THE client is 50 and operates a business. There is a state court judgment against him for $80K. Is this judgment dischargeable in bankruptcy?
The answer is: If the judgment is for breach of contract only, the $80,000 is dischargeable. If the judgment is affirmative for FRAUD, then the $80,000 fraud judgment is not dischargeable. In this case, client accepted $80,000 in cash, which was wired to him by the plaintiff. The deal was that client would use the $80,000 to buy a brand new Tesla and ship the car to plaintiff’s country. Plaintiff was a foreigner who did not live here. In his defense in state court, the client said that the plaintiff owed him commissions for previous transactions. However, at the state court trial, the client failed to offer sufficient evidence that the plaintiff owed him anything. The client never bought the Tesla so the plaintiff wants his $80,000 back and sued the client for breach of contract and fraud.
Well obviously, there’s something amiss when one receives $80,000 in cash to buy a car but doesn’t buy the car despite representing to the guy who gave him the money that he was going to use the money to buy him a brand new shiny Tesla. I mean, the client should have sold him the London Bridge and the bridge to Alaska too for a little bit more of cash, right? When you give somebody $80,000 to buy a car that you could have bought yourself, that says something about yourself right?
So, the State court judgment found that client defrauded plaintiff of his $80,000 since he misrepresented to the plaintiff that he was going to buy the Tesla but never did. If there is a fraud judgment, that judgment is not dischargeable. Otherwise, people would be able to perpetrate a fraud on others to get their money then, discharge their liability for stealing the money in bankruptcy. Even our beloved POTUS, Mr. Trump, would agree that money fraudulently obtained should not be dischargeable in bankruptcy even if it were fake news resulting from Russian collusion that never happened.
Since the judgment is not dischargeable, the client cannot get Chapter 7 relief. The only thing that the client can do is file for Chapter 13 so he can pay off the $80,000 over five years without interest. Chapter 13 will protect client’s house from judgment creditor’s forced sale of his house to satisfy the judgment. The Chapter 13 will require a plan payment of $1,400 more or less monthly, and after 60 months, the judgment would be fully paid off. This is a lot better than having the judgment accrue legal interest of 10 percent a year, that would make the $80,000 double in about six or seven years since the interest is compounded.
If you need debt relief, set an appointment to see me. I will analyze your case personally.
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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave, Mailstop 58, Building A-1 Suite 1125, Alhambra, CA 91803.