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Mistakes Before Filing Bankruptcy

Mistakes Before Filing Bankruptcy

When you are overwhelmed, and in debt, you may have tried other ways to get financial relief before you realized that bankruptcy is your best option. Most people don't realize that there are some things that you should avoid before you file your bankruptcy paperwork with the court. There are specific actions that the court may consider fraudulent, or it could deny the action or drop your case entirely.

Selling or Giving Away Property

Giving away expensive items before you file for bankruptcy sounds like a way to avoid them being seized, but it can cause you problems. Another avenue people take is to sell the item for far less than the value and then repurchase it after your bankruptcy so it won't show up in their bankruptcy estate. If the bankruptcy court discovers any of these tactics, your bankruptcy discharge will be denied, or you could face criminal charges for fraud.

Buying Big Ticket Items Before You File

Using your credit card to buy expensive items just before you file is also a red flag for the courts.
You may believe that since your debt will be eliminated, you can purchase that high dollar item that you usually wouldn't be able to afford and expect it to be eliminated in bankruptcy. The bankruptcy law was enacted to prevent this type of behavior. Bankruptcy law is supposed to be fair to the consumer and the creditors. The court will look at your debt in the last six months before filing bankruptcy to see if any recent excessive amounts of purchases were made. The judge might refuse to discharge those debts if the items were not a necessity.

Taking out a Second Mortgage

A second mortgage will not help you remove your debts; in most cases, it will only add another bill to your already burdened finances. It doesn't make sense to take out a second mortgage to pay your unsecured debt like medical or credit cards when you could have eliminated that debt in bankruptcy. The equity in your home is usually protected through the exemptions allowed during bankruptcy, while mortgage debt is not allowed to be discharged under the bankruptcy laws. If you have mortgage debt, you can file Chapter 13 and make a court-approved repayment plan for 3 to 5 years.

Withdrawing Retirement Funds

Withdrawing funds from your retirement accounts to attempt to get current on your debts is not a sound financial plan. Your retirement funds are usually protected in bankruptcy and cannot be seized to repay your creditors. If you are at an age where you can safely work enough years to add back to the retirement account, you may be fine. Taking money from your retirement accounts could jeopardize your future if you can no longer work.

If you are overwhelmed in debt, contact a Folsom bankruptcy attorney to find out how you can get financial relief.

Retirement Accounts and Bankruptcy

Retirement Accounts and Bankruptcy

In 2005 the bankruptcy abuse prevention and consumer protection act was signed into law, stipulating that many types of retirement plans, including IRAs, are exempt assets in bankruptcy. These accounts cannot be used to satisfy creditors' demands for payment on your debt.

Protected Retirement Plans

Company retirement plans such as simplified employee plan or SEP and Simple IRAs can be protected in bankruptcy. Company retirement funds that are rolled over to an IRA can also be protected in bankruptcy. SEP, IRAs, simple IRAs, and most rollover IRAs, are protected from creditors in bankruptcy up to a dollar value limit that is applied based on your circumstances.

Keeping Accounts Separate

Opening a second account for a rollover IRA from a retirement plan is a good idea for record-keeping. While it is not a legal requirement, it will help avoid any issues that may come up during the bankruptcy proceedings. It is easier to document the origin of the assets with separate accounts.

If you have significant assets in your retirement plan and want to be sure that it is safe from creditors, contact an Elk Grove bankruptcy attorney today.

Chapters in bankruptcy

Chapters in bankruptcy

The United States bankruptcy code is divided into chapters, and each chapter represents a section of the code. The different chapters will help various debtors in their unique situations. Some are personal bankruptcies, while others are farmers and business bankruptcies.

Chapter 7

Chapter 7 bankruptcy is a type of bankruptcy that eliminates all of your qualifying debt without you having to make a payment plan. Chapter 7 is the most common bankruptcy filed by personal debtors. Individual filers, businesses, and corporations can file for Chapter 7 bankruptcy protection. Chapter 7 is considered a liquidation bankruptcy. All of your nonexempt property may be sold, and the funds distributed to your creditors to be applied to your debt. Most personal filers do not lose any property chapter 7 due to the amount of exemptions available.

Chapter 11

Chapter 11 bankruptcy is for large complex business organizations seeking protection from the courts while they work out a financial plan. The plan will include how to get back on sound financial standing while continuing to operate the business now and in the future.

Chapter 12

Chapter 12 bankruptcy is for family farmers who need bankruptcy protection while getting their finances in order. Much like Chapter 13, the debtor will still owns all of their assets and will make the court-approved plan to repay their creditors over a number of years.

Chapter 13

Chapter 13 bankruptcy is a personal bankruptcy that allows you to keep all of your assets and pay a court-approved repayment plan to your trustee to distribute to your creditors. The repayment plan can last from three to five years. At the end of your payment plans, if any unsecured debt remains, it will be discharged with the bankruptcy courts.

