Tag Archives: Chapter 7 Bankruptcy

Can I Sue My Chapter 7 Bankruptcy Trustee?

By

Yes, you can sue your chapter 7 bankruptcy trustee, but it is extremely rare and difficult. It is possible though. Chapter 7 bankruptcy trustees are human and sometimes make mistakes when administering bankruptcy estates and do intend the negative consequences. Suing them could be the only way to get justice. The road is long and at no point will seeking damages against a Chapter 7 bankruptcy trustee or their attorney going to be easy. Here is why.

The Barton Doctrine

To sue a Chapter 7 bankruptcy trustee you must first obtain leave from the court. Yes, this is one of those situations that require you to get court permission to sue someone before you can sue the person. Yes, it is like suing the government. You must get the government’s permission first. The system has to agree with you first that you have been wronged and should be able to then sue the system. It is how the system protects itself and continues to do what it does without change. So yes, you could be denied the right to sue and never get your day in court no matter what happened if you cannot get permission to sue. The Supreme Court established in Barton that before another court may obtain subject-matter jurisdiction over a suit filed against a receiver for acts committed in his official capacity, the plaintiff must obtain leave of the court that appointed the receiver. See Muratore v. Darr, 375 F.3d 140,143 (1st Cir. 2004). This principle has been extended to suits against bankruptcy trustees, see id.; Beck v. Fort James Corp. (In re Crown Vantage, Inc.), 421 F.3d 963, 971 (9th Cir. 2005), and to suits against trustees’ attorneys, see Lowen-braun v. Canary (In re Lowenbraun), 453 F.3d 314, 321 (6thCir. 2006).

There are all kinds of similar immunities for police offices and judges for example. The theory is for them to do their job they have to be immune from the damages caused by their legal decisions in carry out their job. A police officers’ immunity is easier to understand. A police office cannot be sued each and every time they arrested someone and use physical force on the person to effectuate the arrest. A certain amount of physical force is required and legal in the carry out of the police officers’ duties or scope of employment. There are situations where a police officer uses excessive force though and the question of whether judicial immunity should apply arises. The Barton doctrine is no different. The court first evaluates whether the Chapter 7 bankruptcy trustee’s alleged wrongful act falls within the scope of their duties and whether the conduct exceeded what is necessary…….

Before leave can be granted the plaintiff must establish a prima facie case against the Chapter 7 bankruptcy trustee or their bankruptcy attorney. That means present adequate grounds upon which to proceed against the trustee in another forum. If the court determines the Chapter 7 bankruptcy trustee was acting within their official capacity when the alleged wrong took place you could be out of luck. The point is to give the Chapter 7 bankruptcy trustee the ability to administer an estate freely and limit the personal liability for choices in administering the estate. It is a tough job and could be made nearly impossible if Chapter 7 bankruptcy trustees are personally liable for every act or decision they make. The administration of an asset chapter 7 bankruptcy cases would be forever burdensome and less funds would go for the benefit of creditors. All of the assets would go to the professionals administering the estate.

Does The Barton Doctrine Even Apply

Before filing a motion for leave to sue a Chapter 7 bankruptcy trustee you must first determine if the Barton doctrine even applies to the situation or alleged wrong. What a process. First you have to spend thousands of dollars determine if the Barton doctrine applies then thousands of dollars to try and prove the wrong and damages. To determine whether a complained-of act falls under the Barton doctrine, bankruptcy attorneys and courts consider the nature of the function that the trustee or his counsel was performing during commission of the actions for which liability is sought. See Heavrin v. Schilling (In re Triple S Rests., Inc.), 519 F.3d 575, 578 (6th Cir. 2008).
When trustees act “within the context” of their role of “recovering assets for the estate,” leave must be obtained. Acts are presumed to be part of the duties of the trustee or his counsel “unless Plaintiff initially alleges at the outset facts demonstrating otherwise.” In re Lowenbraun , 453 F.3d at 322 (internal quotation marks omitted). The Barton doctrine serves the principle that a bankruptcy trustee “is an officer of the court that appoints him,” and therefore that court “has a strong interest in protecting him from unjustified personal liability for acts taken within the scope of his official duties.” Lebovits v. Scheffel (In re Lehal Realty Assocs.), 101 F.3d 272, 276 (2d Cir. 1996).

Proving The Actual Wrong

A Chapter 7 bankruptcy trustee can be sued for their misconduct in the discharge of their duties as trustee. If you are successful in obtaining arguing the Barton doctrine does not apply you then must show a prima facie case against the Chapter 7 bankruptcy trustee. If the bankruptcy court initially finds there is no merit to the claims against the Chapter 7 bankruptcy trustee then leave to sue may not be granted either. You will have to appeal the order denying leave to sue.

Conclusion

This is surely an expensive process and all pro’s and con’s should be evaluated before deciding to go after a Chapter 7 bankruptcy trustee for their administration of a bankruptcy estate. Rarely have I come across a situation that even raised the question of suing a Chapter 7 bankruptcy trustee. Generally trustee’s stay within their lane and do not take foolhardy risks that may raise doubts to their administration. It is just not worth it.

Do Not Use A Bankruptcy Petition Preparer To File Bankruptcy

By

Who are bankruptcy petition preparer’s? They are hired to prepare the documents necessary to file a bankruptcy petition. Bankruptcy petition preparers are prohibited from giving legal advice or practicing law in any way shape or form. I personally have not witnessed anything good coming from using a bankruptcy petition preparer. In theory the petition preparer just takes the documents from you and prepares a bankruptcy petition. The problem is they cannot discuss exemptions to protect your assets, timing of filing the case and pretty much everything you need to know to complete the process correctly and receive a discharge. Bankruptcy attorneys can provide legal advice to make sure your rights are protected properly. Most attorneys carry malpractice liability insurance also. So you can pay someone $150 who will undoubtedly screw up your bankruptcy case since they cannot do anything but put numbers and letters on paper, or you can pay an experienced attorney anywhere from $1,000 – $2,000 to make sure the process is completed properly. The extra cost is priceless. Just ask bankruptcy filer Edward P. Guidry. See below for what happened in Mr. Guidry’s case due to not using an experienced attorney.

