An insider payment is when you borrow money from a friend or family member and repay them within twelve months prior to filing your bankruptcy case.
The significance of an insider payment is that the trustee can make you pay the bankruptcy estate the same amount of your insider payment in order to get your bankruptcy discharged. For example, six months prior to filing your bankruptcy case, you repaid your mom $5,000. Because you chose to repay your mom instead of using that money to pay your creditors the trustee will require you to pay him/her $5,000. The trustee in turn takes that $5,000 and uses it to pay creditors.
Your other option is to wait to file until the twelve months have expired since the time of your insider payment. We strongly recommend not repaying friends or family members during your bankruptcy process to avoid this as an issue in your case.
An insider payment is different from a gift because it is a repayment. Any gifts over $600 to any one individual two years prior to filing your bankruptcy case or any charitable donations need to be disclosed as well on your paperwork.
Any insider payment regardless of the amount of the repayment is required to be disclosed. If you have any questions about an insider payment and how it may potentially affect your bankruptcy case, it is best to consult with an attorney to determine the best time to file your case.
There is something called a right to set off. This means that a banking institution can take money from your checking or savings account to make a payment on another debt such as a credit card or car loan that you owe the bank. If you are behind on your payments the terms of the contract will allow the bank to do that. It is completely legal. If you are filing for bankruptcy and cannot afford the credit card payments, it is advisable to get a new account at a banking institution where you don’t owe them any money. That is one reason why banks offer credit or incentives to use their bank.
Once a bankruptcy is filed, the automatic stay under the bankruptcy code should limit the bank’s right to a set off. Once your bankruptcy is filed, the law prohibits a setoff of any debt that arose prior to the filing of your bankruptcy petition from any creditor. However, it is still a safe practice to use a bank where you have no credit lines. There are still occasions where creditors violate the automatic stay and while we can get it corrected, it can take some time to do so. There are so many banking options, it is better to be safe than unable to pay your bills or mortgage payment because the bank took their offset. .
If you have any questions about whether a creditor took inappropriate action, reach out to us for assistance and we are happy to evaluate the circumstances.
People often ask if they can keep their existing vehicles when they file for bankruptcy. The answer is yes. You can either surrender the car if you do not want to keep it or you can keep it and reaffirm the debt.
If you are current on your vehicle payments the lender will send what is called a reaffirmation agreement for you to sign. Essentially that means you are reaffirming or agreeing to make good on your existing contract with the car lender. The terms of the loans remain the same. You are not refinancing or re-negotiating the terms of the loan or interest rate on the loan.
If you are not confident that you can afford the vehicle payments going forward, we do not recommend signing the reaffirmation agreement because if you default on the loan, the lender can come after you for the deficiency if they sell the car for less than you owe on it. For example, if your car is worth $10,000 but you default and the lender sell it for $8,000, you will owe the lender $2,000 which they can try to collect against you.
Once you execute the reaffirmation agreement your payments should start reporting positively to the credit bureaus that you are making timely payments. This will also help rebuild your credit score once your bankruptcy is complete which is a great opportunity for your fresh start. We can help assess your car value and look at your budget to help you decide the best course of action with your vehicle.
This becomes very relevant because your ability to file a chapter 7 is based upon your income and expenses. That threshold varies due to your household size. As of October 2023, the Florida chart for the median income to qualify for a Chapter 7 is as follows:
One person household $60,429
Two-person household $74,131
Three-person household: $83,396
Four-person household: $100,476
Five-person household: $110,376
Six-person household: $120,276
Those numbers typically get adjusted twice annually for inflation. A dependent can be anyone age 18 or younger residing in your house at least 50% of the time. College age children are still considered dependents, as long as, they are between the ages of 18-24 and are full-time students.
If you have a partner, disabled or elderly family member who resides in your household they may qualify as dependents if they don’t work and you are providing more than half of their financial support. Two people cannot claim the same individual as a dependent on their tax returns. For example, you have your child and grandchildren living with you.
You are the person really providing more than one half of the financial support for your grandchild, but your child wanted to declare them as a dependent to get a tax refund. If you are counting someone in your household as a dependent, the tax returns should be consistent and reflect that.
Typically, if someone is divorced and they have 2 children 50/50 custody we list one child as the dependent not two. There are situations where it can be tricky so it’s best to consult with an attorney to make sure you are claiming the correct number of dependents.
Pool loans usually get financed through a third-party company, such as a bank or credit union not through the pool contractor themselves. On credit reports the debt is usually listed as an unsecured debt which is the same as any type of credit card debt. However, the actual loan agreement/contract always needs to be reviewed.
It is commonplace for the pool contract to state that there will be a UCC filing if the loan becomes 30+ days past due. A UCC filing (Uniform commercial code financing statement) is a document filed by the creditor with the Florida Secretary of State to assert their security interest in the collateral (pool). A UCC lien cannot be removed or avoided.
UCC liens can include everything from real property (homestead or rental properties) or other personal property. A UCC lien will prevent you from being able to sell your property or use your property as collateral to obtain another loan such as a second mortgage or refinance of your current loan.
Unfortunately, it is something that will likely have to be paid. A bankruptcy may still be helpful because you can eliminate other debt like credit card debt or personal loans so you can focus on staying current with your secured debt. If you are having difficulty navigating whether something is a secured or unsecured debt it is good to speak with a bankruptcy attorney to figure out what can be discharged in bankruptcy and what you should continue to pay.
