster as, "having or showing a desire to cause harm to another person; having or showing malice." Once again, someone can act willfully or intentionally, but if there was no intent to do harm, the standard of "willful and malicious" is not met.

It should be pointed out, this standard of willful and malicious conduct will rarely be applicable to auto accidents. Most auto accidents involve either driving under the influence or negligence. Auto accidents are rarely "willful and malicious", though the possibility exists. For instance, an individual could intend to injure a victim with a car by ramming their car or chasing and hitting them.

The willful and malicious standard will more commonly apply to situations where a judgment has been entered in a civil lawsuit for physical assault. But, as discussed above, it could apply to an auto accident in rare instances.

There is an important distinction in Chapter 7 bankruptcy between intoxication damages and willful and malicious damages. As discussed in an earlier post, property damage resulting from intoxication may be discharged in a Chapter 7; however, property damage resulting from a willful and malicious act is NOT dischargeable in Chapter 7. It will be important to discuss this distinction with your attorney. -See 11 USC Sec. 523(a)(6)

There are a couple slight distinctions to the willful and malicious standard in Chapter 13 bankruptcy. In Chapter 13, the act need be only willful OR malicious to be non-dischargeable. Therefore, the act only needs to be intentional or done with malice. It will be a very slight distinction in almost every case. However, there is a major distinction between Chapter 13 and Chapter 7 related to property damages. Property damages caused by willful OR malicious acts can be discharged in Chapter 13, whereas they cannot be discharged in Chapter 7.

In my next post, I will summarize the last three posts, as it becomes quite complicated what can be discharged in Chapter 7 and Chapter 13 when dealing with auto accidents.

Can I Keep a Credit Card in Bankruptcy?

Clients will often ask if they can keep one or two credit cards in bankruptcy. Usually, bankruptcy clients will want to keep at least one credit card to cover emergencies or to help bridge the gap between pay periods. Sometimes, the client will have a long-standing account they don't want to close, or a favorite retail card used frequently.

Whatever the circumstances, unfortunately you will not be able to keep and maintain a credit card through bankruptcy. This is true in both Chapter 7 and Chapter 13 bankruptcies, and it doesn't matter whether or not the credit card has a large balance or no balance at all.

Why is the Bankruptcy Code so adamant about all credit card debts being disclosed and eliminated? Wouldn't a credit card company want the account to remain open rather than be discharged? The Bankruptcy Code has other ideas, and it revolves around the theory that creditors of the same type should all receive the same treatment.

This logic prevents creditors from rushing to file lawsuits and make the first or earliest claim on the debtor. It also promotes fairness in general. The debtor is not permitted to pick and choose which credit card will get paid. The credit card companies know this, and accept the treatment. This reduces adversarial motive throughout the bankruptcy process.

In practice, all credit cards are eliminated in a Chapter 7 bankruptcy (with some rare exceptions, such as credit cards used to pay taxes). In a Chapter 13 repayment plan, all credit cards are paid at the same rate, which can range anywhere from zero cents on the dollar, to full repayment.

Debtors filing a Chapter 13 bankruptcy will need to acclimate themselves to not using credit cards for the duration of the 3 to 5 year plan. This may be difficult, but it is certainly not impossible. But, more to the point, it is necessary. All credit cards will be closed out.

Once the bankruptcy is discharged, the debtor will have the opportunity to apply for new credit. Getting new credit cards may be easier than you think. It is highly recommended to get one credit card coming out of bankruptcy, paying the full balance every month. This will rebuild your credit without leading to old debt problems. 

Car Accidents and Bankruptcy, Part II

As discussed in my previous post, there are three major questions that must be answered when considering whether to include an auto accident lawsuit in a bankruptcy for potential discharge.

• Was the debtor under the influence of drugs and alcohol at the time of the accident?
• Was there bodily injury to the victim, or just property damage?
• Were the actions of the debtor willful or malicious (intentional)?