Chapter 13 and Chapter 11 Bankruptcy Petition Preparers Are Not Really Possible Around Here

If you know of a case under Chapter 13 or Chapter 11 that was prepared by a bankruptcy petition preparer in which the case was filed, plan of reorganization approved/confirmed by the court, the plan was completed and the bankruptcy filer received a discharge of their debts please provide me with the bankruptcy case number. At least in the Northern District of California using a bankruptcy petition preparer and expecting to have any type of success in a Chapter 13 or Chapter 11 reorganization is not possible. While Chapter 13 reorganization is a streamlined process compared to a Chapter 11 bankruptcy reorganization, a bankruptcy petition preparer will not be able to guide you through the process. It is actually a legal impossibility in my opinion for a bankruptcy petition preparer to even draft a Chapter 13 or Chapter 11 plan of reorganization given they cannot provide legal advice. I suppose they can just put down numbers and information that the client tells them to. I do not know how that would ever work though. While the Chapter 13 Trustee assigned to the case has duty to all parties involved in the bankruptcy case it is not their job to guide someone through the process from day one. If you choose to file your own Chapter 13 or Chapter 11 reorganization case, please retain the services of an experienced bankruptcy lawyer.

Bankruptcy Petition Preparers Can Only Charge You $150

In the Northern District of California bankruptcy petition preparers can only charge $150 to prepare a bankruptcy petition. Many attorneys charge more than $150 to prepare a skeleton petition and the bankruptcy attorney does not sign the petition or represent the bankruptcy filer in the case. In my opinion attorneys violate Section 110 of the Bankruptcy Code if they do this and charge the bankruptcy filer more than $150. If an attorney takes money from a client to help them file bankruptcy you are either the attorney-of-record in the case or do not take the money. Let us think about this. Why would an attorney that files bankruptcy cases for a living not want to put their name on your petition and be your attorney? Is it because they charged more than $150 for drafting a skeleton bankruptcy petition? Is it because the filing of the case is in bad faith? An artist signs their work right? So can we safely assume that if an artist refuses or chooses not to sign their work that there is something wrong with the work, or they are not proud of the work, or they do not want anyone to know that the art is their work? You get the point. An attorney not signing documents they prepare and charge you for is a red flag. If you are going to file a bankruptcy case for the benefit of the automatic stay there is nothing wrong with that in and of itself. That is a benefit of seeking protection of the bankruptcy code.

Bankruptcy Petition Preparers Cannot Give Legal Advice

This is where I have a huge problem with even allowing bankruptcy petition preparers to exist at all. How can anyone prepare a bankruptcy petition under Chapter 7 or Chapter 13 of the bankruptcy code without asking certain LEGAL questions to the bankruptcy filer? They cannot provide any advice as to the benefits/detriments to filing bankruptcy, when to file, what chapter of the code to file under, what is necessary to complete the bankruptcy and obtain a discharge, advising regarding exemptions to protect assets, what the different types of debts are and how to treat or list them, discussing the effects of bankruptcy at all and more less all the other important issues that need to be addressed BEFORE filing for bankruptcy protection.

Horror Story Resulting From Use of Bankruptcy Petition Preparer

I personally have met with at least 50 people who should not have used a bankruptcy petition preparer. The main problems are usually related to listing assets properly and protection them, and the Chapter 7 statement of monthly disposable income. If you own a home you cannot mess around with filing a Chapter 7 bankruptcy case on your own or with a petition preparer. In the current market of rising home prices that is a good way to have your house sold through the bankruptcy estate for the benefit of those you owe money to. In 2005 Congress amended the Bankruptcy Code and created the Chapter 7 Statement of Monthly Disposable Income (“Means Test”). If your six-month average gross income is over the median income for the number of people in your household you do not automatically qualify to pass the means test. You have to know what allowable expenses can be included in the Means Test to try and pass the Means Test and file a Chapter 7 case.

Transfers of Property and Why You Should Care When Filing Chapter 7 Bankruptcy

By

The California Uniform Fraudulent Transfers Act (CUFTA) is codified in California Civil Code Sections 3439-3439.12. At the end of this article is every word of the CUFTA. Simply put, the purpose of the CUFTA is to deter and prevent the transfer of assets with the intent to make the asset out of reach of creditors or the asset was transferred for less than equivalent value when insolvent. So the CUFTA says you cannot transfer your house that is paid in full, worth $400,000, to your brother for nothing when you are about to get sued for $120,000. If you lose the lawsuit you may have an issue under the CUFTA. If you later file bankruptcy within 4 to 10 years you may have problems too. How does the CUFTA apply to filing for bankruptcy protection? Well, Section 544(b) of the Bankruptcy Code gives bankruptcy trustees the power to avoid, or undo, any transfer of an interest of the debtor in property that is voidable under nonbankruptcy law by a creditor holding an allowable unsecured claim. So the bankruptcy trustee can step into the shoes of an unsecured creditor and use their right to undo a transfer of property by the bankruptcy filer by using the CUFTA.

What is the statute of limitations for the CUFTA? Section 3439.09

Bankruptcy attorneys far and wide need to know the intricacies of their state fraudulent transfer acts and the look back periods for different types of creditors. Where things get very tricky is the types of claims that are involved in the actual bankruptcy case. This is the part you need to read and remember forever. Each state has their own version and there are some differences from state to state. In California the CUFTA provides that a cause of action is extinguished under the CUFTA as follows:

Actual intent to hinder, delay, or defraud any creditor: 3439.04(a)(1) within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant;
– The four years part is simple, but could reasonably have been discovered by the claimant is not. In theory a Chapter 7 trustee could argue 15 years after the transfer was made the claimant could not reasonably have discovered the transfer once the bankruptcy case is filed and then bring an action within one year of the filing of the bankruptcy case or discovery of the transfer in the bankruptcy case . . . . . . . .

