Interviewer: Who is the appointed trustee? How is that person selected?
Court Koehler: The trustee is kind of like a referee; that’s a good way to think of him. He’s not the judge. He’s a lawyer and he’s usually appointed by the United States Trustee, which is sort of a division of the Department of Justice. It’s part of the executive branch. They appoint a trustee to each region. Then that trustee will in turn appoint basically an attorney that’s representing the trustee to take over the case.
A trustee’s job is to protect the interest of the creditors in your case. They make sure that the creditors are getting what is due to them under the law. They’re making sure that you get all of your documents and your financial declarations and things like that that you need to make, that you’ve made all those and that everything looks good. They also try to root out bankruptcy fraud, so they want to make sure that you’re not hiding assets or hiding income or something like that, or otherwise trying to commit some sort of fraud by declaring bankruptcy.
They’re kind of a referee. They don’t necessarily have an interest in your case. They’re appointed to make sure that things go smoothly between you and the creditors.
Interviewer: They’ve got to make sure that everything you have is correct, right? Do people unintentionally ever do that where they have, like you mentioned, hidden assets or they have something that they weren’t informed of in the first place?
Court Koehler: Yeah, it happens. You hear stories all the time about people doing that. I don’t take on cases where that’s an issue because obviously I can get in a lot of trouble, too. I have a duty as an attorney to tell the truth to the court, so if I know that you’re hiding something I have to disclose it.
Anyway, it does happen, sure, but it’s pretty uncommon. If you have a thousand bankruptcy filings, maybe not even one of them is fraudulent. It’s rare, but sure, it does happen.
Interviewer: What about student loan debts, for instance? Will that be covered?
Court Koehler: They’re not dischargeable, unfortunately. What that means is you cannot get rid of them in bankruptcy like you can a credit card or a medical bill or something like that. The law in this area is kind of a hot area right now. Lots of people have really high student loan payments. I wouldn’t be surprised to see a change in the next decade or so, but right now you cannot get them discharged.
This is another good thing about Chapter 13 plans: if you’re behind on something, it can allow you a period of time over the Chapter 13 plan to spread repayments out. If you’re behind on like a student loan or you’re behind on mortgage or anything like that, it’s something that you can make a plan to get back to current over a long period of time so that you can afford, it as opposed to having to come up with two or three payments right away, like if you’d missed a few. Yeah, it can be helpful that way.
Unfortunately, it can’t erase the student debt. I wish we could, because there’s a lot of people with a lot of student debt that’s causing them problems, but that’s the way the law is right now.
Interviewer: What would Chapter 13 not be able to help someone out with as far as a certain kinds of debt? Now, we mentioned student loan is number one. Are there any others?
Court Koehler: Yeah, student loans aren’t dischargeable. I wouldn’t go so far as to say that a Chapter 13 bankruptcy can’t help you out with them, because they can give you some time to repay back debts and things like that. It can help with really any kind of debt. If it’s debt, if you owe somebody money, Chapter 13 bankruptcy is going to allow you to repay them in a way that you can afford.
That being said, student loans are not dischargeable so you won’t be able to discharge the remaining amount of your student loan after your Chapter 13 plan’s done. Other things that aren’t dischargeable: taxes are common ones. Back taxes, depending on the situation, most of the time will have to be paid back and aren’t dischargeable.
There are certain kinds of debts that aren’t dischargeable for sort of moral and societal reasons. For instance, child support or alimony – domestic support obligations, as they’re called legally – aren’t dischargeable. You can’t get out of paying child support by filing bankruptcy. Also, things like restitution payments in criminal cases you can’t discharge either. There are certain things like that that are not dischargeable for kind of moral and societal reasons. There are your taxes and government debts; some of those debts are not dischargeable. Then the student loans kind of fall into that category as well.
Interviewer: Did you say back taxes?
Court Koehler: Yeah. Back taxes, but it depends. There are some kinds of situations where your taxes can be dischargeable. The general rule of thumb if you get behind on income taxes or something like that, for instance, that is not dischargeable. It’s kind of in a similar way the student loans aren’t.