All posts in Chapter 7

Employment Law & BK — “Will Filing BK Affect My Chances of Getting Hired?”

Section 525 deals with protection of debtors against discrimination.  Section 525 is broken up into two main sections relating to two main standards:  one for governmental employers and one for private employers.   Let’s take a look…and note the big omission by Congress for private employers.

525(a) says a governmental unit may not:

  • Deny employment to
  • Terminate the employment of…
  • Discriminate re: employment against a person on basis of their bankruptcy filing.

525(b) says a private employer may not:

  • Terminate the employment of…
  • Discriminate re: employment against a person on basis of their bankruptcy filing.

Government cannot deny your employment because you filed bk but a private employer can!  This is also how rental companies can ask you “did you file bk in past” and deny your rental application.


Difference Between “False Pretense” and “False Representation” under 523(a)(2)

Section 523(a)(2)(A) excepts from discharge any debt for money obtained by false pretense, a false representation or actual fraud.   But how can you tell the difference?

False representation is an express representation.  “There are no leaks in the roof of my house.” 

False pretense is an implied representation or conduct intended to create a false impression.  “Whenever it rains, it is dry as a bone in this house.”


Can a Lawyer Give Advice to a Client to Incur Prepetition Debt?

Tip of the hat to Mr. Dennis McGoldrick who pointed me to Justice Sotomayor’s footnote 6 in during a wonderful class session.

Dennis McGoldrick

Thus, advice to refinance a mortgage or purchase a reliable car prior to filing because doing so will reduce the debtor’s interest rates or improve his ability to repay is not prohibited, as the promise of enhanced financial prospects, rather than the anticipated filing, is the impelling cause.  Advice to incur additional debt to buy groceries, pay medical bills, or make other purchases “reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor,” §523(a)(2)(C)(ii)(II), is similarly permissible.  Milavetz, Gallop & Milavetz, P. A. v. United States, 559 U.S. 229 (2010)

Pay off Taxes on a Credit Card Then File Bankruptcy To Wipe Out the Credit Card…will it work?

I paid my car registration fee on my credit card tonight and it got me thinking.   A lot of government sites allow you to pay their debts with a credit card.  Can you charge these on a credit card and then file bankruptcy to discharge the debt?  What about taxes?   Of course not.  Conceptually it makes sense but do you know the two Code sections that say this?  See below.

Read more…

What did you spend $140,000 on? “Wine, Women, and Song”

Section 727(a)(5) says you can be denied a discharge if you (debtor) cannot explain how you lost your assets.  One court in Connecticut denied a 70+ year old debtor a discharge when he said he spent $140,000 on “wine, women and song” and carried all that money in rolled up one hundred dollar bills.  The court said that is dubious.  Regardless, I would like to meet this gigolo!

Is Fraud under California Law the Same as Fraud under 523(a)(2)? Yes says Judge Maureen Tighe.

In Moussighi v. Talasazan (In re Talasazan), 1:16-ap-01119-MT (Bkrcy June 2018, C.A. Cal Tighe J.), Judge Tighe said,

Fraud under California law and § 523(a)(2)(A) are identical for purposes of collateral estoppel. In re Younie, 211 B.R. 367, 373 (B.A.P. 9th Cir. 1997), aff’d, 163 F.3d 609 (9th Cir. 1998); In re Jung Sup Lee, 335 B.R. 130, 136 (B.A.P. 9th Cir. 2005).

This came up in an argument I had with someone recently re res judicata.  I stated that a state court judgment that says ONLY “Plaintiff wins $1 million based on the fraud of defendant,” is res judicata in bankruptcy court whether entered by default or not.   I was told I was mistaken in no uncertain terms because fraud under California law is not the same as fraud under 523(a)(2).  Wrong!