If you are overwhelmed with debt and would like financial relief. Contact a Folsom bankruptcy attorney to find out which chapter of the bankruptcy code will be best for you.

Bankruptcy's History

Bankruptcy's History

Bankruptcy was considered a creditors remedy in the beginning. The creditors could seize the property of the trader who was behind in payments and have them thrown in jail until his debts were paid. These jails were modeled after the workhouse debtor's prison in London from the late 1600s to the early 1800s. The debtor would work off a debt, or the family would have to come up with the money to pay the debt and get the person out of jail. In 1833 in the United States, federal law banned all debtor's prisons. Several states also prohibited the practice of locking up people behind in their debt.

Bankruptcy Today

Today bankruptcy is a tool that helps the debtor get financial relief. It also helps creditors by providing an environment for the settlement of debtor's affairs and the distribution of any seized and sold assets from the bankruptcy estate.

Flexible Rules

It is almost impossible to create laws that will benefit both the debtors and the creditors every time. Creditors and debtors have two different agendas when it comes to bankruptcy. The bankruptcy rules were written to be flexible enough to allow for all parties' interests. We may not have debtors’ prison anymore, but you may feel trapped if you are in debt and struggling to make your payments.

Contact a Citrus Heights bankruptcy attorney today to find out what your options are to get financial relief.

Proof of Claims in Bankruptcy

Proof of Claims in Bankruptcy

A proof of claim is a document filed in the bankruptcy court to register a debt for the trustee to pay if funds are available. The creditor will need to list the amount of money owed, to whom, and any priority status if relevant as of the date the bankruptcy was filed. If a creditor seeks to be paid, they must submit a proof of claim with the clerk at the United States Bankruptcy Court.

In most Chapter 7 bankruptcy cases, there won't be any assets in the bankruptcy estate to distribute to the creditors. This is due to the amount of exemptions that the debtor is legally allowed. If there is any nonexempt property in the bankruptcy estate, it can be sold and the money distributed to pay debt of the creditors. This is when the proof of claim is used for the trustee to know who to pay.

Deadline for Filing Claims

The courts will usually set a deadline for the creditors to file the claims, so the trustee will know how the estate funds will be distributed. Typically, the proof of claim must be submitted within 70 days after the bankruptcy petition is filed with the court. Additional time will be allowed to government creditors. Unless the creditor can show extenuating circumstances, extensions are usually not permitted. If the trustee or the debtor disputes the claim, the bankruptcy court may set a hearing to resolve the dispute.

Reasons Claims are Rejected

When the bankruptcy trustee receives a proof of claim, they must notify the creditor if the estate will allow or object to the claim to proceed. Some reasons a claim may be rejected:
The amount of the claim is in dispute
The creditor is claiming a higher priority

When the debtor makes their monthly payments to the trustee, administrative fees involved in the bankruptcy will be processed first. Priority unsecured creditors will be paid next and then the non-priority unsecured creditors if anything is left from the estate. Proof of claim forms can be downloaded from the United States Court Website.

Contacting a Sacramento bankruptcy attorney can help you understand the claims being made against your estate and help give you financial relief from your debt.

Bankruptcy Trustee

Bankruptcy Trustee

When you file bankruptcy, the court will appoint a trustee to your case. The trustee is there to protect the interests of the creditors. Within a few weeks of submitting your bankruptcy paperwork to the court, the trustee will send you and your creditor's notice of the time and date of the meeting of the creditors. Also, this notice will serve to inform of the automatic stay, letting your creditors know all collection attempts against you must stop.

Meeting of the Creditors

The meeting of the creditors is also called the 341 meeting. 341 refers to the bankruptcy chapter it covers. Your trustee will conduct this meeting with you, your spouse if you are filing jointly, your attorney, and any creditors. Rarely do creditors attend this meeting. The trustee will ask you questions during an informal meeting, usually lasting 5 to 30 minutes. The trustee will go over your financial paperwork and verify everything is correct.

Chapter 7 Bankruptcy

During a Chapter 7 bankruptcy, the trustee will evaluate your property and any non-exempt assets. These assets may be eligible to be sold to pay creditors. The trustee collects the property, sells it, and then distributes the money to your creditors. It is important you work with a qualified attorney to assist you in this process to determine which of your assets may be exempt or recovered in your bankruptcy discharge.

Chapter 13 Bankruptcy

In a Chapter 13 Bankruptcy, the trustee will collect your monthly payment and disperse it to your creditors. If you fail to make the payments the trustee will ask the court to dismiss your case. Chapter 13 can offer better asset protection. Be sure to discuss all of your options when deciding to regain financial control through a bankruptcy filing.

Proof of Claim

In order to get paid, your creditors must file a proof of claim with the bankruptcy court. A written objection to the claim can come from you or your trustee. An objection can be due to being overcharged or having a defense to owing the money.

If you have any questions about how bankruptcy can help you with your financial issues, contact a Roseville bankruptcy attorney today.