Legal Articles, Credit & Debt

Bankruptcy courts are special courts. They are neither Article III courts (Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982)) nor their adjuncts (Stern v. Marshall, 564 U.S. 462 (2011)), but nonetheless have inherent powers (Law v. Siegel, 134 S. Ct. 1188, 1194, 571 U.S. __ (2014)) and—pursuant to 11 U.S.C. § 105—certain equitable powers. This means that they have broad powers to order equitable remedies—such as specific performance—where no adequate remedy at law exists, to the extent not inconsistent with any other provisions of the Bankruptcy Code. See Law v. Siegel, 134 S. Ct. at 1194, 571 U.S. at __. This is the backdrop against which inequitable conduct by a creditor may lead to subordination of its claim in a bankruptcy proceeding under established, codified, equitable principles. Subordination means that a claim, by judicial decree, is lowered, in whole or part, in priority relative to its ordinary position in respect of one or more other claims.

This article discusses Minnesota law relating to the removal (“discharge”) of judgments following a judgment debtor’s bankruptcy.

Done properly, chapter 13 provides certain above-median wage earners—and others with special considerations, often relating to a mortgage—with debt relief.

The Internal Revenue Code ("I.R.C." or the "Code") broadly defines gross income as "all income from whatever source derived, including . . . [i]ncome from discharge of indebtedness" I.R.C. § 61(a)(12). Although the I.R.C. does not define "discharge," this has long been understood to include the taxpayer's release from a monetary obligation such as debt forgiveness or by way of a discharge in a bankruptcy case.

Many debtors—and a few attorneys—are unaware that the Bankruptcy Code provides a way for debtors in a chapter 7 case to "redeem tangible personal property intended primarily for personal, family, or household use, from a lien securing a dischargeable consumer debt, if such property is exempted [by the debtor] . . . or has been abandoned . . . [by the trustee], by paying the holder of such lien the amount of the allowed secured claim of such holder that is secured by such lien in full at the time of redemption." 11 U.S.C. § 722. There is quite a bit to unpack here, but at bottom, almost any non-commercial physical personal property subject to a security interest can be exempted and redeemed in a chapter 7 case.

Debtors are often pleasantly surprised to learn that, in Minnesota, roommates generally count toward their household size for purposes of the means test, permitting certain debtors who would otherwise fail the means test, and thus not qualify for a chapter 7 case (permitting almost immediate discharge of all debts, not otherwise dischargeable, without any repayment required, as with a chapter 13 case), to qualify.

Bankruptcy counsel frequently field questions from debtors who’ve previously filed bankruptcy. Sometimes this involves a prior case completed years ago, but more often it involves a debtor who has filed a recent case that was dismissed—often in connection with a chapter 13 case by reason of failure to confirm a plan or to make plan payments.

Choosing the right attorney for your chapter 7 or chapter 13 case can ultimately save you money, even by comparison to filing pro se (without counsel). In many cases, this means selecting the right chapter under which to file your case. There are certain advantages uniquely associated with chapter 7 or chapter 13 (the most common) proceedings.

The Equifax Data Breach impacts roughly 143 million people. Lear more about your rights under the Fair Credit Reporting Act!

Student loans are difficult but not impossible to discharge in bankruptcy. While courts are reluctant to discharge student debt a student burdened by his student loan has options. For more information on this subject contact the law office of Mitchell Reed Sussman & Associates at 800 - 233 - 8521