There are several things you should not do, prior to filing bankruptcy.

There are several things you should not do, prior to filing bankruptcy.

DO NOT:

1) Use credit cards, open new credit lines, or take out cash advances. This could be viewed as a bad faith filing if you take out a large credit line then file for bankruptcy within a few months. The reason is because it appears that the money was taken out without the intention to repay the debt. This could result in the debt potentially not getting discharged. Cash advances taken out and not repaid 90 days prior to filing your bankruptcy case would likely have to be repaid.

2) Give any gifts over $500. If this happens, expect to have to repay the trustee the equal amount of the gift. So, you give your mom a $1,000 birthday gift, you or your mom will be repaying the trustee $1,000.

3) Repay any family members or friends. Same scenario, you’ll have to repay the trustee whatever repayment you have made to friends or family members (insiders) in the last 12 months.

4) Make more than a regularly monthly payment on your car, rent or mortgage. This is considered a preferential payment.

5) Take out large cash withdrawals out of your bank account. The trustee could ask for receipts for these withdrawals to see how the money was spent. It’s much better to deposit funds and use a debit/check to track how the money was spent.

6) Gamble. There are a few potential problems associated with gambling. First, if your spending $500 a month gambling, that money could be used to pay your creditors. Second, if you are incurring debt and taking out credit lines for the purpose of gambling that is also problematic.

7) Sell, transfer, borrow against, or dispose of any property. You do not want to convert assets that would be exempt to a non-exempt asset, or you’ll potentially need to pay the trustee.

8) Purchase new assets. If you purchase an asset, it might not be covered by the bankruptcy exemptions. If that happens you would need to pay the trustee or surrender your personal property. It’s critical to get legal advice, prior to selling or purchasing any property (personal property, real property, or vehicles) prior to filing.

9) Spend money on unreasonable expenses such as vacations or luxury items. Your bank statements are produced so it’s evident when and where money is taken out and spent. Any luxury items can also be viewed as a bad faith filing if you are spending frivolously instead of paying your creditors.

10) Get married. You can get married, but if you do, your spouse’s income gets counted towards the means test and could put you into a Chapter 13. If you’re in the middle of a divorce or getting married, definitely discuss the potential ramifications with your lawyer.

Can I file for bankruptcy if I am the victim of fraud?

Can I file for bankruptcy if I am the victim of fraud?

There are numerous types of fraud that can occur. We have seen situations where another person uses your social security number to file taxes to obtain a tax refund or uses your personal information or to get a credit card in your name.

Sometimes people don’t know this has happened until the IRS notifies them that a tax return has already been filed under their social security number or they pull a credit report and notice that there are credit lines on the report that they have never taken out. In that case you would need to contact the FBI and social security office. In extreme cases, it might require you to re-issue another social security number. Other types of fraud scams occur when a party asks you to send them money or gift cards in exchange for an investment opportunity.

The same situation happens on dating websites when someone starts asking for funds. People take out credit lines of tens of thousands of dollars, then the person disappears with their money never to be heard from again.

Usually, it’s difficult to apprehend these criminals to get reimbursed which leaves no other option other than filing for bankruptcy to eliminate the debt. Fortunately, bankruptcy is an option.

However, it is recommended that you attempt to make payments to the best of your ability for several months to a year to show you made a good faith effort to pay on it prior to filing your bankruptcy case so the creditor does not object.

What is bare legal title?

What is bare legal title?

This issue comes up frequently when the person who files for bankruptcy (otherwise known as the debtor) is on the title to a vehicle that someone else drives and makes the payments on.

This happens oftentimes when a parent keeps the vehicle in titled in their name instead of their child’s name but the child drives it. It also happens when the debtor puts the vehicle and loan in their name for a family member who does not have good credit. If there is equity in the vehicle (the value of the vehicle exceeds what you own on it) and that amount is over the allowed bankruptcy exemptions you would need to pay the trustee the difference.

However, if you have not paid anything towards the vehicle or any gas or paid for any maintenance then there is an exception you might qualify for called bare legal title which allows you not to have to pay anything to the trustee under those circumstances.

You may have to provide proof that the other person has been the one making the payments. Bare legal title applies to personal property and cars. However, you cannot have bare legal title to real property.

If you are on the deed of any real estate, whether you live there or not, or whether you have paid for it or not, that cannot be considered bare legal title. At that point, we would need to evaluate if the property can be exempt as your homestead or not.

Is a voluntary repossession still collectable?

Is a voluntary repossession still collectable?

The short answer to that question is yes. It really doesn’t matter whether the car is repossessed by being towed out of your driveway in the middle of the night, or whether you voluntarily and cooperatively turn over the car to the lender because you couldn’t afford to make the payment.

If the lender sells your vehicle for less than you owe on it, you will be responsible legally for paying the difference (otherwise known as a deficiency). This is a little less of a problem in recent months due to car shortages, there tends to be more equity in vehicles than there has been in the past, meaning the lender in many cases can sell the car for more than you owe on it. The good news is that filing for bankruptcy will discharge a deficiency judgment against you.

It is recommended to never trade in a vehicle with negative equity and add it to your current vehicle loan. This forces you as the borrower to be in a position where you cannot sell it for more than you owe on it. Typically, that is usually accompanied with a high monthly payment. It also puts you in a position where if the car has mechanical issues it makes it even harder to get rid of it because you can’t break even if you sell it.

If you do have any questions about prior vehicle repossessions or if you are considering turning in your car, feel free to contact our office to discuss your options.

Are SBA Loans Dischargeable in Bankruptcy?

Are SBA Loans Dischargeable in Bankruptcy?

Many borrowers are surprised to learn that SBA loans are a dischargeable debt in a bankruptcy even though they are government backed loans unlike a lot of tax debt or federally backed student loans which are not. During the course of the pandemic many businesses took out SBA loans to help keep their businesses afloat.

Others took out loans just before the pandemic and despite efforts to sustain their businesses have been unable to do so. Billions of dollars in loans have been taken out by small business owners. Many type of businesses from gyms to restaurants have suffered decreased business due to COVID, increased costs and supply shortages resulting in the closure of those businesses.

The good news is, you do have the ability to start over again either by finding other employment or starting a new business without having to be saddled with the SBA loan for the rest of your life.

Essentially the government has the same right as any other unsecured creditor. Your business account and most likely your personal bank accounts can be garnished. Most business loans are also personally guaranteed which means you are personally responsible for the debt in addition to your business.

If the loan is secured by collateral, that collateral could potentially be taken if the loan is not paid. Depending on the terms of the loan, there might be a lien on your home. Filing for bankruptcy can be your solution to wipe the slate clean.

For more information and a “Free Initial Phone Consultation” about SBA loans and bankruptcy concerns such as chapter 7, chapter 13, debt settlement and more… Please contact our office today! 813-463-8000

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