What documents does the court provide after a Chapter 7 case is closed?:
Looking at Pacer, the court (Central District of CA) recently closed our non-individual Ch 7 bankruptcy case. The trustee submitted a no asset report about 60 days after the creditor meeting and the court closed the case 8 days later.
There appears to be a document that the court issued when they closed the case however it is not downloadable from Pacer.
Is there an order/decree that the court automatically issues and mails at the closing of the case and how long does it normally take for this to be issued to the debtor after the case is closed?
Also, how do the debtors that we listed in the bankruptcy petition get notified that the court has closed the case and dismissed the debts they were owed?
Francis’s answer:
To my knowledge, in the Central District of California, the Court does not mail out a notice of the closing of a bankruptcy case. I believe they view it as an administrative act to close out the case and no notice is sent out to creditors.
Please be aware that in a non-individual Chapter 7 bankruptcy case, there is no discharge granted to the debtor. Only individuals in Chapter 7 receive a discharge. Therefore, technically, the debts are not discharged or wiped out as to your non-individual debtor entity. Creditors can still try to collect from the debtor entity. But, practically speaking, the debtor entity probably has no assets of significance, so probably not worth creditors pursuing their debts after the bankruptcy.
Please also be aware if any individuals cosigned for the entity's debts or were otherwise obligated on them, the creditors can still also pursue the individuals that are still responsible for the debts.
Can a second mortgage issue a 1099 for forgiven debt if I previously filed bankruptcy?: I filed a Chap 13 BK in 2013. The 13 was converted to a Chap7 in 2014 and discharged. In the chap 7 my attorney noted to reaffirm a first and 2nd mortgage debt d/t possible reconciliation. Neither mortgage company provided paperwork to reaffirm the debts. Ex-spouse continued to pay the 1st mortgage, but did not make any payments to the 2nd. The 2nd mortgage later sold the loan to a new company. In Feb 2016 my divorce was finalized and in the divorce decree, it specifies that my ex spouse is solely liable for the first mortgage, and the 2nd mortgage under the new lenders name. Today I received a notice from the IRS that I owe back taxes for 2016 because the new 2nd mortgage lender chose to "cancel" $42,769 of debt and "forgive" the interest of $17,600 via 1099c issued on 12/27/16. I never received any notices, nor did my ex spouse. Questions are (1) since the original lender chose not to reaffirm the debt, can I be held liable for the "forgiving/cancelling" (2) if I am not covered by 1, would I be covered by the divorce. House-IN, current residence-CA
Francis’s answer:
This debt was discharged in your bankruptcy case when you received your Chapter 7 discharge. Based on what your description, you did not reaffirm this debt (and reaffirming a second mortgage would be extremely rare). So, you should consult with your tax professional concerning the 1099 that you received and explain that the debt had already been discharged in a bankruptcy. You do not have to pay income taxes on debt that was discharged in a bankruptcy case. Your tax professional can assist you in completing and filing IRS Form 982 to exclude the 1099C income due to the bankruptcy discharge.
Good luck.
Is it advisable to wait to short sale a house if you are in a middle of a BK or is it better to wait for the BK to be dismissed?: My BK lawyer is advising me to wait to short sell the house until the Bk is discharged. However, my father is trying to short sale the house now ( I am on title and borrower of house) and he has a lawyer who is telling me to short sale the house now. I do not want to sign anything that would hinder my BK. Im not sure what to do. Thank you for your help.
Francis’s answer: Generally, you should listen to the advice of your bankruptcy attorney since she/he knows the specific facts of your case and this situation. Once you file a bankruptcy, all assets that you own or have an interest in (such as this house) are property of your bankruptcy estate. You do not authority to sell the house during the bankruptcy without permission of the bankruptcy Trustee and the Court. Since there is no equity in the property (otherwise this would not be a short sale), the Trustee would likely have no interest in the property and you can seek abandonment of the property thereby removing it from the bankruptcy estate so the short sale can proceed. There are most likely attorney fees and filing fees associated with this, so as a practical matter it may make sense to wait until you receive a discharge and your case is close (typically only a 4-5 months).