Readers of Bankruptcy Soapbox vote for their favorite bits of bankruptcy and money advice with their eyeballs.

I’ve tallied the eyeballs on the 48 posts written in 2018, and, cue the fanfare, present the top 10 most-read new posts for 2018.

And in fact, this advice will stand you in good stead in 2019.

10  What really causes bankruptcy

The pundit’s proposition that irresponsibility was the cause of bankruptcy made me furious.  Four decades of bankruptcy practice suggests that the root causes of bankruptcy relief have much more to do with laudable human activities and unavoidable bad luck.  See if you agree.

9  Chapter 13 discharges HOA debts

Thirteen years after the miserably written bankruptcy reform act became law, the 9th Circuit Court of Appeals made one thing clear:  the discharge in a Chapter 13 case wipes out the debtor’s personal liability for HOA dues that arose after the filing of the case.

8  What the automatic stay doesn’t stop

Filing bankruptcy automatically makes the continuation of most collection actions unlawful.  That’s the power of bankruptcy.  But that power has its limits.  These five kinds of legal actions can proceed despite a bankruptcy filing.

7  Are you screwed if you omit a creditor from your bankruptcy

What happens if you accidentally leave a creditor out of the list of creditors filed in your bankruptcy case?  Having screwed up, can you recover?  We look at when you can fix the mistake and whether that fix really solves the problem.

6  True story of a family who settled their debt for 3 cents on the dollar

My client, with a fine income, a home, and a working spouse, escaped $370,000 in credit card debt for pennies.  The power of Chapter 13 is that you keep your assets and pay only what your income or your assets allow.  Protection while you pay and no tax when debt is discharged.  Sweet.

5  What is life REALLY like after bankruptcy?

Creditors and the debt-settlement companies want you to think that life as you know it ends if you seek relief in bankruptcy.  Tain’t so.  Here is a clear-eyed look at seven ways that your economic life changes after your discharge.  None are negative.

4   IRS caught double-dipping

The Affordable Care Act imposed a penalty for not having health insurance, collected by the IRS.  I caught the IRS trying to collect that penalty twice: once as a part of my client’s tax debt for the year, and again as a separate tax on the IRS proof of claim.  Challenged, the IRS reduced its demand.

3  New law gives heirs and divorced people equal mortgage rights

Homeowners who got title through inheritance or a divorce decree have historically been treated as outsiders by mortgage servicers.  If the present owner wasn’t also the sole borrower on the secured loan, mortgage modification and even monthly statements were denied.  No more under new federal law.

2  The Motley Fool offers truly foolish advice on filing bankruptcy

In which I go off on a national financial service focusing on all the wrong things when looking at bankruptcy as an option for financial woes.  The question of whether to file bankruptcy has no simple or universal answer, and is NOT, in my view, driven by its effect on your credit score.

1  CFPB rule gives all bankruptcy filers a right to monthly mortgage statements

Mortgage servicers can no longer hide behind bankruptcy law to justify withholding monthly mortgage statements to a borrower who wants to pay the home loan.  Federal law now requires monthly statements, and protects servicer from a claim that it violates the law by doing so.  Score one for homeowners!

Next time, I’ll assemble my personal favorites from this year’s batch of posts.

Have a happy and prosperous New Year.

The bankruptcy discharge is the goal of bankruptcy.

Having been through the financial wringer and having been proactive to get out from under old bills,  debtors hope for a tranquil and prosperous life after bankruptcy.

Then, life intervenes.

• A debt buyer calls demanding payment
• Discharged debt remains on the credit report
• The IRS levies your bank account
• Your wheels are repossessed
• Foreclosure threatens a deficiency judgment

So, just what behavior on the part of your creditors, or former creditors, violates the bankruptcy judge’s order that your debts are discharged?

What was discharged

We’ve got to start with the question of what was really discharged.

Not all creditors get discharged in bankruptcy.

Further,  the discharge wipes out your personal liability, but not necessarily creditor liens on your assets.

And the discharge order itself is useless in telling what was discharged.

So, here’s what your former creditors can and can’t do once you get your discharge.

Bankruptcy discharge no-no’s

Zombie debt back from the dead

In a world where disappointed creditors sell their uncollectable debt to debt buyers, debt wiped out in bankruptcy is often included in the sale.

But all too often, the debt buyer gets nothing that tells him about the bankruptcy discharge.

Thankfully, the debt buyer gets no better rights than the seller had.  If it was discharged when the seller owned it, it remains discharged in the hands of the buyer.

And while innocent efforts to collect discharged debt are still prohibited, you won’t get much relief from a bankruptcy judge unless the debt buyer is told the debt is discharged and then persists.

Then, you have a suit for sanctions.

Liens after bankruptcy

Unless the bankruptcy judge voids a lien, a secured creditor’s interest in your pre bankruptcy assets survives the discharge.

The tricky thing is that, after bankruptcy, the creditor can only enforce its claim to the asset.  It can’t get a judgment against you for any shortfall.

And, its letters and lawsuits in connection with enforcing its lien rights can’t threaten a judgment against you, or claim that you are liable for its attorneys fees or other collection costs.

Many discharge violation suits are successful against secured lenders because lenders are careless about what their form letters say about their rights and your obligations.

Debt you reaffirmed

Car lenders got special, advantageous treatment in the 2005 bankruptcy “reform” act.

After bankruptcy, it is no longer enough to keep paying on your car loan.  Just the bankruptcy discharge itself is a default of the loan terms.  Gotcha!

