It is perfectly proper to engage in pre-bankruptcy planning to maximize your allowable exemptions. Your planning, however, should be done with the guidance of a knowledgeable bankruptcy attorney.
Unfortunately, many clients tell me that they sold their car for $1 to their girlfriend, or they signed a quit claim deed to their property to their sister shortly before coming to see me. These types of attempts at protecting assets often result in the needless loss of the very property they were trying to save.
Other times people borrow from their family to catch up payments or to pay off a particular debt. They use their income tax refund to pay their family back followed by filing for bankruptcy. This type of pre-bankruptcy activity often results in a Chapter 7 trustee recovering the money paid on the debt AND recovering the tax refund money paid to the family.
An example of proper pre-bankruptcy exemption planning is as follows: Say you have $6,000 in cash in the bank, a car on which you owe more than its value, and furniture worth $1,000. Depending on your exemptions, a Chapter 7 trustee could take up to $4,950 of your cash (and perhaps the entire $6,000) and use it to pay creditors. What you could do instead is, using the cash that you have in the bank, purchase a used car for $3,225, purchase $1,000 of furniture you need for your house, and use the remaining $700 towards repairs needed for your home. Then, you are left with an exempt car (with no car payments-you can walk away from the one that you are upside down on), exempt furniture, and $1,075 in exempt cash in the bank. The trustee now has nothing to take.
Remember, while it is perfectly acceptable to engage in pre-bankruptcy planning to maximize your assets, it is NOT acceptable to defraud your creditors, or engage in actions that could constitute “bad faith”. You CANNOT “hide” your assets. Please use the advice of an informed bankruptcy attorney.
Showing posts with label finances. Show all posts
Showing posts with label finances. Show all posts
Friday, February 20, 2009
Monday, December 1, 2008
Will Bankruptcy Affect My Credit?
There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcies will probably not make things any worse.
The fact that you've filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
What Else Should I Know?
- Utility Services - Public Utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills that arise after bankruptcy is filed.
- Discrimination - An employer or government agency cannot discriminate against you because you have filed for bankruptcy.
- Driver's License - If you lost your license solely because you couldn't pay court ordered damages caused in an accident, bankruptcy will allow you to get your license back.
- Co-signers - If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.
The fact that you've filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.
What Else Should I Know?
- Utility Services - Public Utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills that arise after bankruptcy is filed.
- Discrimination - An employer or government agency cannot discriminate against you because you have filed for bankruptcy.
- Driver's License - If you lost your license solely because you couldn't pay court ordered damages caused in an accident, bankruptcy will allow you to get your license back.
- Co-signers - If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.
Monday, November 10, 2008
Will Bankruptcy Wipe Out All My Debts?
Yes, with some exceptions.
Bankruptcy will not normally wipe out:
-money owed for child support or alimony fines, and some taxes;
-debts not listed on your bankruptcy petition;
-loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
-debts resulting from "willful and malicious " harm;
-student loans owed to a school or government body, except if, the court decides that payment would be an undue hardship;
-mortgages and other liens that are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).
Bankruptcy will not normally wipe out:
-money owed for child support or alimony fines, and some taxes;
-debts not listed on your bankruptcy petition;
-loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;
-debts resulting from "willful and malicious " harm;
-student loans owed to a school or government body, except if, the court decides that payment would be an undue hardship;
-mortgages and other liens that are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).
Thursday, November 6, 2008
Can I Own Anything After Bankruptcy?
Yes! Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after filing for bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt.
Wednesday, October 29, 2008
What Bankruptcy Can and Cannot Do for You.
What Can Bankruptcy Do for Me?
Bankruptcy may make it possible for you to:
· Eliminate the legal obligation to pay most or all of your debts. This called a "discharge" of debts. It is designed to give you a fresh financial start.
· Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages or other liens on your property without payment.)
· Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
· Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
· Restore or prevent termination of utility service.
· Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
What Bankruptcy Cannot Do.
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
· Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan.
Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
· Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, and certain other debts related to divorce, some student loans, court restitution orders, criminal fines and some taxes.
· Protect cosigners on your debts. When a relative or friend has cosigned a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
· Discharge debts that arise after bankruptcy has been filed.