Transfer was not for equivalent value while insolvent: 3439.04(a)(2) and 3439.05 within four years after the transfer was made or the obligation was incurred;

Max Seven Years: The catch here is 3439.09(c) says notwithstanding any other provision of law (other laws could trump this then) obligation is extinguished if no action is brought or levy made within seven years after the transfer was made or the obligation was incurred.

So you think you are home free after seven years no matter what? Nope, it will really depend upon who the bankruptcy filers creditors. The IRS has a look back period of 10 years under the Federal Unemployment Tax Act. There are many other look back periods for other types of claims a Chapter 7 trustee may step into the shoes of. Again, the theme of this article is do you or does your client have the funds to litigate these issues? I also pointed out how the look back period could be more than 7 or ten years in regards to the “within one year after the transfer or obligation was or could reasonably have been discovered by the claimant” is potentially treacherous.

Liability under the CUFTA

Cal. Civil Code § 3439.04 provides the basis for liability under the CUFTA. You can either be liable if actual intent to hinder, delay or defraud any creditor by the transfer of the asset can be proven or you transferred the asset for less than fair market value (equivalent value) while insolvent (balance sheet or cash flow?)

Under Cal. Civil Code § 3439.05, a transfer is constructively fraudulent if the debtor (person owing money) made the transfer without receiving reasonably equivalent value in exchange and the debtor was insolvent at that time or rendered insolvent as a result of the transfer. The chapter 7 trustee must prove both reasonably equivalent value and insolvency by a preponderance of evidence. In re GSM Wireless, Inc., 2013 WL 4017123, at *17 (Bankr. C.D. Cal. April 5, 2013) (citing Whitehouse v. Six Corp., 40 Cal. App. 4th 527, 533–34 (1995)). What is a preponderance of evidence. It is a lower standard than beyond reasonable doubt. Preponderance of evidence means the judge has to believe that the existence of a fact, or something you are trying to prove, is more probably than its nonexistence based upon the evidence presented. Concrete Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for So. Cal., 508 U.S. 602, 622 (1993).

What is the definition of insolvency? Balance Sheet Test vs. Cash Flow Test?

Cal. Civil Code § 3439.02(a) provides that “[a] debtor is insolvent if, at fair valuations, the sum of the debtor’s debts is greater than all of the debtor’s assets.” This is the balance sheet test for insolvency. Bay Plastics, Inc. v. BT Comm. Corp. (In re Bay Plastics, Inc.), 187 B.R. 315, 328 n.22 (Bankr. C.D. Cal. 1995). This should include retirement accounts that are completely exemptable under most state exemption laws.

Under Cal. Civil Code § 3439.02(c), “[a] debtor who is generally not paying his or her debts as they become due is presumed to be insolvent.” This is the cash flow test for insolvency. In re Bay Plastics, 187 B.R. at 328 n.22. As a general rule, solvency and not insolvency is presumed. Neumeyer v. Crown Funding Corp., 56 Cal. App. 3d 178, 186 (1976).

Actual intent to defeat, hinder or delay creditors must be proven.

Under the CUFTA, a transfer is intentionally fraudulent if it is made with the intent to defeat, hinder or delay creditors. Cal. Civil Code § 3439.04(a)(1) provides that transfers made with actual intent to delay, hinder, or defraud creditors are fraudulent and therefore voidable. Like many issues that involve the intent of the party actually proving intentional fraud with direct evidence is usually extremely difficult. Over time the courts have come up with badges of fraud that help to establish intent. The badges are listed in Cal. Civil Code Section 3439.04(b): (1) whether the transfer or obligation was to an insider; (2) whether the debtor retained possession or control of the property transferred after the transfer; (3) whether the transfer or obligation was disclosed or concealed; (4) whether before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit; (5) whether the transfer was of substantially all the debtor’s assets; (6) whether the debtor absconded; (7) whether the debtor removed or concealed assets; (8) whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) whether the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.

The Chapter 7 Trustee has a duty to creditors.

Every jurisdiction has a panel of Chapter 7 trustees that are assigned to chapter 7 bankruptcy cases to administer the bankruptcy estate that is created when the petition is filed. First off let us get something straight right now. When you file Chapter 7 bankruptcy, or your file a Chapter 7 bankruptcy case for a client, you are choosing to put a plate in front of the Chapter 7 trustee to eat off of. So do not be displeased with the Chapter 7 trustee for fulfilling their obligation to creditors and doing their job properly. You invited them into your house, asked them to sit at the table and after that just because you do not like their behavior you think you have a right to kick them out of your house? No, you will most likely not be allowed to dismiss your Chapter 7 bankruptcy case. At best you will be allowed to convert to Chapter 13.

See 11 U.S.C. Section 704 Duties of Trustee: Chapter 7 trustees actually have broad discretion in how they administer a bankruptcy estate. The issue to focus on is do you, the bankruptcy filer, have the money to pay your bankruptcy attorney to litigate the statute of limitations, your intent, your solvency or whether you received equivalent value for the property you transferred prior to filing a chapter 7 bankruptcy case? I can tell you, and of course this is my opinion based upon being involved in well over 2,000+ bankruptcy cases in various capacities, you do not have stomach or the money to fight this battle. There absolutely could be a good faith question as to whether you made a fraudulent transfer and a bankruptcy judge needs to determine who is right and who is wrong. This will be an expensive process and there is no guarantee your attorney or you will get their attorneys’ fees and costs paid for by the over party even if they successfully defend you.

The moral to the story . . . . . . . . .

Just do yourself a favor if you are thinking about filing for bankruptcy protection and have transferred assets, or do your client a favor and just file a Chapter 13 case and not a Chapter 7 case.