These three questions will determine if the lawsuit filed (most likely by the insurance company) will be discharged, or whether it will survive the bankruptcy.

The United States Bankruptcy Code addresses bankruptcy discharge under Title 11, Sections 523, 727, and 1328, and these are the sources for most of the information to follow.

Congress has embraced a policy that personal injury and death damages caused by a driver intoxicated or under the influence of drugs should not be eligible for a discharge in either a Chapter 7 or a Chapter 13 bankruptcy.

Section 523(a)(9) prevents the discharge of a debt related to, "death or personal injury caused by the debtor's operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance."

This section applies to both Chapter 7 and Chapter 13 bankruptcies. It is most important to note what this section does NOT apply to... property damage caused while under the influence of drugs and alcohol. If an individual causes only property damage while intoxicated, for instance by running into a parked car or destroying a fence, the purely property damage claim can be discharged in either a Chapter 7 or Chapter 13 bankruptcy.

If, on the other hand, the damage claim relates to a bodily injury or death, the claim cannot be discharged, even if it was not willful or malicious. The claim and the debt will survive or "pass-through" the bankruptcy. It will be important to review the details of the lawsuit with your bankruptcy attorney to determine how section 523 will apply to your bankruptcy petition. It is entirely possible that filing a bankruptcy will remain worthwhile, if the debtor has large amounts of other debt. Filing a bankruptcy on the remaining debt may make it possible to pay damages related to an accident.

Congress has taken a hard stand against discharging debts related to driving under the influence when someone has been injured. As an experienced Pittsburgh bankruptcy attorney, I can help you determine if you are eligible for a discharge of an accident related debt.

In my next post, I will write about damages related to willful or malicious conduct of the debtor, and the (sometime) differing results in Chapter 7 and Chapter 13 bankruptcy. Willful and malicious acts will prove to be the most difficult to discharge.

What to Bring to Your Bankruptcy Meeting of Creditors

The bankruptcy Meeting of Creditors, for both Chapter 7 bankruptcy and Chapter 13 bankruptcy, is largely a formality. The hard work in preparing and filing a bankruptcy petition is mostly complete. However, this does not mean you should show up unprepared. If certain information is not brought to the meeting, your case could be delayed, and even dismissed (in rare cases!)

The two most important things you need to bring in EVERY bankruptcy case is a valid, government-issued photo ID (normally, this will be your drivers license) and your Social Security card. You must bring BOTH. Otherwise, the Trustee will refuse to conduct your Meeting of Creditors, which will need to be rescheduled. This information is used by the Trustee to verify your identity.

If you cannot find your Social Security card (I know mine has been lost for periods of time!) you will need to bring an original document showing your complete Social Security number, with none of the numbers obscured or redacted. An original Social Security payment statement (with all of your Social Security numbers visible) will also be accepted if you are retired.

If you absolutely cannot find your Social Security card, and you do not have a pay stub or any other original proof, you will need to visit the Social Security office downtown and order a new card. They will give you a receipt with you Social Security number on it... this will be sufficient for the Meeting of Creditors.

A valid government-issued photo ID is also necessary. For most people, this will be their drivers license. A military ID card would also suffice. Something like a Costco card will NOT (remember, it needs to be government-issued). Non-drivers can still be issued a state ID card (they look just like normal drivers licenses), and this may be necessary if you have no other government-issued IDs.

A brief list of things that would be helpful to bring, but are not mandatory, include:

• your most recent pay stubs
• proof of payment to the Trustee (Chapter 13 bankruptcy cases only)
• any documents or paperwork your attorney requested you to forward before the Meeting
• your completed Certificate of Financial Management

Prepare to be at least a half-hour early so your attorney can review your petition with you one last time, and review the questions normally asked at the Meeting. If you bring your government-issued photo ID, your Social Security card, and the above-listed material, your bankruptcy Meeting of Creditors will likely be a breeze!