Articles Posted in Chapter 13 Bankruptcy

I just put a client together with a reporter doing a story about high interest vehicle loans.  I’ll leave the details to him and post here when the story comes out — but I did want to remind folks that there are ways out of these loans.

This particular loan was for 17.45% interest loan.  The client made low six figures in income from a very reputable employer at the time.  Why such high interest?  I’m not sure what her credit score was at the time, but the incredibly high interest rate caused her to pay $58k for a used vehicle she bought at $35k.  She made payments for approximately two years, but with a mortgage, and everyday expenses going up, she couldn’t keep it up.

Her solution was to file bankruptcy and surrender the car.  This way they couldn’t come after her for the deficiency balance.  Other things were addressed in the bankruptcy as well.  But this vehicle and the 17.45% interest rate was a leading cause.  We assist clients in obtaining other more sustainable vehicles during the bankruptcy – usually with a reasonable interest rate, warranty, sustainable payment.  We get that you need a vehicle.  You just need one that makes financial sense.

Basically, a Rule 2004 exam is just like any other deposition.  In every bankruptcy case, a 341 creditors meeting is set approximately five weeks after a bankruptcy petition is filed.  A 341 examination is usually short (about 15 minutes on average) and viewed as the only opportunity for a creditor, trustee or other interested person to ask questions of  debtor under oath.  Rather than the “only” opportunity to test the debtor on the merits of his or her case, a 341 meeting is actually only the “first” opportunity to ask a debtor questions about their financial history or other relevant matter.  A much lesser used option exists to get a debtor under oath – the Rule 2004 Exam.

A 2004 exam can cover your pre-filing actions or conduct.  Often a debtor’s financial condition and debts are the prime focus of the exam.  Many 2004 exams are associated with a possible action to deny a bankruptcy discharge or some other adversarial case.  It is more formal and often involves production of documents.

Don’t forget-under § 727(a)(3), a discharge can be denied if the debtor, “failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor’s financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case…”