You can thank me later.

Complete Text of the California Uniform Fraudulent Transfers Act

3439.

This chapter may be cited as the Uniform Fraudulent Transfers Act.

3439.01.

As used in this chapter the following definitions are applicable:
(a) “Asset” means property of a debtor, but the term does not include, the following:
(1) Property to the extent it is encumbered by a valid lien.
(2) Property to the extent it is generally exempt under nonbankruptcy law.
(3) An interest in property held in tenancy by the entireties to the extent it is not subject
to process by a creditor holding a claim against only one tenant.
(b) “Claim” means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.
(c) “Creditor” means a person who has a claim, and includes an assignee of a general assignment for the benefit of creditors, as defined in Section 493.010 of the Code of Civil Procedure, of a debtor.
(d) “Debt” means liability on a claim.
(e) “Debtor” means a person who is liable on a claim.
(f) “Lien” means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien, or a statutory lien.
(g) “Person” means an individual, partnership, corporation, limited liability company, association, organization, government or governmental subdivision or agency, business trust, estate, trust, or any other legal or commercial entity.
(h) “Property” means anything that may be the subject of ownership.
(i) “Transfer” means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.
(j) “Valid lien” means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.

3439.02.

(a) A debtor is insolvent if, at fair valuations, the sum of the debtor’s debts is greater than all of the debtor’s assets.
(b) A debtor which is a partnership is insolvent if, at fair valuations, the sum of the partnership’s debts is greater than the aggregate of all of the partnership’s assets and the sum of the excess of the value of each general partner’s nonpartnership assets over the partner’s nonpartnership debts.
(c) A debtor who is generally not paying his or her debts as they become due is presumed to be insolvent.
(d) Assets under this section do not include property that has been transferred, concealed, or removed with intent to hinder, delay, or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter.
(e) Debts under this section do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.

3439.03.

Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor or another person.

3439.04.

(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor.
(2) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either:
(A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction.
(B) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.
(b) In determining actual intent under paragraph (1) of subdivision (a), consideration may be given, among other factors, to any or all of the following:
(1) Whether the transfer or obligation was to an insider.
(2) Whether the debtor retained possession or control of the property transferred after the transfer.
(3) Whether the transfer or obligation was disclosed or concealed.
(4) Whether before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit.
(5) Whether the transfer was of substantially all the debtor’s assets.
(6) Whether the debtor absconded.
(7) Whether the debtor removed or concealed assets.
(8) Whether the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred.
(9) Whether the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.
(10) Whether the transfer occurred shortly before or shortly after a substantial debt was incurred.
(11) Whether the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor.
(c) The amendment to this section made during the 2004 portion of the 2003-04 Regular Session of the Legislature, set forth in subdivision (b), does not constitute a change in, but is declaratory of, existing law, and is not intended to affect any judicial decisions that have interpreted this chapter.

3439.05.

A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

3439.06.

For the purposes of this chapter:
(a) A transfer is made:
(1) With respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good faith purchaser of the asset from the debtor against whom applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee; and
(2) With respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien otherwise than under this chapter that is superior to the interest of the transferee.
(b) If applicable law permits the transfer to be perfected as provided in subdivision (a) and the transfer is not so perfected before the commencement of an action for relief under this chapter, the transfer is deemed made immediately before the commencement of the action.
(c) If applicable law does not permit the transfer to be perfected as provided in subdivision (a), the transfer is made when it becomes effective between the debtor and the transferee.
(d) A transfer is not made until the debtor has acquired rights in the asset transferred.
(e) An obligation is incurred:
(1) If oral, when it becomes effective between the parties; or
(2) If evidenced by a writing, when the writing executed by the obligor is delivered to or for the benefit of the obligee.

3439.07.

(a) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in Section 3439.08, may obtain:
(1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim.
(2) An attachment or other provisional remedy against the asset transferred or its proceeds in accordance with the procedures described in Title 6.5 (commencing with Section 481.010) of Part 2 of the Code of Civil Procedure.
(3) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure, the following:
(A) An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or its proceeds.
(B) Appointment of a receiver to take charge of the asset transferred or its proceeds.
(C) Any other relief the circumstances may require.
(b) If a creditor has commenced an action on a claim against the debtor, the creditor may attach the asset transferred or its proceeds if the remedy of attachment is available in the action under
applicable law and the property is subject to attachment in the hands of the transferee under applicable law.
(c) If a creditor has obtained a judgment on a claim against the debtor, the creditor may levy execution on the asset transferred or its proceeds.
(d) A creditor who is an assignee of a general assignment for the benefit of creditors, as defined in Section 493.010 of the Code of Civil Procedure, may exercise any and all of the rights and remedies specified in this section if they are available to any one or more creditors of the assignor who are beneficiaries of the assignment, and, in that event (1) only to the extent the rights or remedies are so available and (2) only for the benefit of those creditors whose rights are asserted by the assignee.

3439.08.

(a) A transfer or an obligation is not voidable under paragraph (1) of subdivision (a) of Section 3439.04, against a person who took in good faith and for a reasonably equivalent value or against any subsequent transferee or obligee.
(b) Except as otherwise provided in this section, to the extent a transfer is voidable in an action by a creditor under paragraph (1) of subdivision (a) of Section 3439.07, the creditor may recover judgment for the value of the asset transferred, as adjusted under subdivision (c), or the amount necessary to satisfy the creditor’s claim, whichever is less. The judgment may be entered against the following:
(1) The first transferee of the asset or the person for whose benefit the transfer was made.
(2) Any subsequent transferee other than a good faith transferee who took for value or from any subsequent transferee.
(c) If the judgment under subdivision (b) is based upon the value of the asset transferred, the judgment shall be for an amount equal to the value of the asset at the time of the transfer, subject to adjustment as the equities may require.
(d) Notwithstanding voidability of a transfer or an obligation under this chapter, a good faith transferee or obligee is entitled, to the extent of the value given the debtor for the transfer or obligation, to the following:
(1) A lien on or a right to retain any interest in the asset transferred.
(2) Enforcement of any obligation incurred.
(3) A reduction in the amount of the liability on the judgment.
(e) A transfer is not voidable under paragraph (2) of subdivision (a) of Section 3439.04 or Section 3439.05 if the transfer results from the following:
(1) Termination of a lease upon default by the debtor when the termination is pursuant to the lease and applicable law.
(2) Enforcement of a lien in a noncollusive manner and in compliance with applicable law, including Division 9 (commencing with Section 9101) of the Commercial Code, other than a retention of collateral under Sections 9620 and 9621 of the Commercial Code and other than a voluntary transfer of the collateral by the debtor to the lien or in satisfaction of all or part of the secured obligation.

