Dischargeable Debts

When someone gets a formal discharge from the bankruptcy court, s/he no longer owes anything on all debts discharged. Some debts do not get discharged in a bankruptcy.

Non-Dischargeable Debt

Debts that are never dischargeable include:

• Fines, Restitution and Penalties:  Government imposed money punishments cannot be discharged in a bankruptcy. Examples:  (1) Fines for agency regulation violations, (2) Restitution ordered to be paid to crime victims in federal cases, (3) Fines for misdemeanors and felonies, (4) Charges for time spent in jail.
• DUI Debt:  Debts resulting from personal injury claims because of drunk driving are not dischargeable. This does not apply to property damages caused by an intoxicated driver.

Bankruptcy Fraud

In bankruptcy, the debtor needs to be careful not to commit any fraud, and reveal all debts, no matter how embarrassing.  If a debtor commits fraud, the debt will not be discharged. The creditor must prove the debt was created by a dishonest act, with intent to deceive, and had the debtor been honest, the debt would not have been created. The creditor relied on the false statement and the reliance was reasonable. Examples:  (1) False statement of financial standing; (2) Written statement in a credit application important enough for the creditor to extend credit.

Not being truthful in disclosing debts and assets in bankruptcy is a crime.  In California criminal cases, Proposition 8 is a Victims’ Bill of Rights and part of California Constitution.  All relevant evidence is admissible except for certain exclusionary rules such as exclusionary rules based on the US Constitution, privileges, and hearsay.

When a trustee suspects fraud, there can be a civil case against a debtor.  In the case, evidence is logically relevant if it has any tendency to make any fact of consequence more or less probable than it would be without the evidence.  In California, the fact must be in dispute.  Logically relevant evidence may be excluded if its probative value is outweighed by its prejudicial effect.

During the civil litigation, witnesses may be asked to testify against the debtor.  Witnesses must be competent and have personal knowledge. A witness may be impeached either by cross-examination or by other witnesses on the stand who introduce facts discrediting a witness’ testimony. If the debtor makes any admissions like statements in a bankruptcy petition, California allows evidence of a statement when offered against the declarant in an action to which he is a party.

Rinne Legal helps people with bankruptcies and loan modifications in Contra Costa County, Sacramento County and Solano County. We have offices in Walnut Creek, Fairfield, Sacramento and Elk Grove. Contact Rinne Legal for a free consultation.  Follow Rinne Legal on Twitter @RinneLegal.  These blog posts are for informational purposes only and not intended nor should be construed as legal advice.  These blog posts may be considered attorney advertising in some states. Prior results described on blog posts do not guarantee similar outcomes in future cases or transactions.