Car Accidents and Bankruptcy, Part III

The last situation to discuss regarding the dischargeability of debts related to auto accidents is the situation in which the debtor's conduct was considered to be "willful and malicious".

"Willful" denotes the idea that the act was done with motive, on purpose. It could involve a level of premeditation or planning by the actor. The act must be more than merely negligent to be willful. There must be a clear intention to cause harm.

"Malicious" is defined by Merriam-Webster as, "having or showing a desire to cause harm to another person; having or showing malice." Once again, someone can act willfully or intentionally, but if there was no intent to do harm, the standard of "willful and malicious" is not met.

It should be pointed out, this standard of willful and malicious conduct will rarely be applicable to auto accidents. Most auto accidents involve either driving under the influence or negligence. Auto accidents are rarely "willful and malicious", though the possibility exists. For instance, an individual could intend to injure a victim with a car by ramming their car or chasing and hitting them.

The willful and malicious standard will more commonly apply to situations where a judgment has been entered in a civil lawsuit for physical assault. But, as discussed above, it could apply to an auto accident in rare instances.

There is an important distinction in Chapter 7 bankruptcy between intoxication damages and willful and malicious damages. As discussed in an earlier post, property damage resulting from intoxication may be discharged in a Chapter 7; however, property damage resulting from a willful and malicious act is NOT dischargeable in Chapter 7. It will be important to discuss this distinction with your attorney. -See 11 USC Sec. 523(a)(6)

There are a couple slight distinctions to the willful and malicious standard in Chapter 13 bankruptcy. In Chapter 13, the act need be only willful OR malicious to be non-dischargeable. Therefore, the act only needs to be intentional or done with malice. It will be a very slight distinction in almost every case. However, there is a major distinction between Chapter 13 and Chapter 7 related to property damages. Property damages caused by willful OR malicious acts can be discharged in Chapter 13, whereas they cannot be discharged in Chapter 7.

In my next post, I will summarize the last three posts, as it becomes quite complicated what can be discharged in Chapter 7 and Chapter 13 when dealing with auto accidents.

Credit Card Lawsuits, Part IV.5: The Hearing Date

A quick interlude about your credit card lawsuit hearing date...

When you are served with a complaint by the sheriff, it will show a hearing date, usually on the cover sheet. This date often becomes a point of obsession for clients, and understandably so. It's not a routine experience to be served a complaint by a sheriff, and it is terrifying to think about missing a hearing date.

However, this hearing date is only important if you intend to formally respond to the complaint. I discussed these responses in an earlier post. It will require a formal answer to the complaint, exerting a valid legal defense (statute of limitation, for instance), and filed in the proper court using its forms and practices. If you make this full answer, the hearing will go on as scheduled and you will need to attend.

If you do NOT file a full, formal response, a default judgment will be entered against you around 30 days after you have been served by the sheriff, and the hearing listed on the complaint will be cancelled. The hearing date can be safely ignored, because no hearing will be held. The sheriff will not come looking for you, and you will not be held in contempt.

This is also true if you are filing a bankruptcy or negotiating a settlement through a lawyer. The bankruptcy automatic stay will automatically stop the credit card lawsuit from proceeding. Once again, there will be no lawsuit hearing to attend. If your attorney is actively negotiating with the creditor's law firm, they will routinely agree to hold off on proceeding (but make sure to verify this with your attorney!)

If you have any confusion about what hearing you need to attend and what hearing you can ignore, speak with your bankruptcy lawyer. But, the hearing listed on the cover sheet of the complaint will rarely be of concern in most instances.

Car Accidents and Bankruptcy, Part II

As discussed in my previous post, there are three major questions that must be answered when considering whether to include an auto accident lawsuit in a bankruptcy for potential discharge.

• Was the debtor under the influence of drugs and alcohol at the time of the accident?
• Was there bodily injury to the victim, or just property damage?
• Were the actions of the debtor willful or malicious (intentional)?

These three questions will determine if the lawsuit filed (most likely by the insurance company) will be discharged, or whether it will survive the bankruptcy.

The United States Bankruptcy Code addresses bankruptcy discharge under Title 11, Sections 523, 727, and 1328, and these are the sources for most of the information to follow.

Congress has embraced a policy that personal injury and death damages caused by a driver intoxicated or under the influence of drugs should not be eligible for a discharge in either a Chapter 7 or a Chapter 13 bankruptcy.

Section 523(a)(9) prevents the discharge of a debt related to, "death or personal injury caused by the debtor's operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance."

This section applies to both Chapter 7 and Chapter 13 bankruptcies. It is most important to note what this section does NOT apply to... property damage caused while under the influence of drugs and alcohol. If an individual causes only property damage while intoxicated, for instance by running into a parked car or destroying a fence, the purely property damage claim can be discharged in either a Chapter 7 or Chapter 13 bankruptcy.

If, on the other hand, the damage claim relates to a bodily injury or death, the claim cannot be discharged, even if it was not willful or malicious. The claim and the debt will survive or "pass-through" the bankruptcy. It will be important to review the details of the lawsuit with your bankruptcy attorney to determine how section 523 will apply to your bankruptcy petition. It is entirely possible that filing a bankruptcy will remain worthwhile, if the debtor has large amounts of other debt. Filing a bankruptcy on the remaining debt may make it possible to pay damages related to an accident.