3439.09.

A cause of action with respect to a fraudulent transfer or obligation under this chapter is extinguished unless action is brought pursuant to subdivision (a) of Section 3439.07 or levy made as provided in subdivision (b) or (c) of Section 3439.07:
(a) Under paragraph (1) of subdivision (a) of Section 3439.04, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant.
(b) Under paragraph (2) of subdivision (a) of Section 3439.04 or Section 3439.05, within four years after the transfer was made or the obligation was incurred.
(c) Notwithstanding any other provision of law, a cause of action with respect to a fraudulent transfer or obligation is extinguished if no action is brought or levy made within seven years after the transfer was made or the obligation was incurred.

3439.10.

Unless displaced by the provisions of this chapter, the principles of law and equity, including the law merchant and the law relating to principal and agent, estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or other validating or invalidating cause, supplement its provisions.

3439.11.

This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

3439.12.

This chapter, and the other changes in the law made by Chapter 383 of the Statutes of 1986, apply only to transfers made or obligations incurred on or after January 1, 1987; and, as to transfers made or obligations incurred prior to that date, the law in effect at the time the transfer was made or the obligation was incurred shall apply. The provisions of this chapter, insofar as they are substantially the same as the provisions of Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4, which was repealed by Chapter 383 of the Statutes of 1986, shall be construed as restatements and continuations, and not as new enactments.

What Not To Do If You Know You Will Receive A Significant Inheritance When Filing Bankruptcy

By

The definition of property of the estate under Section 541 of the Bankruptcy Code is very broad. So if you know you are going to get a significant inheritance why file bankruptcy? Like everything I guess “significant” could mean something different depending upon the circumstances. If you only have $50,000 in debt and know you will receive $100,000 from someone’s estate that has already passed, that is a significant inheritance in my opinion. An argument could be made for still filing for bankruptcy protection, but be careful. The inheritance is part of the bankruptcy estate, must be disclosed and held for the benefit of your creditors if you file bankruptcy. The following is a rundown of what not to do if you know you will receive a significant inheritance when filing bankruptcy. This Ninth Circuit Bankruptcy Appellate Panel case deals with what happened to a debtor that received a significant inheritance right before filing for bankruptcy protection in the Bankruptcy Court for the Southern District of California. See: Jason Scott Brown v. Thomas H. Billingslea, Jr., Chapter 13 Trustee; 9th Cir. BAP No. SC-14-1388-JuKlPa. After discussing the initial Chapter 13 bankruptcy filing and then Mr. Brown’s appeal, this article concludes with what is currently taking place after this appeal (spoiler alert) in the Chapter 7 case. What did the Chapter 7 Trustee do upon conversion for the benefit of Mr. Brown’s creditors?

In this case the debtor, Jason Scott Brown, filed a Chapter 13 Bankruptcy petition on December 13, 2013, three days before the closing of the sale of a property he inherited when his father, Herbet D. Brown, who passed away July 20, 2012. The sale of the inherited property closed on December 16, 2013, and Mr. Brown received $65,812 in proceeds. I do not really know why Mr. Brown filed for bankruptcy knowing he was entitled to over $65,000 from the sale of the property. I will not begin to speculate because there may be a very legitimate and reasonable reason why. I just do not know what it is. What I do know is what happened next in his Chapter 13 bankruptcy case. Mr. Brown represented in his Schedule B that he was only going to receive $2,500 in inheritance and his Schedule F listed $33,499 in general unsecured debts. Also upon receiving the probate funds Mr. Brown did not amend his schedules.

At the Section 341 meeting of the creditors the Chapter 13 Trustee and Mr. Brown entered into a pre-confirmation modification of the Chapter 13 Plan requiring Mr. Brown to turn over to the trustee for the benefit of his creditors $3,224 in probate proceeds within 45 days of receiving the funds. Why $3,224 instead of the $2,500 he listed in this schedules is unknown. At some point the Chapter 13 Trustee found out about the actual amount of the proceeds Mr. Brown was receiving from the sale of his deceased father’s house via probate. In April 2014 the Chapter 13 Trustee moved for dismissal of the case and objection to confirmation arguing that $37,569 should be turned over to the trustee for the benefit of unsecured creditors.

The Chapter 13 trustee’s objection to confirmation included documents from the probate proceeding and sale of the house. Again for some unknown reason Mr. Brown’s brothers assigned him their beneficial interest in the inheritance from their father’s estate on August 7, 2013. At some point in May 2014, Mr. Brown changed Bankruptcy Lawyers and immediately amended his schedules to allege his share of his father’s estate was only $12,372 and fully exempt from creditors. Mr. Brown alleged that his three brothers were each entitled to 25% of the inheritance. After some more legal wrangling the Chapter 13 Trustee also requested the case be converted to Chapter 7 given Mr. Brown did not disclose the inheritance and this was an abuse of the bankruptcy process. See: Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 767 (9th Cir. 2008).