So, to make doubly certain that the car lender doesn’t pick up the car because of your discharge, debtors reaffirm the debt.  The car is then safe from repossession.

But fall behind on the reaffirmed debt, and it’s as if you’d never filed bankruptcy as to this debt.  The lender can, lawfully, repo the car and sue you for the difference.

Community property gets a discharge

Debtors in community property states get an extra measure of protection from the bankruptcy discharge.  Even when only one spouse gets a discharge, all of the community property is forever protected from the discharged community debts.

Can’t tell you how often creditors violate the community property discharge.  But they do, it’s wrong, and it can be expensive to the bungling creditor.  One of my clients effectively got a $400,000 benefit from a creditor’s violation of §524.

Mortgage servicing screwups

In a rare gift to consumers, the 2005 bankruptcy amendments made it a violation of the discharge for a mortgage servicer to fail to properly credit payments made on a home loan during a Chapter 13.

(i) The willful failure of a creditor to credit payments received under a plan confirmed under this title, unless the order confirming the plan is revoked, the plan is in default, or the creditor has not received payments required to be made under the plan in the manner required by the plan (including crediting the amounts required under the plan), shall constitute a violation of an injunction under subsection (a)(2) if the act of the creditor to collect and failure to credit payments in the manner required by the plan caused material injury to the debtor.  § 524(i)

This remedy is limited to payments “received under a plan”…. so we’re talking about Chapter 11, 12, or most likely Chapter 13.

Another reason I love Chapter 13.

What doesn’t violate the discharge

Credit reporting errors

Most bankruptcy courts have held that failures to properly report discharged debt to credit reporting agencies doesn’t constitute a violation of the discharge injunction.

It might well violate the Fair Credit Reporting Act, but absent facts showing improper reporting intended to collect a discharged debt, it’s not a favored complaint in bankruptcy court.

Failure to foreclose

Underwater property or junker cars are the bane of debtor’s existence.  And despite the necessity to file a notice of intentions concerning assets securing debt, checking the surrender box on the bankruptcy form doesn’t make the property someone else’s.

Secured creditors can sit on their hands, and their rights, apparently unchecked, under our law, and the collateral continues to belong to the debtor after bankruptcy.

Collection against guarantors

The discharge is unique to the person who filed bankruptcy.  You may discharge your personal liability on a debt, but if someone else is also liable on the debt, that liability lives on despite your bankruptcy discharge.

Protecting cosignors with Chapter 13

Collection of debts not discharged

And, of course, if the debt wasn’t discharged in the bankruptcy case, it remains collectible after the case is over.

The automatic stay may temporarily prevent collection, but once the stay is dissolved, by the debtor’s discharge or the closing of the case, a creditor whose claim survives is free to collect according to state law.

Stand up for your rights

Get full measure from your bankruptcy discharge.  If you think that creditors are violating your discharge, get legal help.

Too many debtors endure discharge violations without fighting back.

More

How to enforce your discharge

Found a mistake in your credit report after bankruptcy?

Happens all too frequently.

But a major credit reporting agency is flat wrong on its advice on how to debts discharged in bankruptcy reported properly.

The cynical side of me is not surprised.

They get so little else right, why do I expect them to write truthfully about bankruptcy and credit reporting?

Credit report after bankruptcy

The “Experian Team”  answered a question from a reader asking how to get a bankruptcy discharge shown in a credit report.

The “team”  correctly said that a credit report should show that a debt was discharged in bankruptcy.  They were correct to say the consumer needed to challenge the incomplete information and provide the correct information.

But, their solution to a credit reporting problem was laughably off base.

Here’s what they said about getting a credit report to show that debts are discharged:

Your bankruptcy records should include a schedule “A” that lists all of the debts included in the bankruptcy filing. Simply send to the address on your report a copy of the schedule “A” and a copy of documentation that the bankruptcy has been discharged, along with a statement explaining that the bankruptcy information should be updated. If necessary, the court also will be contacted and asked to verify the information in your dispute.

Two things are glaringly wrong with this advice.

One, Schedule A is not a list of all the debts included in the bankruptcy.  It’s a schedule of real property assets, not liabilities.

Second, not every debt listed in the bankruptcy case is discharged.

We can pretend that Experian is really going to attempt to verify the challenged information.  (Studies say they don’t).

But a bankruptcy court is highly unlikely to verify the disputed information.  The bankruptcy documents are found online on PACER. No court clerk is going to tell a CRA what debts were discharged.

So, let’s hope the Experian Team gets some higher round draft picks next time around.  These team members are woefully inadequate.

Where to find discharge information

The answer about debts “included in bankruptcy” is found in two places in the bankruptcy schedules.  One place is schedules D, E, and F , which list secured debts, priority debts, and general unsecured debts like credit cards.

The second source of creditors affected by the bankruptcy is the mailing matrix or master address list.  It’s online on the court’s electronic docket as well.

The tricky thing about all of this is that not all debts listed in the bankruptcy case are necessarily discharged.

Some debts, like child support, recent taxes, and student loans, simply aren’t dischargeable.

But for most folks, trying to get their credit report to be accurate, it’s the general unsecured debts that are reported by the CRA, and often reported incorrectly.

So, don’t send schedule A with your credit report dispute.  Send schedules D, E, and F along with a copy of your discharge.

Stay on top of it until the credit report is right.

More

What was discharged in my case

Does bankruptcy fatally damage my credit?

Life after bankruptcy