Chapter 7

Published on: April 5, 2012

Amelia Island Bankruptcy Attorney: Privacy in Bankruptcy

Bankruptcy can be scary. There are a lot of rumors about bankruptcy, some of them are true, some not. One of the things people fear for the most is the lost of their privacy. They don’t want people to know they’ve filed bankruptcy and they don’t want people from the court going to their house or snooping through their things.

When you file for bankruptcy, everything you own becomes part of your “bankruptcy estate”. A trustee of that estate is appointed by the court who sifts through the property listed in your schedules, uses his or her experience to judge it’s reliability and as long as it passes the smell test, the trustee administers the estate and you can go on without having people poke in your business. However, if you fail the smell test because the trustee thinks something stinks in your schedules, he or she can petition the court to permit an appraiser to visit your house. This is typically done because your Schedule B (Personal Property) list either omits property the trustee suspects you actually have or because you have seriously undervalued the property on Schedule B so as to keep more property than you would otherwise be exempt.

If an appraiser is to visit your home, the inspection is typically scheduled with you so as to make the appointment as convenient as possible. The appraiser creates an independent list of all of the property there that has value. This appraisal is then given to the case trustee who may use it as evidence against the bankrupt.

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Published on: April 4, 2012

Atlantic Beach Bankruptcy Attorney: Bankruptcy’s Effect On Credit

By David M. Goldman

People contemplating bankruptcy often fear the effect it will have on their loved ones. Debtors often think that their credit is somehow merged with their spouse or that their children will be liable for their debts if they’re still outstanding at time of death. I would like to dispel these rumors because they at worst are untrue and at best are misleading.

First and foremost, from a credit perspective married couples might as well be strangers on the street. One spouse may have a stellar credit score while the other may not. Sometimes all the unsecured debts are all in the name of one spouse, while the home mortgage liability is in the name of the other and so on. Oftentimes, home mortgage liabilities are so great that they require the commitment of income from both spouses to justify the bank’s risk in permitting the loan. This is likely the reason people mistakenly believe that marriage results in the “merge” of credit. If there is any truth to this, it is like so: Once two spouses sign a mortgage note on a house, they are now in the same boat as to that debt. If that boat sinks, whose fault it is ceases to matter and they will both drown equally. This is why so many people file for bankruptcy soon after their divorce is completed.

The idea of inheriting debt is archaic. It’s true that there are account of our own Thomas Jefferson having inherited debt from his late father-in-law, but any such law transferring liability on debts by inheritance is a thing of the past. Still, there are some ways in which a son or daughter may ‘feel’ they have inherited a debt. For instance, when someone dies and leaves an estate, the personal representative of the estate must make an accounting of the decedent’s (dead person’s) property and pay their creditors off before allowing the property to be distributed to the heirs. This may make those who inherit feel as though they’re being forced to pay the decedent’s debts. The distinction here being that it is the decedent’s funds that are used to pay the debts and not those of the living heir.

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Published on: April 4, 2012

Fleming Island Bankruptcy Attorney: Homestead

By David M. Goldman

Although it’s rarer these days, people occasionally come into my office who have equity in their home. This is fortunate because Florida has one of the most generous homestead exemptions in the United States. There are exemptions on a federal level, but if a state chooses to create their own, residents of that state must utilize the state exemptions instead of the federal ones. Some states, like Pennsylvania, have no homestead exemption at all.

The Florida homestead exemption requires that the property be either: one half acre if within a municipality or one hundred and sixty contiguous acres outside a municipality. This is a unique benefit for many folks who live in Fleming island because it is largely unincorporated. What this could mean is that a person could file bankruptcy and retain a home with two million dollars in equity as exempt property and, if it’s in an unincorporated area, the property could cover several acres of land.

This exemption is outlined by the Florida Constitution, Article X, § 4. Land located within a municipality that was previously unincorporated can still be “homesteaded” as it so referred, unless the owner of the land consents to inclusion into the municipality.

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Published on: April 3, 2012

Mandarin Bankruptcy Attorney: The Means Test

By David M. Goldman

Anyone who knows anything about bankruptcy knows that there were big changes to the bankruptcy code in 2005. Several things were changed by that amendment, but the one having the greatest effect was the creation of the dreaded, “Means Test”.