In another strange turn of events, Mr. Brown’s Bankruptcy Attorneys on his behalf on June 17, 2014, filed a status report telling the court that Mr. Brown misunderstood that the inheritance was property of the bankruptcy estate. Therefore to make it right Mr. Brown would pay 100% of his unsecured debts in the Chapter 13 Plan after objecting to a claim of a creditor. See section below about the Chapter 7 case regarding this objection to claim.

At the hearing on the Chapter 13 Trustee’s objection to confirmation on July 8, 2014, Mr. Brown informed the court that his part of the inheritance was put into his business and the rest of the inheritance as paid in CASH to two brothers and by check to a third brother. At this hearing the Bankruptcy Court noted that given the source of payment for creditors, the inheritance was gone, continuing to pursue Chapter 13 reorganization was not in good faith. The Bankruptcy Court also found based upon the facts that cause existed to convert the Chapter 13 case to Chapter 7 so that a Chapter 7 Trustee could seek return of the inherited funds via fraudulent transfer or transfer avoidance powers for the benefit of creditors. Mr. Brown timely appealed the conversion of his case to Chapter 7.

Cause To Convert The Case To Chapter 7

On appeal the Ninth Circuit Bankruptcy Appellate Panel found the Bankruptcy Court’s finding of cause was not clearly erroneous. The Ninth Circuit BAP also noted that Mr. Brown’s appeal focused on the fact that Mr. Brown proposed a 100% Chapter 13 Plan and not that the Bankruptcy Court’s findings were erroneous. Also cleverly noted is that Mr. Brown never actually filed an amended plan or motion to modify the confirmed chapter 13 plan to pay creditors 100%. Mr. Brown only orally alleged he would propose a 100% chapter 13 plan upon objecting to a creditor’s claim. If successful with the claim objection Mr. Brown “believed” he would be able to pay unsecured creditors 100%. How could this be possible though? Mr. Brown’s income was only social security and was not sufficient to fund a 100% Chapter 13 Plan and he used and gave away all of the inheritance . . . . so.

The 9th Circuit BAP also noted that Mr. Brown’s case was pending for seven months and Mr. Brown could have paid all of his unsecured creditors in full with the inheritance and did not even though the Chapter 13 Trustee requested him to turn over the inherited funds. Mr. Brown instead used the inheritance for his business and paid the inheritance to his brothers. Mr. Brown’s creditors suffered prejudice from the loss of the money.

Conversion of the Chapter 13 to Chapter 7

A case can be converted to Chapter 7 for cause, including the failure to make Chapter 13 Plan payments. In Mr. Brown’s case he did not pay the Chapter 13 Trustee the $3,224 of the inheritance he agreed to turn over in the pre-confirmation modification agreement he signed. Section 1307(c)(4) applies to debtors when Chapter 13 Plan payments commence and then the debtor pays less than what the Chapter 13 Plan on file requires. See: In re Mallory, 444 B.R. 553, 558 (S.D. Tex. 2011) (citing In re Jenkins, 2010 WL 56003, at *2 (Bankr. S.D. Tex. Jan. 5, 2010). Mr. Brown argued he did not turn over the $3,224 on advice of this counsel.

Lack of Good Faith

The Bankruptcy Court found two factors of lack of good faith by Mr. Brown: (1) that Mr. Brown misrepresented facts in his petition or plan, unfairly manipulated the Bankruptcy Code, or otherwise filed his petition or plan in an inequitable manner, and (2) there was a presence of egregious behavior. In response Mr. Brown argued he never misrepresented facts in this petition or plan and he disclosed the inheritance to the court. The Ninth Circuit Court of Appeals discussed two cases: (1) Marrama v. Citizens Bank of Mass., 549 U.S. 365, 368 (2007) and (2) In re Rosson, 545 F.3d at 771; Levesque v. Shapiro (In re Levesque), 473 B.R. 331, 336 (9th Cir. BAP 2012).

In Rosson the debtor communicated to the Bankruptcy Court that he was going to receive a large arbitration award to fund his Chapter 13 Plan. When Rosson received the award he did not turn over the funds to the Chapter 13 Trustee and the Bankruptcy Court found Rosson was rebelliously horsing around with bankruptcy estate assets and therefore converted the Chapter 13 case to Chapter 7. Rosson then tried to voluntarily dismiss his Chapter 13 case and the Bankruptcy Court denied the motion. The decision was affirmed upon appeal.

In Marrama the debtor filed a Chapter 7 bankruptcy case and allegedly misrepresented the value of a piece of real property in Maine and denied transferring the property into a trust for no value during the year prior to filing Chapter 13 to protect the property from his creditors. After the debtor admitted to the above improprieties he requested conversion to Chapter 13. His main creditor objected saying the conversion was in bad faith. In Marrama the debtor argued the information provided incorrectly about the Maine property were due to scrivener’s error and that now that he is employed he was eligible to proceed under Chapter 13. The Bankruptcy Court denied conversion to Chapter 13.

Mr. Brown on appeal tried to argue his facts are not like those in Rosson or Marrama. The 9th Circuit BAP was not convinced. They provide the following in support of a finding of bad faith:

– Mr. Brown’s failure to provide an accounting of the inheritance funds was bad faith;
– Mr. Brown’s explanation for disbursing the funds to his brothers, but found that his explanation did not justify his actions when the Chapter 13 Trustee had made demands on Debtor to place the funds in Trustee’s lockbox account or deposit the funds in his counsel’s client trust account;
– Evidence showed that Mr. Brown already had the proceeds from the sale of his father’s house at the time he filed his schedules but Mr. Brown disclosed that he anticipated receiving only $2,500 from the probate estate. There is no explanation in the record from Mr. Brown as to how he came up with the $2,500 number;
– Mr. Brown claimed his brothers were entitled to 75% of the inheritance but his brothers had filed waivers of their beneficial interests with the probate court.

