You Can’t File Bankruptcy if You Make Too Much Money
This is a complex area you need to speak with a bankruptcy lawyer who will analyze your families’ individual situation. The banks, credit card companies, loan companies and the general media have created a lot of confusion leading to general misinformation about who and who can not file bankruptcy.
Here it pays to talk to a professional. If you make too much, or if your right on the edge of making too much, but mess up the characterization of income and expenses you could be forced to file a Chapter 13 or have your case dismissed. This is where bankruptcy attorneys earn their money. Don’t skimp in this area.
What About My Retirement Account and the Bar of Gold Buried In My Back Yard?
When you file bankruptcy, you are allowed to keep a certain amount of your assets. These are called “exemptions”. Certain property is exempt from seizure by the bankruptcy court.
Common items exempt from are almost all retirement accounts (401(k), 403(b), IRA, SEP IRA and pensions), Social Security benefits, household items (furniture, televisions), clothing.
Other items like jewelry, automobile, whole life insurance policies and home equity are also protected but with these things the dollar amounts vary with each individual situation.
Exemptions are an important part of legally protecting assets, so when dealing with assets it’s important first to disclose everything, place real world value (the legal standard is what’s its replacement value price today – not what you paid for it 2 years ago) and properly claim all exemptions possible. Again this is where a good bankruptcy is necessary – first to ensure you don’t “forget” to list an item and next to exempt as much property as legally allowed.
NOTE: To those clever and not so clever individuals who think they can hide assets or fail to disclose them, I would strongly suggest you re-think this course of action if you decide to file bankruptcy. When you sign a bankruptcy petition, you do so under the penalty of perjury, and if your “secret” comes out later a lot of bad things can happen from revocation of your discharge to criminal prosecution. Bankruptcy law is federal law and they take this stuff seriously. You should too. If you do have a bar of gold buried in your backyard, remember the old saying: “three people can keep a secret if two of them are dead.”
If you looking for a fresh start, why start over based upon a lie?
Can run up my credit card debts right before I file bankruptcy?
No. There are two reasons. First the moral reason, if you’ve decided to file bankruptcy and you use your credit card (with no intention of paying) I believe this is morally wrong. Now, if you use a credit card with a month or two before you decide to file a bankruptcy (and at the time you used the card you fully intended to pay the money back) that is a different story, but there are limitations even if you “intend to repay.”
When a new client comes into our office (and they make a decision to file bankruptcy) I advised them to stop using their credit cards immediately. This is just the right thing to do and more importantly from a bankruptcy stand point absolutely necessary.
The credit card companies are fully aware that people use their credit cards and than file bankruptcy, so laws have been enacted to penalize debtor’s who do this. Specifically, there are time limits that automatically create the “presumption” of fraud if you purchase certain luxury goods or take cash advances right before filing bankruptcy.
Credit card companies and the law firms that work for them are keenly aware of this fact and they are prepared to pounce on the debtor with a lawsuit called a “non-dischargeability” action. They are usually filed with days or weeks of an individual who has run up cash advances or bought luxury items right before filing bankruptcy. As the number of bankruptcies has increased so have these lawsuits (which you must fight in bankruptcy court – if you fail to respond that credit card debt survives bankruptcy).
If there is any question regarding credit card usage right before you file bankruptcy – especially if its been within the last 90 days before filing make sure you tell your attorney because these type of lawsuit can be avoid or minimized if the facts are known “before” you file bankruptcy.
Lawsuit Filed Against You Prior to Bankruptcy Involving Fraud
Most state court lawsuits get discharged in bankruptcy including lawsuits filed by credit card companies. The only exception is a lawsuit that has alleged fraud, misrepresentation or intentionally willful injury to another person. With these types of cases, the burden is initially on the person suing you to file a “non-dischargeability” lawsuit in your bankruptcy case, and if they don’t file it then the alleged claim is discharged: However, if they do pursue you with such a claim in bankruptcy or if there already exists a judgment against you, three possibilities exist: (1) it can be fought in bankruptcy court; (2) a negotiated settlement reached; (3) the court (if the parties don’t settle) will decide if debt is non-dischargeable; (4) it may already be to late (especially if there is already a state court judgment). But, each case is different so seek counsel from your attorney early on in the process.
Gambling Debts
Gambling debts, including cash advances taken inside a casino within one year of filing bankruptcy are subject to the same scrutiny that maxing out your credit cards right before filing bankruptcy. The credit card companies can object to those individual debts from discharge. Again, disclose this early on when talking with a lawyer as negotiated settlements or the passage of time may solve or alleviate this potential red flag. But talk with your lawyer about this candidly upfront since credit card companies know the rules and are very aggressive about pursuing these debts in bankruptcy.
Transferring Property Right before Bankruptcy
If you have or going to give away property to family or friends right before bankruptcy (that’s ok) if you disclose the transfer in your bankruptcy schedules. Sometimes it benefits you to wait until after you file bankruptcy because the property can sometimes be protected (exempted) in the bankruptcy and than given away after bankruptcy with no repercussion.
The key is disclosure.
If you fail to disclose than you can get into trouble. If the asset you “give” away is simply a scheme to hide or conceal an asset you setting yourself up for trouble. However, if you are legitimately giving something away of value (and disclose it), you won’t get into trouble, but the bankruptcy trustee may demand the property to be turned over to him to pay your creditors with. If they fail to turn the property over the trustee can sue to enforce their right to the property.
If you have sold or transferred or given away any thing of value of $600 or more in the last 3 years this also has to be disclosed in your bankruptcy schedules. If you disclose there is usually no problem from your standpoint, except if you sell your brand new 2009 Honda Accord (paid in full) for $1500.00. The trustee and the bankruptcy court tend to get a little cranky about these types “sales” since you obviously are selling the property way below market value. Expect to get questions. There may be very legitimate reasons for selling something below market value: (1) you needed to pay a hospital bill before they perform additional services; (2) pay a bail bond; (3) bring your house out of foreclosure.
The lesson is that disclosure is everything and if the trustee has questions of why you sold or gave something away just be prepared to explain the transfer and the circumstances. If it’s not acceptable they can ask for the property to be turned over for sale for the benefit of your creditors. Work with you attorney to minimize these problems by disclosing them up front.
Disclaimer
Fresno-Bankruptcy-Lawfirm.com is owned by the Law Offices of Jeffery D. Rowe. We are a debt relief agency. We help people file for bankruptcy relief under the Federal Bankruptcy Code (Title 11 of the United States Code). If you would like to discuss your situation in further detail, please call our offices at: (559) 228-1500 to schedule a consultation.
Tags: Bankruptcy Law, chapter 13, income