A year ago I purchased a water softener system and had it funded by a financial institution through revolving credit loan. The interests are...

Question

A year ago I purchased a water softener system and had it funded by a financial institution through revolving credit loan. The interests are very high and I'm struggling to make the payments. So the question is can I discharge this debt through chapter 7 bankrupsy without losing my water softener and even though that up until now I have been meeting the minimum payment. Can I discharge credit card debt even though I have still been making minimum payment on the credit card and occasionally using the card for small purchases

Answer

Did you sign anything that states the financial institution can repossess the water softener if you default on the payments? If the creditor does not have the right repossess, they cannot take the item from you, even if you file bankruptcy and the debt is discharged.

Credit card debt is dischargeable in bankruptcy regardless of when you last made a payment. As for recent purchases, it depends on what was purchased. If the items were for "necessities of life", they are dischargeable. If the purchases were for luxury items, those charges are likely no dischargeable.

Answer

The answer to your question about softener can be a bit tricky and depends on 2 big factors: (1) did you sign any documents giving the lender a valid security interest in the water softener; and (2) whether the water softener is attached in a way that it would be considered a "fixture" under California law.

It something becomes "permanently" attached to the house, it is considered a fixture and thus would require a deed of trust against your home to have a valid lien. A water heater or a central HVAC would be considered a fixture and they probably could not repossess it. A contractor who didn't get paid for a roof repair couldn't legally come to your house and repossess the work.

On the other hand, some things aren't attached to the house. A washing machine is typically connected to the house by water hoses and a drain hose, so it would not be a fixture and could be repossessed if the lender had a valid security interest.

Now does the lender have a valid security interest? Well, that would be hard to say without having an attorney review the contact AND the method in installation for the water softener. I've had clients filed bankruptcy and tell the company that they consented to repossession of the water softener. The reality is that they probably won't pick it up.

As for the credit card purchase, the are dischargeable unless the creditor files a lawsuit in bankruptcy court called an adversary proceeding. Certain luxury purchase or chase advances made within 90 days might be considered fraudulent and nondischargeable, but the lender does have to file the lawsuit and prove its case.