Best Interest of Creditors

Another factor of consideration is the best interest of creditors when converting or dismissing a case. Mr. Brown argues that now that there are no inheritance funds to distribute to creditors the case should remain a Chapter 13 case and allow Mr. Brown to pay creditors via the Chapter 13 plan. The Bankruptcy Court correctly originally noted Mr. Brown’s income was not sufficient to fund a 100% Chapter 13 Plan and the inheritance was gone. On appeal the Ninth Circuit Bankruptcy Appellate Panel noted there was no court order allowing Mr. Brown to dispose of the inheritance. Under Section 348(f)(1)(A) Mr. Brown argues that the inheritance has been eliminated from the bankruptcy estate therefore making the Chapter 7 case a “no asset” case.

This is a strange argument given that if it were true, then any Chapter 13 debtor could file Chapter 13 after disposing property of the bankruptcy estate fraudulently, then convert to Chapter 7 and creditors would get nothing? Mr. Brown is making this argument in an attempt to remain in Chapter 13 and not face being sued for fraudulent transfer of the inheritance or have his brother’s potentially sued for the turnover of the inheritance funds their received by the Chapter 7 trustee upon conversion. That is the whole point in converting the case really. Chapter 13 Trustee’s traditionally do not seek to avoid fraudulent or preferential transfers of assets. The 9th Circuit Bankruptcy Appellate Panel provides Section 348(f)(1)(A) is not a “safe harbor” for debtors that fraudulently dispose of property of the bankruptcy estate while in Chapter 13. See: Wyss v. Fobber (In re Fobber), 256 B.R. 268, 279 (Bankr. E.D. Tenn. 2000).

Mr. Brown also argues that upon dismissal creditor would be free to collect against Mr. Brown from his potential assets. Mr. Brown is arguing creditors would be worse off with conversion to Chapter 7. More or less Mr. Brown wants to stay in Chapter 13 and try and pay his creditors via the Chapter 13 Plan 100%. The problem again is that Mr. Brown’s income is not sufficient to pay creditors 100% and Mr. Brown never actually filed a motion to modify his plan to pay creditors 100% of the allowed claims. The Ninth Circuit BAP noted there is no evidence that Mr. Brown’s creditors would receive any prompt payment if the Chapter 13 case was dismissed and held there was no error in Bankruptcy Court’s conversion to Chapter 7.

Absolute Right To Dismiss Chapter 13 Case

There kind of used to be an absolute right to dismiss a Chapter 13 case. Section 1307(b) provides: On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. There was a split in authority between different circuit courts whether this was an absolute right. In cases where there was improper conduct of the debtor some circuit courts held a debtor should not be able to dismiss the Chapter 13 case. In other circuits court held that Section 1307(b) does not provide for a good faith or bad faith component but says on request of the debtor at any time the court shall dismiss a case. The 9th Circuit BAP cites In re Rosson, 545 F.3d at 771, 774. The right to convert pursuant to Section 1307(b) is not absolute but a qualified right to prevent an abuse of the process pursuant to Bankruptcy Code Section 105(a). Section 105(a) provides: The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.

The bankruptcy court is after all a court of equity or fairness. So, it is not fair to creditor or the bankruptcy process to make misrepresentations in your schedules, mislead the bankruptcy court and trustee, or dispose of bankruptcy estate assets without permission of the court and then try and voluntarily dismiss your Chapter 13 case.

So What Took Place In The Chapter 7 Case After Conversion?

Well first of all, something that was not brought up in the appeal, Mr. Brown on September 9, 2014, filed an objection to the claim they mentioned in their argument to stay in the Chapter 13 case and pay creditors 100%. On October 27, 2014, Mr. Brown then filed an amended objection to the claim to correct a problem in the first objection to the claim. Mr. Brown was arguing that if this claim was not allowed then he could pay his creditors 100% and the case should not be converted. The objection is meaningless given the case was converted to Chapter 7 and Mr. Brown lost the appeal. The Chapter 7 trustee will now object to claims if there are grounds to object. I just thought it interesting that Mr. Brown in fact filed the objection to the claim.

On October 14, 2014, Santander filed a motion for relief from stay to request permission from the Bankruptcy Court to repossess Mr. Brown’s 2008 Dodge Caravan for his failure to make the monthly vehicle loan payments. This is a problem when a Chapter 13 case is converted the Chapter 7. In some Chapter 13 cases the monthly vehicle loan payment is paid through the Chapter 13 Plan. Some plans call for payments on the vehicle loan before a Chapter 13 Plan is approved by the court and then the Chapter 13 Trustee makes payments to the vehicle loan company. So in Mr. Brown’s case he either stopped making his vehicle loan payments or while his Chapter 13 case was pending for the last ten months Santander did not receive any payments from the Chapter 13 Plan. On November 5, 2014, the Bankruptcy Court granted the motion for relief from stay giving Santander permission to repossess their collateral, the 2008 Dodge Caravan.

On April 21, 2015, after conclusion of the Section 341 meeting of the creditors the Chapter 7 Trustee, Christopher Barclay, filed his notice of abandonment of property of the bankruptcy estate. One of the arguments on appeal by Mr. Brown was that in the Chapter 7 case there would be no assets to distribute to creditors and the Chapter 7 case would therefore be a “no asset” case so the case should remain in Chapter 13. The filing of the notice of abandonment of property of the estate kind of confirms there are no assets. The Chapter 7 Trustee did not abandon the bankruptcy estates claim against Mr. Brown for transferring the inheritance or Mr. Brown’s brothers that received the inheritance.

Chapter 7 Adversary Proceeding

On May 19, 2015, the Chapter 7 Trustee filed an adversary lawsuit against Mr. Brown and his three brothers for conversion and requesting punitive damages, objecting to Mr. Brown receiving a discharge and/or revocation of discharge pursuant to Sections 727(a)(2(A), 727(a)(2)(B), 727(a)(3), 727(a)(4), 727(a)(5) and 727(c). The adversary lawsuit also seeks avoidance of the post-petition transfer of the inheritance pursuant to Section 548 of the Bankruptcy Code. Adversary Case No. 15-90085-MM. As for timing, remember the appeal was filed on August 12, 2014, and the court entered the order converting the case to Chapter 7 on July 28, 2014. The Ninth Circuit Bankruptcy Appellate Panel entered their decision on October 26, 2015, affirming the bankruptcy’s conversion of the case to Chapter 7. Sometimes an adversary lawsuit will be stopped or stayed due to an appeal being filed. In this case the court held the adversary lawsuit should continue regardless of the appeal.

