Author Archives: Ryan C. Wood

About Ryan C. Wood

Ryan C. Wood is a California attorney practicing primarily in the areas of Bankruptcy Law, Business Law and generally seeking justice for under represented clients in the Bay Area.

Revesting of Property of the Estate Upon Confirmation of the Chapter 13 Plan and the Automatic Stay

By Ryan C. Wood, Attorney at Law

From time to time a great subject comes up while you are sitting at hearing waiting for your case to be called.  Today was one of those days.  Almost every jurisdiction uses a model chapter 13 plan.  There are a few holdouts like the Santa Rosa Division of the United States Bankruptcy for the Northern District of California.  Usually one of the normal plan provisions is that the debtor elects to have the property of the bankruptcy estate revest in the person who files bankruptcy, the debtor, at the time the chapter 13 plan is confirmed.  Right, why not?  The Chapter 13 Trustee does not want the liability of the property continuing to be in bankruptcy estate.  The debtor should have the right to sell or refinance real and personal property after the chapter 13 plan is confirmed.  It is their property.

What Happens When a Debtor Incurs a Post-Petition Debt Though

Well, the property that revested back to the debtor is now available to a creditor, say the Internal Revenue Service, to try and collect on taxes incurred after the petition for bankruptcy protection was filed.  Why, because there is now no automatic stay as to the property that revests in the debtor.  A recent case in the Ninth Circuit did not help this issue any.  It helped to clarify that the Internal Revenue Service could seek payment of unpaid taxes incurred post-petition.  What happens to the confirmed chapter 13 plan then?  The post-petition collection by the IRS may negatively affect the confirmed chapter 13 plan and possibly make the confirmed plan no longer possible.  This also means a mortgage holder on a home does not have to seek relief from the automatic stay to foreclose on a home once the chapter 13 plan is confirmed too.  If a debtor misses payments after the chapter 13 plan is confirmed the mortgage company technically does not have to obtain the bankruptcy court’s permission to foreclose on the house and enforce their lien.

So What Can Be Done to Protect Those Who File Chapter 13 Bankruptcy?

There are debtors’ attorneys trying to insert language into chapter 13 plans to enjoin all creditors from being able to collect on post-petition debts without the bankruptcy court’s permission.  The issues are whether injunctive relief can be provided for in a chapter 13 plan?  If so, how does the balance of benefit and hardships play out to the debtor and creditor involved?  Is the injunctive relief reasonable based upon the timing involved to seek bankruptcy court permission?  How many days of notice must be given for a hearing?  Or must the creditor only provide the debtor with notice and the right to request a hearing?  Does the bankruptcy code even provide for this type of relief?  These questions will be answered in the next couple of months.  It is doubtful that every judge will allow a provision such as this.  A good place to start is Section 1322(b)(11) and FRBP 7001(7).

For more information about the bankruptcy process contact our Redwood City bankruptcy attorney or San Jose bankruptcy lawyer to schedule a free consultation.  You may reach us toll free at 1-877-963-9543.

 

What Happens if You Have Gambling Debts Prior to Filing Bankruptcy?

By Ryan C. Wood

Whether you suffered a huge loss because you have a gambling addiction, or just had bad luck in the casinos that one time you now owe the casino money from a marker received.  The question is: what happens if you are unable to pay the casinos back?  Can you file for bankruptcy to have the debt discharged?  The answer is of course it depends and timing and circumstance are everything.  In a perfect world you will not have to deal with such a thing, but of course nothing is perfect.  This is especially true when talking about gambling.

Credit card used to pay for gambling debt

If credit cards were used to pay for the gambling debt, especially with online gambling sites, then the question of whether that debt is dischargeable in bankruptcy depends on the totality of circumstances.  The bankruptcy court can deny a discharge if they believe that filing the bankruptcy was an abuse of the bankruptcy process based on bad faith.  This is pretty rare in reality.  A discharge can also be denied if a creditor or party-in-interest files an adversary complaint alleging fraud was involved in incurring the debt.  At that time that you used the credit card to pay for the gambling, did you have the intention of paying it back?  Were you going to pocket the winnings, but try to discharge any losses incurred?  There are a lot of factors to look at in determining whether the bankruptcy filing was an abuse of the bankruptcy process.  The bankruptcy trustee will be bringing an action against the bankruptcy filer if they believe there was an abuse of the process.  The credit card lender can file a non-dischargeability action against the bankruptcy filer if they believe that there was fraudulent activity in obtaining the credit to gamble on the credit card.  If you pass the bad faith and fraud test, then the gambling debt should be dischargeable in bankruptcy.

Casino markers/counter checks/post-dated checks

If you are gambling in Las Vegas and a casino issues you a marker, counter check, or if you are signing a post-dated check, what normally happens is the casino would give you credit for a certain dollar amount on the marker.  The casinos will claim that you are promising to repay the amount at a later date and at the time that you sign the marker, counter check, or post-dated check, you are representing to the casino that you have the amount in your bank account.  If you win the money, hopefully you pay them back and they rip up the marker, and you get to keep whatever the remaining winnings are.  However, if you lose the money, a casino will still expect you to pay the amount that you received credit for.  If you do not have the funds in your bank account, then the casinos could turn the case over to the District Attorney’s office, where they could prosecute you not paying back the marker, counter check or post-dated chdeck.  If you do not respond, or if you are not from the Las Vegas area, there could be a felony warrant issued for your arrest.  This would be a criminal prosecution, and not a civil matter that could be dischargeable in bankruptcy. Bankruptcy proceedings would not be able to stop criminal actions against you or discharge potential resulting restitution upon conviction.  Thus, even if you file for bankruptcy, it may wipe out the debts that you have, but the district attorney’s office can still criminally prosecute you.  In addition, if you file for bankruptcy, a casino, at their discretion, can pursue a non-dischargeability action under 11 U.S.C. §523(a)(2) or 11 U.S.C. §523(a)(4).  If they win, and have the gambling debt deemed non-dischargeable, then you would still continue to owe the money even after you receive a discharge of your other debts.

The best you can do is seek to file bankruptcy prior to the filing of criminal charges or referral to the district attorney’s office for prosecution.  If you qualify you will receive a discharge and hopefully life goes on.  It also may be in your best interest to file a Chapter 13 case even if you qualify to file for Chapter 7 and pay something back to your creditors.  The casinos and your other creditors then file proof of claims in the Chapter 13 to prove what they are owed and get what they get via the Chapter 13 plan or reorganization and do not refer you for criminal prosecution.  Beautiful.  Life goes on.

Furthermore, Indian casinos are not subject to the Fair Debt Collection Practices Act (FDCPA).  Indian tribes have sovereign immunity, so you cannot sue them under the FDCPA even if they are calling and harassing you.

If you have gambling debts you need an experienced bankruptcy attorney to help you.  Some attorneys will just say they are not dischargeable without discussing with you the details to make a real determination.  There are all kinds of gamboling debts and how they were incurred and when matter.  While no one really wants to file for bankruptcy protection it can make all of your debt problems go away forever by federal court order.  A beautiful thing.  The best bankruptcy attorneys will usually provide a free consultation to confirm how bankruptcy can help and how much work and fees your case warrants.  You can spend thousands and thousands of dollars treating the cancer; or you can choose to file bankruptcy and cure  the cancer forever by law and receive a federal court order discharging your debts.