The Means Test was so terrifying and misunderstood that people rushed to file bankruptcy before it’s scheduled enactment. Some said it made filing Chapter 7 impossible.

Of course, as with all big changes in the news, not all rumors are completely accurate. What the Means Test does is look at the number of people in the debtor’s household, compare that number to the annually published IRS standards and see if the debtor makes less money than the average American in the area. If the person makes less money than average, they can file a Chapter 7. If they make more than the average, they have to file another chapter and make payments to their creditors. This is because they have the Means to do so, i.e. the Means Test.

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Published on: April 3, 2012

Baldwin Bankruptcy Attorney: Keeping Cars in Bankruptcy

By David M. Goldman

Ever since Henry Ford popularized the car a little more than a century ago, people have loved their cars. So it’s no surprise when people looking to file bankruptcy ask me how filing will effect their car. And since Henry Ford filed bankruptcy himself, the two subjects are even more related.

People need cars to get to work, to buy groceries and to live. The legislature knew this when they created the bankruptcy exemptions (the things you get to keep). So, everyone is allowed to keep a car in their bankruptcy, but how much car? Certainly not a Mercedes Benz. Well, maybe a Mercedes Benz, but only if it’s very old. People who file bankruptcy in Florida may have to use the Florida exemptions. These exemptions require a person to live in Florida for more than two years, but they allow a Florida citizen to keep $1,000 in vehicle equity $1,000 in personal property and then either a home or $4,000 additional personal property. Now, personal property can apply to a vehicle, for example: If Jeff owns a car worth $1,500 he can use the $1,000 vehicle exemption on the car and then use half of his $1,000 personal property exemption to cover the rest. If his car was worth $4,000 then he would use his $1,000 vehicle exemption and the $1,000 personal property exemption but if he owned a home he’d be out of exemptions. This doesn’t have to mean that Jeff loses his car (although that’s an option he can choose), instead he can offer to pay the car’s value in exchange for getting to keep it. Typically these payments are spread out over a year to make them reasonable. Since most people pay off their car before anything else, this comes up a lot.

Another option Jeff may have is to get a loan on his vehicle. If Jeff’s car is worth $4,000 and he can’t pay within twelve months of his bankruptcy case, he could take a loan for $3,000 out with his car as collateral and spend that $3,000 on reasonable and necessary living expenses such as food, gasoline, rent, or legal fees. He would still have to pay for the car, but as long as it was a loan term longer than a year, his payments would be lower than they would be paying the court.

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Published on: March 30, 2012

Bankruptcy Can Stop Florida Evictions

By David M. Goldman

#bankruptcy

The Jacksonville, Florida court determined in 100 B.R. 579.pdf that the automatic stay protections extend to protect against not just evictions but damage resulting from those that are done wrongfully.

The debtor had entered a lease agreement with a residential property. Days prior to filing a bankruptcy case the debtor was served with an eviction notice. Despite receiving notice of the bankruptcy filing, the landlord forced her way into the Debtor’s home and placed the debtor’s belongings on the street. Before the debtor was able to discover the eviction, her personal possessions were stolen.

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Published on: March 27, 2012

Secured vs. Unsecured Debts: What’s the Difference

By David M. Goldman

When you file bankruptcy you’re required to provide a list of everyone to whom you owe money. Those people and businesses are your creditors. There are separate sections in your bankruptcy petition for creditors that are secured and unsecured.

A secured debt is one that is backed by collateral. This means that if you don’t pay the debt, the creditor can repossess something, typically a car or house, to help pay what is owed. If the collateral is sold for less than what is owed, the debtor must pay the difference. This is called a deficiency.

Unsecured debt doesn’t have collateral like secured debt. It’s security is the creditor’s ability to damage the debtor’s credit. This includes items like, medical bills, signature loans and most credit cards. Occasionally, a credit card will attempt to collateralize the item purchased using the card, such as furniture or jewelry.

