A DEBTOR with a judgment against him needs to determine if he can discharge his personal liability under that judgment in a Chapter 7 bankruptcy petition. That would depend whether the underlying debt is dischargeable or not. (In bankruptcy, a discharge is the final order issued by the bankruptcy court which releases the debtor from personal liability of certain types of debt. In other words, a debtor does not have to pay for the debts, and the creditors can no longer collect on those debts.)
Although a lot of debts are generally dischargeable (like credit card debts, medical debts, personal loans, utility bills, etc.), the Bankruptcy Code identifies specific debts are not dischargeable due to public policy or improper actions of the debtor. Debts that are automatically considered non-dischargeable debts include certain taxes or customs duties; certain debts not listed or scheduled by the debtor in the bankruptcy filing not covered by exemptions; domestic support obligation owed either for spousal or child support, including such amounts owed to a governmental unit; certain fines, penalties, and forfeitures payable to governmental units including state court criminal restitution and payments due under federal criminal restitution orders; and student loans.
Certain debts may also be considered non-dischargeable provided the creditors file an objection with the bankruptcy court requesting the court to declare a debt non-dischargeable due to the following actions of the debtor:
• Transfer, removal, destruction, mutilation, or concealment of any of the debtor’s property within one year before the petition was filed or of any property of the bankruptcy estate after the petition was filed, with the intent to hinder, delay, or defraud a creditor or the trustee;
• Concealment, destruction, falsification, mutilation, or failure to keep or preserve any books, documents, or records relating to the debtor’s financial condition or business transactions, unless such failure was justified under the circumstances of the case;
• Knowingly and fraudulently making a false oath of account, presenting a false claim, withholding information from the trustee, or offering or accepting money or property in exchange for acting or forbearing to act in connection with the bankruptcy case.
• Failure to explain any loss of assets or deficiency of assets to meet the debtor’s liabilities; and
• Refusal to obey a court order, refusal to testify, or invoking the Fifth Amendment after the debtor has been granted immunity to testify with respect to that matter.
Please note that while you can get a discharge on your personal liability of the debts (whether under a judgment or not) as explained above, the lien in a secured debt survives bankruptcy and can remain attached to the property such as a residential house. Under certain applicable conditions, that lien can be avoided (such as a second mortgage).
If you are contemplating of filing bankruptcy or other alternatives, it is advisable to seek the counsel of a bankruptcy lawyer to guide you on the intricacies of filing for such a petition.
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Atty. Gwendolyn Malaya-Santos is a member of the State Bar of California and the Integrated Bar of the Philippines. To schedule for a free initial in-person consultation, please call Tel. Nos. (213) 284-5984 or (626) 329-8215. Atty. Santos’ office is located at 3450 Wilshire Blvd., Suite 1200-105, Los Angeles, CA 90010.
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Information contained in this article does not, nor is it intended to, constitutes legal advice for any specific situation and does not create a lawyer-client relationship. It likewise does not constitute a guarantee, warranty, or prediction regarding the outcome of your legal matter.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