Bankruptcy may make it possible for you to:
· Eliminate the legal obligation to pay most or all of your debts. This called a "discharge" of debts. It is designed to give you a fresh financial start.
· Stop foreclosure on your house or mobile home and allow you an opportunity to catch up on missed payments. (Bankruptcy does not, however, automatically eliminate mortgages or other liens on your property without payment.)
· Prevent repossession of a car or other property, or force the creditor to return property even after it has been repossessed.
· Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt.
· Restore or prevent termination of utility service.
· Allow you to challenge the claims of creditors who have committed fraud or who are otherwise trying to collect more than you really owe.
What Bankruptcy Cannot Do.
Bankruptcy cannot, however, cure every financial problem. Nor is it the right step for every individual. In bankruptcy, it is usually not possible to:
· Eliminate certain rights of "secured" creditors. A "secured" creditor has taken a mortgage or other lien on property as collateral for the loan.
Common examples are car loans and home mortgages. You can force secured creditors to take payments over time in the bankruptcy process and bankruptcy can eliminate your obligation to pay any additional money if your property is taken. Nevertheless, you generally cannot keep the collateral unless you continue to pay the debt.
· Discharge types of debts singled out by the bankruptcy law for special treatment, such as child support, alimony, and certain other debts related to divorce, some student loans, court restitution orders, criminal fines and some taxes.
· Protect cosigners on your debts. When a relative or friend has cosigned a loan, and the consumer discharges the loan in bankruptcy, the cosigner may still have to repay all or part of the loan.
· Discharge debts that arise after bankruptcy has been filed.
Sunday, October 26, 2008
Top 10 Bankruptcy Myths
Myth 1: Filing for bankruptcy hurts your credit for 10 years.
Not True. Bankruptcy stays on your credit about 7 to 10 years. Although the bankruptcy will stay on your credit, you can start rebuilding your credit once your bankruptcy is discharged. You will get credit card offers and be extended credit right after the discharge of your bankruptcy. Bankruptcy wipes out debt, which in turn helps your credit score.
Myth 2:Everyone will know you filed for bankruptcy.
Not True. Bankruptcy is public record but unless you are famous, people aren’t going to go looking. The only people who are going to know are those who you tell and those who have access to the bankruptcy court record system.
Myth 3:It's hard to file for bankruptcy.
Not True. The bankruptcy reform act changed only the method in which Debtors qualify for the different types of bankruptcy. It doesn’t prevent people from filing and in most situations people are still able to get the same relief now as before the law changed. There is a lot of paperwork involved, but having a skilled attorney makes the process much smoother. Filing bankruptcy is electronic these days, which minimizes paperwork on your part.
Myth 4:You are a bad person/failure for filing bankruptcy.
Not True. There is a reason that over one million people file for bankruptcy each year and it is not because they are bad people. Bankruptcy is a means for good people who are going through bad times to get relief. Many times people have to file because they have lost their job, gone through divorce, or experienced medical illness. Bad times don’t make a person bad. Bankruptcy can provide the relief that good hardworking people need to get them out of the bad time. It provides hard working people with the fresh start that they deserve, but are not able to obtain.
Myth 5:You will lose everything you own.
Not True. Bankruptcy allows you to keep your property. Outside of bankruptcy you could lose your property to creditors, but once you have filed for bankruptcy you and your property are protected. Bankruptcy doesn’t always wipe out liens, which means if you want to continue to keep the property you will need to continue to pay the lien.
Myth 6:Both you and your spouse have to file bankruptcy together.
Not True. You can file together or separately, that is your choice. In many cases it makes sense for husband and wife to file together, but in some instances the spouse might not want to file. This is absolutely fine and definitely allowed by the court.
Myth 7:You can't get rid of back taxes in bankruptcy.
Depends. You can get rid of income taxes that are more than three years old by filing bankruptcy. There are several qualifications that have to be met in order for the taxes to be wiped out, but having a portion wiped out is better than none at all.
Myth 8:You can only file bankruptcy once.
Not True. You can file for bankruptcy as many times as you like. Although, you are limited by how often you can receive a discharge. You can receive a discharge from Chapter 7 once every 8 years. You can receive a discharge from Chapter 13 every 2 years. If you get discharged in a Chapter 7 you have to wait 6 years before getting a discharge from Chapter 13. If you get a Chapter 13 discharge then you need to wait 4 years to get discharged from a Chapter 7. However, there is no waiting period if your case is dismissed. You can file back to back should you choose.
