Whether you are debating between a Debt settlement and bankruptcy filing or have decided to file bankruptcy but are worried about the effects it might have on your credit, you are bound to have many questions.
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The Bankruptcy Code gives you property exemptions, because it recognizes that in order for people to move forward after bankruptcy, people have basic needs. If a property is exempt, it can’t be used to pay your creditor’s claims.
Most of the assets that a typical Chapter 7 bankruptcy debtor owns are exempt under the federal and state exemption law. You may, however, own an asset whose market value far exceeds the amount allowed under the exemption law. While some pre-bankruptcy planning may be allowed, putting property you own into someone else’s name to avoid it being taken by creditors or the trustee may be considered a avoidable transfer and can result in your discharge being denied. In addition, the trustee may be able to recover the property from the person to whom it was transferred. The transfer of assets during the months and even years prior to the filing of a bankruptcy petition could constitute a “fradulent transfer” regardless of your subjective intent to defraud creditors, especially if the transfer was made to an ”insider” (e.g., family, relatives, or friends) for less than the fair market value of the property at a time when you were “insolvent” (or had other debts that you couldn’t repay). If you have assets that you are contemplating to dispose of before filing bankruptcy, you should first discuss your situation with a competent bankrutpcy attorney in your area. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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If you owe money to friends or relatives, they are likely to be in the same rank of unsecured creditors
with your credit card companies. One of the duties of a trustee in bankruptcy is to make sure that all unsecured creditors are treated equally (i.e., while they are behind secured creditors in rank, they rank equally among themselves). If you repay your friends or relatives, or other “insiders” while not paying your other creditors, the transfer may be considered a “preference” and the bankruptcy trustee may”avoid” or reverse the transfer. While the court looks back 90 days from the filing date for payments made to non-insiders, there is longer look-back period for payments made to “insiders,” or people who have a close relationship with you because they were not dealt at arm’s length. If you are thinking about filing bankruptcy, you need let your attorney know about all payments made prior to filing to discuss how best to protect you or your family and friends. The Bankruptcy Code gives you property exemptions, because it recognizes that in order for people to move forward after bankruptcy, people have basic needs. If a property is exempt, it can’t be used to pay your creditor’s claims. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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Yes, small business owners (whether it’s a sole-proprietorship or an incorporated business) can seek bankruptcy protection while continuing to operate their business by filing under Chapter 13.
Here is why Chapter 7 bankruptcy is generally considered a bad idea for business debtors. After you file your bankruptcy, your business becomes an asset of the bankruptcy estate and thus it can be sold or distributed to pay creditors in a Chapter 7 bankruptcy. Furthermore, due to the liability issues of an operating retail space, sales tax liability, or unpaid wages, etc., you may not be able to keep operating the business while it is still an asset of the bankruptcy estate (i.e. while your Chapter 7 case is pending). By filing a Chapter 13 bankruptcy, you can continue to run the business, and use the proceeds to fund a Chapter 13 plan to make your plan payments and eventually wipe out your debts. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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If you are thinking about winding down your incorporated business, there are two approaches you can take: (1) cease operation, liquidate all the business assets, and dissolve the corporation; or (2) file a Chapter 7 bankruptcy for the corporation.
Usually, when a corporation has some assets that need to be liquidated in the process of winding down, some people file bankruptcy for their corporation (as opposed to winding down the business on their own) even though, unlike individual debtors, corporations do not get a discharge in bankruptcy. One advantage to filing bankruptcy for a corporation is that it may discourage lawsuits from creditors because they know that a trustee in bankruptcy will be administering all the property of the estate, including the assets of the corporation. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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The short answer is no. The most common way that a person loses their home after bankruptcy is when they cannot afford to make the monthly mortgage payments even after eliminating their other debts.
