Typical Post Discharge Issues
1.0 In General
A number of issues typically occur post discharge. A number of these will be discussed in the following material.
2.0 Chapter 7
Once a Discharge Notice has been issued in a chapter 7 it is not possible to add creditors to your Bankruptcy. The local Court in the case In Re Matthew & Debra Cox, 02-23363 has ruled that a Bankruptcy case may not be re-opened for the purpose of adding additional creditors in a no asset case. This is based upon the case of In Re Parker, 264 B.R. 685 (10th Cir. BAP 2001). This case ruled that unsecured obligations are automatically discharged even if not listed in a Bankruptcy, if (a) a case has been determined to be a no asset case, (b) no Bar date for filing claims has been set, and (c) the Trustee has made no distribution of assets to creditors. Thus, if the trustee did not make a distribution to your creditors the debts are discharged even if not listed. Conversely, if a distribution was made, the creditors debt is not discharged because they did not have an opportunity to file a proof of claim.
Even though all of your unsecured debts may have been discharged, creditors may not believe they have been discharged unless the debt has been listed on your Bankruptcy. If you find yourself in this situation, the attorney can prepare a letter for you, for a nominal charge, that you can provide to the creditor discussing In Re Parker and its application to your situation. However, a lending institution or broker is not required to issue you credit or complete a transaction if they feel uncomfortable about doing so.
2.2 Reaffirmations and Redemptions
Once the Bar date has passed, it is too late to file a Reaffirmation or Redemption Agreements with the Court. This does not prevent a creditor from executing a “new” contract with you under such terms as may be acceptable. However, most creditors (other than R C Willey) do not understand that they have the capability of doing this and will not enter into such an agreement.
You may still be able to retain the collateral by making a cash payment to the creditor in an amount acceptable to that creditor. As indicated previously, if you remain current on your payments, you may be able to retain the collateral, even though you have not formally Reaffirmed.
2.3 Revocation of Reaffirmation Agreements.
Once your Bar date has passed, it is no longer possible to revoke a Reaffirmation Agreement. As a result, if you default on your Reaffirmation Agreement, the collateral can be sold and you can be sued for any deficiency.
3.0 Chapter 13
Once the bar date for filing proofs of claim have passed you may not add creditors to your bankruptcy. These creditors may continue their collection efforts and are not dischargeable.
4.0 All Cases
4.1 Credit Report Errors
Once your Bankruptcy has been completed, your credit report should indicate that all of the debts listed on your Bankruptcy have been discharged. Many companies will send a notice to the Credit Bureau indicating the filing of your Bankruptcy or that their debt has been charged off. Unfortunately, not all creditors will update their information with the Credit Bureau. As a result, approximately two (2) to three (3) months after the Bankruptcy Discharge, you should obtain a copy of your Credit Report from each of the major Credit Reporting Agencies. If incorrect information is reported on your report, you should contact each of these agencies and follow their in-house procedures for correcting your credit report. You will be required to provide to the credit reporting agency a copy of the Bankruptcy schedule listing the particular creditor that has been discharged, and a copy of your Discharge Notice.
Consumer Disclosure Center
PO Box 1000
Chester, PA 19022
Equifax Credit Information Services, Inc.
PO Box 740241
Atlanta, GA 30374
PO Box 2002
Allen, TX 75013
Occasionally, a creditor may continue to report your obligation as current and past due, even after discharge. If the creditor does not respond to the normal process for correcting erroneous credit information, it may become necessary for you to sue that particular creditor in the Bankruptcy Court. This is an expensive process, but if you are successful, the creditor will be required to pay your attorney’s fees and any damages that their erroneous reporting may have cost you.
4.2 Home or Car Purchase Problems
Most often, errors on your credit report will come to your attention when you attempt to purchase a motor vehicle or home and are denied credit because of erroneous information on your credit report. Some financial institutions will still extend you credit regardless of errors on your Credit Report if you can prove to them that the particular obligation was in fact listed on your Bankruptcy and you did receive a Discharge. If you have lost or misplaced your documents, the attorney may be able to obtain copies for you from the Court Website. However, there is a charge for doing so.
4.3 Liens Against Real Property
On occasion a bank will deny financing on a home because of a judgment that has been recorded against you. Judgments recorded post filing are invalid and the attorney involved will generally remove them for you if requested to do so. You will need to provide proof of the date of filing of the bankruptcy. Judgements recorded prior to filing are valid if you owned real property in the county in which the judgement was recorded or transcripted at the time. These liens survive bankruptcy and must be paid if you refinance or sell the property. A third situation exists in the case of a pre-filing judgment when you did not own any real property. These liens are extinguished because there was nothing for them to attach to and the bankruptcy has discharged the underlying debt.
4.4 1099 Forms
Occasionally a creditor that you have discharged in Bankruptcy may send you a 1099 Form. Under the law, if a creditor forgives your debt outside of Bankruptcy, the amount of that debt forgiveness becomes taxable income. However, if you have filed Bankruptcy (except for federal guaranteed Mortgages), a debt discharged in Bankruptcy is not taxable income. You prepare your taxes just like normal. However, you also include a copy of the discharge notice and the schedule listing the particular debt. Then you do not include the amount on the 1099 Form as income on your taxes.