Congress has taken a hard stand against discharging debts related to driving under the influence when someone has been injured. As an experienced Pittsburgh bankruptcy attorney, I can help you determine if you are eligible for a discharge of an accident related debt.

In my next post, I will write about damages related to willful or malicious conduct of the debtor, and the (sometime) differing results in Chapter 7 and Chapter 13 bankruptcy. Willful and malicious acts will prove to be the most difficult to discharge.

Credit Card Lawsuits, Part IV: What Happens if I Don't Respond

I have already discussed what constitutes a "response" to a credit card lawsuit, in general how to file one, and whether you should respond.

Even if you don't formally respond to the complaint, you should NOT ignore it. Negotiating a debt settlement or filing a bankruptcy will probably be your best options. Why should you not ignore the lawsuit?

First, when you do not respond, the complaint will become a "default judgment" roughly 30 days after it was served. That means the Court will find for the law firm of the credit card company suing you without you ever appearing in Court. The default judgment happens automatically. Does this seem unfair? Of course! But, it's a fact, so act accordingly.

A holder of a default judgment will have 20 years to "execute" on the judgment. This means they can take the default judgment and place a lien on a bank account, a car, your personal property, or even your home. Once this happens, you cannot transfer your home without the judgment holder getting paid. A lien on your bank account can occur at any time without your prior notice. You can literally lose an entire pay check (or two) before you realize what happened (hint: if there is a default judgment against you, stop your automatic deposit). You will receive service from the Court if a judgment holder attempts to put a lien on your home. If this happens, contact us immediately.

The lawsuit will not go away, so even if you don't have property now, it can be placed on after-acquired property. It can also prevent you from passing on property unencumbered to your children and heirs if you do not take action.

Another thing to point out briefly (to be discussed further in another set of posts)... the statute of limitations for collecting on a debt (4 years in Pennsylvania) does NOT apply to default judgments. Even if you had a proper statute of limitations defense, it must be raised BEFORE the deadline to answer the original complaint.

A second issue, even if you don't have any property to lien (right now) this default judgment will most likely destroy your credit. Clients I meet with are often concerned about the effects of bankruptcy on their credit score. I tell them a default judgment does FAR worse to their credit. They are like a malignant growth that constantly harms your credit by sending negative reports that don't go away.

So, if you do not respond, bad things happen. Liens and damaged credit are sure to follow. Contact us to determine if you are a candidate for bankruptcy or a debt negotiation. I frequently meet with clients in this situation. I can help.

Next, I will look at how bankruptcy deals with creditor lawsuits that have become, or will become, a default judgment.

Credit Card Lawsuits, Part III: Should I Respond?

Briefly reviewing what I have discussed earlier regarding credit card lawsuits...

You have been served with a credit card lawsuit by the sheriff. From that day, you have 20 days to respond, and the court will automatically grant you 10 more days when those 20 days expire. Your response needs to be a formal answer to the complaint filed in the relevant court. The answer must exert a defense and be in the proper form.

All of this raises the next important question... should you actually respond?

Just because you can respond doesn't mean that you should go through the time and effort, or pay an attorney to do so.

If the debt is not your debt, or if it was procured without your knowledge through fraud, you most certainly should respond. A consumer protection attorney should have no problem getting the complaint dismissed. Failing to respond could lead to a judgment being entered against you despite your innocence. A judgment could destroy your credit.

If you have not made a payment on the underlying debt or used the credit in question in 4 or more years, you should consult and an experienced lawyer to see if you can raise a statue of limitation defense (NOTE: this is an affirmative defense, meaning you must respond to the complaint and raise the defense or you will lose!). You may also want to respond if you suspect the creditor no longer possesses the original documentation for the loan, or if it was not transferred properly. These provide effective defenses to the complaint filed against you, and give a good shot at succeeding in court. It will be worth your money to hire an attorney.

However, if none of these circumstances apply, and you suspect the underlying debt is valid, you may decide to NOT respond. Not responding to a legal action is normally not a very good idea. But, it may not be necessary if you are filing (or preparing to file) a bankruptcy.

The bankruptcy automatic stay will stop any credit card lawsuit in its tracks. Filing a bankruptcy prevents creditors from filing a suit against you, proceeding with a suit already filed, or executing on a suit that has already become a judgment. So, if responding to the complaint is not possible, or feasible, or likely to succeed, you should be considering filing bankruptcy to enjoy the protections it offers.

Finally, an experienced consumer protection or bankruptcy attorney may be able to help you negotiate a settlement to stop the lawsuit from proceeding. A settlement agreement will stop the creditor from proceeding with the lawsuit as long as you are paying on the debt. Both options of bankruptcy and debt settlement will be discussed in a later post.

Whether or not to respond to a credit card lawsuit hinges on a couple factors discussed above... whether you have a reasonable chance to succeed, and whether bankruptcy or a negotiated settlement are legitimate options. Contact us and speak to an experienced Pittsburgh bankruptcy lawyer to learn your options and defend your rights.

I'll next discuss what happens when you do not respond to a credit card lawsuit and a default judgment is entered against you.