Motion to Dismiss Adversary Proceeding

On June 19, 2015, the three Brown brothers, Cutis, Kenneth and Christopher filed a motion to dismiss the adversary lawsuit against them alleging that the claims against them of the bankruptcy estate do not exist upon conversion to Chapter 7 pursuant to Section 348(f)(1)(A) of the Bankruptcy Code. Mostly the motion to dismiss alleges deficiencies in the timing of the adversary complaint and its causes of action.

Subsequent First Amended Adversary Complaint

On June 29, 2015, the Chapter 7 Trustee filed a first amended complaint and reply to the Brown Brother’s motion to dismiss the case. On July 27, 2015, the Brown Brother’s filed an answer to the first amended complaint filed against them. On August 4, 2014, the debtor, Jason Brown, filed an answer to the first amended complaint. Again, note the appeal was not decided until October 26, 2015.

So, as of right now the debtor, Jason Brown, and his three brother’s motion to dismiss the adversary complaint were denied by the court and the appeal failed to undo the conversion to Chapter 7. The Chapter 7 case will continue and so will the adversary lawsuit. The discovery deadline, the process of obtaining evidence, is January 21, 2016 and the next status conference hearing in the case is scheduled for January 16, 2016, at 10:00 a.m.

To Sum This Case Up So Far

Mr. Brown received over $50,000 in inheritance and had under $40,000 in general unsecured debts. As a result of choosing to not pay his unsecured creditors in full in the original Chapter 13 case or negotiate settlements with his creditors with lump sum cash payments from the inheritance outside of bankruptcy, Mr. Brown had to fight about the terms of his chapter 13 plan, litigated the conversion of this case to chapter 7 and lost, filed and lost an appeal regarding the conversion to Chapter 7 and is now having to litigate his alleged fraudulent transfer of the inheritance to his three brothers. Mr. Brown is also facing not receiving a discharge at all in the Chapter 7 case and more or less getting nothing from having filed bankruptcy to begin with. To really put the cherry on top the Chapter 7 Trustee is seeking punitive damages to punish Mr. Brown for his alleged misconduct via conversion. By my estimation Mr. Brown, not counting his three brother’s mounting legal fees, Mr. Brown may have incurred over $20,000 in attorneys’ fees and costs already and the adversary lawsuit is not over yet. At what point will the attorneys’ fees and costs exceed the original inheritance received by Mr. Brown?

Reaffirmation in Chapter 7 Bankruptcy

By

When you file for Chapter 7 bankruptcy, all your dischargeable unsecured debt will be discharged once the judge signs the Order of Discharge.  This means that your personal liabilities to repay those debts are discharged, and you are no longer obligated to pay those debts.  If you have a secured debt, however (i.e. houses, cars, etc.), then although your personal liability to repay that debt is discharged, you would need to continue paying on it to keep that property, otherwise the secured creditor could repossess or foreclose on that property.

One of the things that your secured creditors may want you to sign after you have filed a bankruptcy case is a reaffirmation agreement.  A reaffirmation agreement is basically a new contract between you and the creditor indicating that you promise to continue making payments on that debt.  Since it is a contract that you have signed after your bankruptcy case, any liabilities arising out of the default of the debt is not discharged in your bankruptcy case.  The most usual type of reaffirmation agreements pertain to vehicles.  If you default on the payments, the creditor can repossess your vehicle and go after you for any deficiencies.  If you do not sign a reaffirmation agreement and you default on the debt, then the creditor cannot go after you for any deficiencies, as your personal liability was discharged in the bankruptcy case. 

If you do decide to sign a reaffirmation agreement, it needs to be filed with the court.  There may be a hearing on the reaffirmation agreement if you are not represented by an attorney.  If you have signed a reaffirmation agreement and changed your mind, you can cancel the agreement within 60 days or until the discharge of your bankruptcy case, whichever is later.  Since the future is uncertain, it may not be a good idea to sign a reaffirmation agreement unless you are absolutely certain that your job is stable or you receive favorable terms in the reaffirmation agreement, such as decreased interest rate or reduced monthly payments.  Otherwise, if you sign a reaffirmation agreement, and then you lose your job in the future, or receive a pay cut and are unable to repay the debt, then you will lose your property still owe on the deficiencies on the property. 

There are other options other than signing a reaffirmation agreement in your Chapter 7 bankruptcy case, including: surrendering your vehicle, redeeming your vehicle, or retaining your vehicle and paying the secured debt.  If you surrender your vehicle, any deficiency will be discharged in your bankruptcy case. 

Redeeming your property is when you pay the fair market value for your property rather than what you actually owe.  This may be beneficial if the value of your vehicle is significantly less than what you owe.  The only issue with redeeming your vehicle is that you have to pay the full amount of the fair market value of your vehicle. 

The other option is to retain your vehicle and continue making payments on it.  Most creditors will continue to accept payment on your vehicle and they will not repossess your vehicle if you are current on the payments.  Then, if you are unable to make your vehicle payment, then your vehicle will be repossessed, but you will not owe any deficiencies because you did not sign a reaffirmation agreement.  However, one of the risks in this option is that some creditors that will repossess your car even if you are current on the vehicle if you do not sign a reaffirmation agreement. 

If you have any questions regarding which options to choose to retain your vehicle, please contact us at Fremont bankruptcy attorney or Hayward bankruptcy attorney at 877-9NEW-LIFE or 877-963-9543 today.