Myth 9:Creditors can still harass you if you file for bankruptcy.
Not True. When the bankruptcy is filed, automatic protection is put onto you and all of your property instantly. Creditors are not allowed to contact you for any reason, which includes calling or even billing you. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.
Myth 10:Filing bankruptcy is emotional devastating.
Not True. Bankruptcy eliminates debt and eliminates financial stress. Filing bankruptcy is the solution to the problem, not an additional problem. Although making the decision to file bankruptcy might be difficult one, the relief provided will lift a huge weight off of you. You will be able to answer the phone, check the mail, and answer the door without fear that the contact is from a creditor or collection agency.
Not True. Bankruptcy stays on your credit about 7 to 10 years. Although the bankruptcy will stay on your credit, you can start rebuilding your credit once your bankruptcy is discharged. You will get credit card offers and be extended credit right after the discharge of your bankruptcy. Bankruptcy wipes out debt, which in turn helps your credit score.
Myth 2:Everyone will know you filed for bankruptcy.
Not True. Bankruptcy is public record but unless you are famous, people aren’t going to go looking. The only people who are going to know are those who you tell and those who have access to the bankruptcy court record system.
Myth 3:It's hard to file for bankruptcy.
Not True. The bankruptcy reform act changed only the method in which Debtors qualify for the different types of bankruptcy. It doesn’t prevent people from filing and in most situations people are still able to get the same relief now as before the law changed. There is a lot of paperwork involved, but having a skilled attorney makes the process much smoother. Filing bankruptcy is electronic these days, which minimizes paperwork on your part.
Myth 4:You are a bad person/failure for filing bankruptcy.
Not True. There is a reason that over one million people file for bankruptcy each year and it is not because they are bad people. Bankruptcy is a means for good people who are going through bad times to get relief. Many times people have to file because they have lost their job, gone through divorce, or experienced medical illness. Bad times don’t make a person bad. Bankruptcy can provide the relief that good hardworking people need to get them out of the bad time. It provides hard working people with the fresh start that they deserve, but are not able to obtain.
Myth 5:You will lose everything you own.
Not True. Bankruptcy allows you to keep your property. Outside of bankruptcy you could lose your property to creditors, but once you have filed for bankruptcy you and your property are protected. Bankruptcy doesn’t always wipe out liens, which means if you want to continue to keep the property you will need to continue to pay the lien.
Myth 6:Both you and your spouse have to file bankruptcy together.
Not True. You can file together or separately, that is your choice. In many cases it makes sense for husband and wife to file together, but in some instances the spouse might not want to file. This is absolutely fine and definitely allowed by the court.
Myth 7:You can't get rid of back taxes in bankruptcy.
Depends. You can get rid of income taxes that are more than three years old by filing bankruptcy. There are several qualifications that have to be met in order for the taxes to be wiped out, but having a portion wiped out is better than none at all.
Myth 8:You can only file bankruptcy once.
Not True. You can file for bankruptcy as many times as you like. Although, you are limited by how often you can receive a discharge. You can receive a discharge from Chapter 7 once every 8 years. You can receive a discharge from Chapter 13 every 2 years. If you get discharged in a Chapter 7 you have to wait 6 years before getting a discharge from Chapter 13. If you get a Chapter 13 discharge then you need to wait 4 years to get discharged from a Chapter 7. However, there is no waiting period if your case is dismissed. You can file back to back should you choose.
Myth 9:Creditors can still harass you if you file for bankruptcy.
Not True. When the bankruptcy is filed, automatic protection is put onto you and all of your property instantly. Creditors are not allowed to contact you for any reason, which includes calling or even billing you. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.
Myth 10:Filing bankruptcy is emotional devastating.
Not True. Bankruptcy eliminates debt and eliminates financial stress. Filing bankruptcy is the solution to the problem, not an additional problem. Although making the decision to file bankruptcy might be difficult one, the relief provided will lift a huge weight off of you. You will be able to answer the phone, check the mail, and answer the door without fear that the contact is from a creditor or collection agency.
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