BK 7 Denied, How to Settle On Default Judgment

[Konallc]

We were recently denied discharge of our Chap. 7 (long story). Anyway, prior to filing BK, per our attorney's advice, we let our HOA dues end up as a default judgment. Now the HOA attorney has threatened wage garnishment if we don't pay or make payment arrangements.

My question is: if I make payment arrangements and later have the funds to settle, will the payment arrangements give us less leverage to settle for lesser amount at a later date?

Can anyone recommend some good read on debt settlement techniques? We have over $700k to settle over the next few years. One is actually close to $200k on a HELOC that was on a foreclosed home. Could really use some help and suggestions. Thanks!

[HHM]

one point of clarification...was your BK discharge "denied" or was your case "dismissed". There is a significant difference. If the discharge was "denied" that means they found some sort of BK fraud and now all your debts can never be discharged.

Maybe you should get a real attorney and retry the BK. Assuming best case settlement scenario, can you even come up with $175,000 of lump sum cash to settle out all $700K. And then potentially pay income tax on 525,000.

As for the HOA, you are sort of up crap creek. It's hard to settle with HOA's. Best case, you can settle for the amount of the base HOA dues allowing the HOA board to write off the interest, late fees, and collection fees, but even then it is tough because of their super priority lien rights.

[Konallc]

one point of clarification...was your BK discharge "denied" or was your case "dismissed". There is a significant difference. If the discharge was "denied" that means they found some sort of BK fraud and now all your debts can never be discharged.

Maybe you should get a real attorney and retry the BK. Assuming best case settlement scenario, can you even come up with $175,000 of lump sum cash to settle out all $700K. And then potentially pay income tax on 525,000.

.

Thanks for the reply. We were denied discharge, our debts can never be discharged...that is correct. Can an attorney negotiate settlement where we would not have to pay income tax on $525k? Have you seen that happen often?

[HHM]

Nope. Any amount of a debt that is forgiven (i.e. not paid as a result of settlement) is treated as income tax by the IRS, unless you are insolvent at the time of settlement.

The fact that you were denied discharge is pretty screwed up, sorry to say. You are in mostly uncharted territory. The only leverage you have is that cash now is better than constant collection and cash over time, but again, if the debt can never be discharged, you are essentially climbing mount everest blind fold without a rope.

[frogger]

Your creditors have no need to "settle" with you now. Anyone that was listed in your bk filing has received a copy of the denial or has seen it on pacer. Since your debts can never be discharged, the best you can probably hope for is to either start paying or start hiding until the statute of limitations run out.

Not a good situation any way you look at it......

[corrin69]

And then potentially pay income tax on 525,000.

This is scary. HHM, Are there any income tax implications from what gets discharged in a bankruptcy matter?

[MSbklawyer]

Konallc, WHY was your discharge denied? There are some exceptions to the discharged denied = never dischargeable rule.

[despritfreya]

@MSbklawyer:

Read OP's posting history. Denied discharge under 727

Des.

[frogger]

http://www.americanbar.org/content/newsletter/publications/gp_solo_magazine_home/gp_solo_magazine_index/debts.html

Section 727 is designed to protect the integrity of the process. The types of actions that would result in a §727 denial of discharge are lying on the bankruptcy schedules, hiding assets, failing to maintain financial records, refusing to turn over records, and refusing to cooperate with the trustee in the administration of the estate. BRA imposes additional duties on attorneys for debtors. If the schedules are not accurate and the attorney did not conduct a reasonable inquiry, the attorney may be sanctioned and may have to pay the trustee’s attorney fees and a civil penalty. Be very careful.

A denial of discharge under §727 denies the entire discharge. It is as if the bankruptcy was never filed and the debtor is still liable for all debts. Actually, it’s even worse: The assets of the debtor are still administered by the bankruptcy trustee, and the debtor will lose non-exempt property for the payment of creditor claims. After all of the non-exempt assets are liquidated and the creditors are paid, any remaining unpaid claims are still the legal obligation of the debtor. Creditors may pursue their state law remedies to collect those unpaid claims. Loss of a §727 discharge has been described as “bankruptcy hell.” All debts pass through the process unaffected, and the trustee still controls all of the assets; they cannot be used by the debtor to pay for a defense or to settle claims.

[disconapper]

So based on this, denied discharge under 727 is the worst case scenario? I'm not worried about it in the slightest, just trying to get all the terms down.

[catleg]

Head for the border. Find another country to live in.

[jwmc1]

Wow, was there a detailed reason provided? I don't understand what appened here. What can you do?