Your home, depending on how much equity you have in it (i.e. current market value – total mortgage balance), may or may not be a property of the estate for which a trustee in bankruptcy will have an economic incentive to liquidate. When a homeowner is “underwater” on her mortgage (i.e., you owe more on your mortgage than what the house is worth), a trustee in bankruptcy has no economic incentive to liquidate the asset. Even if you have some equity in your home, you may be able to retain your home by claiming a homestead exemption. For example, if you are filing in California in 2011, and you are 65 years of age or older, you may claim up to $175,000 in homestead exemption. (Note: The exact amount of homestead exemption changes periodically.) In the event that a trustee determines that there is administrable equity in your home, the trustee is likely to offer you an opportunity to purchase the property back from the bankruptcy estate for the amount that the estate would have realized had the trustee in fact sold the property. During periods of rising real estate values, trustees in some cases may independently value properties by having a real estate broker run comparable sales and listings and conduct on-site valuation. If you are considering bankruptcy at a time when the value of your real property is rising, you might want to hire an appraiser or a real estate broker to get a strong handle on the value of your home before you file your bankruptcy. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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Yes. When you file bankruptcy, a federal injunction known as “automatic stay” goes into effect
immediately which stays all collection attempts from the creditors, including a foreclosure. But in many cases, the relief is only temporary, unless you address the underlying issue: i.e., you reinstate the loan by curing the default or doing a loan modification. A chapter 13 bankruptcy allows you to catch up on delinquent mortgage payments over a three-to five-year period, paying out the delinquent amount in small additional payments. You must also make all your mortgage payments that come due after the filing of your bankruptcy case. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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Maxing out your credit cards or making large purchases before filing bankruptcy is generally
considered a bad idea. Similarly, cash advances in large amounts or balance transfers may be subject to scrutiny. While it is true that the bankruptcy law protects individual debtors, it is not a blanket protection. When you try to beat the system, a creditor might bring a “non-dischargeability” action in court. And if a judge finds that based on circumstantial evidence, the debtor had no intent to repay at the time of incurring the debt, it may not be discharged. If you are considering filing bankruptcy and you are concernd about a recent purchase or transaction, you should seek advice from an attorney specializing in bankruptcy law. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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People often ask if it’s okay to leave one of their credit cards out of their bankruptcy because they
would like to keep it for emergency use. First of all, if you have a credit card that doesn’t have a balance and hasn’t for some time, you don’t need to list it on your list of creditors in bankruptcy. If there is a relatively small balance on a card, then some people try to pay it off before filing bankruptcy, hoping this would allow them to use the card after the bankruptcy. There are two potential risks in doing this. Even though you are not carrying a balance, the issuer of the card can check your credit, including the bankruptcy filing, and may think that you’re more of a risk and they may or may not close the account. More importantly, however, paying off one or more creditor prior to bankruptcy filing may be considered a “preference” (depending on the type of creditor and amount of payment), and the trustee can require those assets be brought back into the bankruptcy proceeding in order to be used for all creditors. Many consumers are surprised when they receive numerous offers of credit immediately after their discharge in bankruptcy. (Credit card companies know that you don’t owe any debts now and you won’t be able to file another bankruptcy for another 4 to 8 years in most cases.) Most people get one or two cards with low interest rates and fees and use them to help re-establish their credit by paying off the balances each month. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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Should I File Bankruptcy?7/27/2020 Some consumers and small business owners file bankruptcy when they become overwhelmed with bills that they cannot pay and they do not anticipate any change in their financial situation in the next few months that would enable them to pay their bills. Often, people file because their financial situation is causing them lots of emotional distress or because they would like to free themselves of debt now and be able to protect their future income and assets, i.e., "get a frest shart." Debtors should also be aware that there are some alternatives to a bankruptcy filing, such as out-of-court agreement with creditors or debt counselling services. The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation.
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Self-Assessment Checklist7/27/2020 You can consider filing bankruptcy if one or more of the following apply in your situation:
The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice. You should seek advice from a bankruptcy attorney for your specific situation. |
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