By the way, the judgment example above IS res judicata as to the amount owed in any event – at least for claims purposes.  The typical state court judgment says “Plaintiff wins $1 million” (nothing else).  Collateral estoppel in that case as to fraud still MIGHT apply depending on whether it was actually litigated etc.  Underlying documents, rulings etc are needed.  But the judgment ITSELF is res judicata as to how much defendant/debtor owes the creditor.  That statement does NOT mean that if there was fraud, the damages for fraud are $1 million.  But it does mean debtor owes creditor $1 million (which is discharged unless 523(a) applies).

The Talasazan matter has an interesting twist.  The debtor moved for summary judgment on the grounds that fraud was litigated in state court and the ruling was in the debtor’s favor and therefore could not be relitigated.  The problem is that the state court judge did not say that.   Judge Tighe wrote:

“[W]hile fraud was pled, argued, and briefed after trial, the Third Amended Judgment does not include fraud in the list of causes of action on which Plaintiffs prevailed.

It appears that the Superior Court ruled in Plaintiffs’ favor on the negligent misrepresentation cause of action rather than fraud.

For purposes of collateral estoppel, as detailed below, the Superior Court’s silence with respect to the fraud action, in the context of undisputed evidence from both sides that the issue was fully litigated, was a ruling in favor of the Debtor and not the Plaintiffs.”

Why Non-Individuals Do Not Have To Turn Over Tax Returns Prior to 341

Read another great piece from Colliers and I reconcile with Rule 4003(b).   Corporation files bankruptcy, trustee requests tax returns 7 days prior….do you have to send it?   Well let’s see what the statute says…

Rule 4002 Duties of Debtor

(b) Individual Debtor’s Duty To Provide Documentation.

(3) Tax Return. At least 7 days before the first date set for the meeting of creditors under §341, the debtor shall provide to the trustee a copy of the debtor’s federal income tax return for the most recent tax year ending immediately before the commencement of the case….

The statute is pretty clear to me in the title of that section — Individual Debtor’s Only.

UPDATE:  Yes, section 521(e)(2) says “debtor shall turnover tax returns” but 521(e)(1) has the word “individual” and under some statutory interpretation or canon I would argue that since (e)(1) comes before (e)(2) that Congress implied  “individual” in (e)(2)  but I know it’s a far stretch.  Thanks Michael Avanesian, I enjoy our stimulating conversations.

FRBP versus the Code — both are federal statutes with conflicting language– who wins?  (turning to 2L conlaw outline).

Scope of Examination for 341 with Trustee

My morning ritual involves reading Colliers while enjoying my homegrown coffee beans that I roast myself  (coffee snob?  absolutely!).  I stumbled across this great piece of information from Collier’s re: scope of 341 examination with the trustee.  I particularly enjoyed reading the legislative history of what the trustee can/cannot ask.  Turns out the 341 examination is not a carte blanche, ask anything you want type of meeting.  Nay!

If you represent debtors and attend 341(a) meeting of creditors then you should read the below….

Read more…

Dower and Curtesy? Sounds like a restaurant on Melrose

I had no idea what a dower and curtsy are.  Where did I find these words?  In Section 363 sale/use/lease of property.   Section 363(g) says the trustee may sell property free and clear of any right in nature of a dower or curtesy.    ::::go to

A dower or curtesy is a surviving spouse’s right to receive a set portion of the deceased spouse’s estate (1/2 in California).  Dower (not dowry) refers to the portion to which a surviving wife is entitled, while curtesy refers to what a man may claim.  However, because discrimination on the basis of sex is now illegal in most cases, most states have abolished dower and curtesy and generally provide the same benefits regardless of sex — and this amount is often known simply as the statutory share.

Learn something new everyday.

Public Counsel Reaffirmation Clinic – June 28, 2018

Email from Christian Cooper,

Did you know that bankruptcy filers with auto loans can not only keep their cars, but may be able to lower their payments substantially? Learn how at Public Counsel’s “Reaffirmation and Redemption in Chapter 7 Bankruptcy” MCLE program next Thursday in Downtown L.A. There is no cost to attend, and lunch is provided.

More info:

No automatic alt text available.