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Published on: March 26, 2012

Florida Debtors Sometimes Allowed To Keep Unexempt Property

By David M. Goldman

One of the first questions I’m asked by a person considering bankruptcy is what effect filing has on the property they own. If you’ve lived in Florida for a while, you are allowed to keep property that is exempt from the collection of creditors under Florida law. While there are a large number of somewhat complicated exemptions, you can generally think of exemptions as follows: You may keep $1,000 in personal property, $1,000 in vehicle equity and then either a homestead property that has equity or $4,000 in additional personal property. So, if the homestead property was retained in the bankruptcy case, but it had no equity, the debtor could keep $1,000 in vehicle equity and $5,000 ($4,000 + $1,000) of personal property. Any property the debtor has beyond that amount is subject to the whim of a trustee appointed by the court to preserve the debtor’s assets for the benefit of the debtor’s creditors. The trustee takes the debtor’s non-exempt property in a method similar to repossession and then auctions those goods off. The funds from this liquidation are used to pay the repossessing agent, the auctioneer’s fee and the trustee’s portion (typically 25%). The remaining funds are paid on a pro rata share to the debtor’s creditors who timely file claims.

Just because a debtor has property that is non-exempt does not mean the trustee will claim an interest in the property. Sometimes repossession and auctioning are impractical. When determining whether to liquidate an asset, the trustee must decide on the likelihood of sale and the cost benefit analysis of using estate proceeds to repossess and sell an item which may not render a sufficient sale to cover it’s own cost.

There is no clear-cut amount on which trustees rely when deciding to abandon an asset, but many trustees will occasionally leave an asset that will not earn more than $1000. Because these decisions are so subjective, trustees will almost always consider a debtor’s request to keep the asset in exchange for a cash settlement. As the old cliché goes, “There is no harm in trying.”

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Published on: March 23, 2012

Bankruptcy Can Make Cars More Affordable

By David M. Goldman

Car payments seem to be unavoidable. Unless you’re one of the rare people who have the luxury of being able to ride a bicycle to work, you must have a car. Everyone knows that the value of a car drops as soon as you drive it off the lot and as a result, many people who drive financed vehicles owe more to the lender than the asset is worth. Wouldn’t you love to be able to pay what you vehicle is worth right now, rather than what you owe on it? You can, and here’s how:

11 USC 722 allows a bankruptcy debtor to pay the secured portion of the debt owed on the car to satisfy the lien. “Security” for a loan the physical asset which can be exchanged to satisfy a lien. A typical security is a house or car. If you stop paying on the lien, the lender can take the house or car to satisfy the lien amount. Any value in the house or car above and beyond what is required to satisfy the lien (and associated fees) is returned to the borrower. A “Deficiency” occurs when the house or car sell for less than the lien amount. Deficiencies are unsecured debts for which a lender may sue. Deficiencies are very typical in the housing market these days.

When a debtor elects to use 11 USC 722, the court bifurcates the lender’s single claim into two claims, one secured which is equal to the fair market value of the car and one unsecured which represents the remainder. This way the borrower can discharge the unsecured portion, pay the secured portion and keep the vehicle. This is relatively easy in a Chapter 13 because the debtor can re-amortize the secured debt to be paid over the length of the Chapter 13 repayment plan, typically over five years. However, in Chapter 7 the payoff must occur immediately which is often impossible for people who’re already bankrupt.

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Published on: March 21, 2012

Florida Garnishment Exemption Used in Bankruptcy

By David M. Goldman

The head of family exception to wage garnishment also applies in an application for Chapter 13 Bankruptcy. Under the statutory exemption, an individual is considered to be the head of the family when (s)he “provid[es] more than one-half of the support for a child or other dependent.” Fla. Stat. Ann. § 222.11(1)(c). This statute allows for the head of family whose disposable earnings do no exceed the statutory amount to exempt all of his or her earnings from garnishment or attachment. Additionally, the disposable earnings of a head of family exceeding that amount may not be attached or garnished unless the individual agrees otherwise in writing, and then the amount available for garnishment is limited by 15 U.S.C. § 1673.
However, if the individual filing is only claiming a spouse as a dependent, the dependent spouse’s income must be insufficient to support him or herself without the income of the spouse claiming them. The purpose of the head of family exemption is to preserve the home and shelter for the family, so as to prevent the family from becoming a public charge.
The head of family exemption is intended to protect the family unit; therefore, when an individual filing for bankruptcy and claims the head of a family exemption, the dependent she is supporting must be receive income insufficient to independently support himself without the claimant’s income. If the claimant’s dependent is able to independently support himself, the claimant will not qualify under this exemption.