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Debts declared nondischargeable in future bankruptcy

On Behalf of | Dec 23, 2016 | Bankruptcy

When Virginia debtors file petitions for Chapter 13 bankruptcy, it is important for them to understand that they must get permission to engage in any financial transactions from the U.S. bankruptcy trustee. They must also report all additional income that they receive to the trustee for inclusion in their bankruptcy estate.

A Kansas case demonstrates what can happen if people try to skirt the bankruptcy rules. In the case, a woman who had filed multiple bankruptcy cases beginning in 2002 filed a Chapter 13 petition in 2013. Thereafter, she sued her employer without getting permission to do so from the trustee. The employer settled with the woman for $25,000, and she failed to report it. She then spent the money, and when the trustee found out, the trustee objected to her repayment plan.

The woman responded by filing a motion to dismiss her bankruptcy petition and stated that she intended to refile a new one. The court ruled that while it could not prevent her from dismissing her case, it could instead order that none of the debts that were included in the dismissed filing could be discharged in a future bankruptcy case.

Chapter 13 bankruptcy may allow debtors to reorganize debt into an affordable repayment plan. It is important for them to make certain that they are completely honest about their income and pending lawsuits with the trustee. If they are not honest and try to hide transactions, lawsuits or additional money from the trustee, they may face multiple penalties. Attorneys who have experience in this practice area will likely point this out when the repayment plan is being prepared.