The automatic stay (which takes effect the day your case is filed) is effective against all entities and brings almost all forms of civil legal action against the you to an abrupt halt, 11 USC 362(a)(1)-(8), Willford v. Armstrong World Industries, Inc., 715 F.2d 124, 126 (4th Cir. 1983). Hence, foreclosure, repossession, wage and bank garnishments etc. must stop upon filing of the petition.
Actions taken in violation of the stay are void as a matter of law, see In Re Schwartz, 954 F.2d 569, 26 C.B.C.2d 649 (9th Cir. 1992) (IRS violation of stay was void, not voidable).
Acceptance of payroll deductions after filing violates the automatic stay, Matter of Hellums, 772 F2d 379 (7th Cir. 1985).
A driver’s license revocation based on an unpaid accident judgment cannot be continued after discharge, Perez v. Campbell, 402 U.S. 637, 91 S. Ct. 1704 (1971).
Withholding of a student’s college transcript for non-payment of a discharged debt is prohibited, In re Merchant, 958 F.2d 738 (6th Cir. 1992).
Attorney fees and costs are mandatory for willful violation of the automatic stay and punitive damages are also available, United States v. Ketelson, 880 F.2d 990, 993 (8th Cir. 1989).
Recent Iowa cases: Discharge of Student Loans:
(note, all cases are abbreviated)
KENNETH RAY TINDER Bankruptcy No. 05-01190
DATED AND ENTERED: April 14, 2009
Facts: Debtor attended Chiropractic College from October 1985 to October 1988. Debtor practiced as a chiropractor briefly after which he became otherwise employed.
Law: Student loan debt is not discharged “unless excepting such debt from discharge . . . would impose an undue hardship on the debtor and the debtor’s dependent’s.” 11 U.S.C. § 523(a)(8). The debtor has the burden to prove undue hardship by a preponderance of the evidence. Undue hardship requires “a certainty of hopelessness that the loans will be repaid'. The standard for student loan discharge is intentionally set very high.
The totality of the circumstances test includes an examination of the following factors:
(1) the debtor’s past, present, and reasonably reliable future financial resources; (2) a calculation of the debtor’s and dependent’s reasonable necessary living expenses; and (3) any other relevant facts and circumstances surrounding each particular bankruptcy case. Simply put, if the debtor’s reasonable future financial resources will sufficiently cover payment of the student loan debt – while still allowing for a minimal standard of living – then the debt should not be discharged.
Holding: Debtor has not established that he is entitled to an “undue hardship” discharge of his student loan debt. Debtor has sufficient income to make significant payments on his student loan debts. Debtor did not make a reasonable effort to pay his student loans when he was earning sufficient income. Finally, Debtor will need to delay his retirement but this burden is mitigated by his failure to make payments when he had sufficient income to do so. As Debtor has not established an undue hardship, his student loan debts are excepted from discharge under § 523(a)(8). United States Bankruptcy Court Northern District of Iowa
Johnston v. Fifth Third Bankcorp. (In re Johnston), Ch. 7, No. 05-05136, Adv. 06-09110, 2008 WL 687002 (Bankr. N.D. Iowa Mar. 11, 2008) (student loan debt discharged for undue hardship)
Facts: Debtor seeks an undue hardship discharge of her student loan under § 523(a)(8). ECMC asserts Debtor is able to pay the student loan without undue hardship.
Holding: Debtor is currently suffering severe financial circumstances and will continue to do so into the indefinite future in light of her chronic illness. A fair evaluation of this record reveals a very candid debtor who has no reasonable possibility of paying any meaningful amount toward these student loans. She has met her burden by establishing that excepting the student loan debt to ECMC from discharge will impose an undue hardship on her. United States Bankruptcy Court Northern District of Iowa
Video talks about the American Courts philosophy on bankruptcy. Better to "draw a line in the sand" and take responsibility for future debt than to keep taking on debt we can never repay.
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