Can the trustee take the proceeds from my personal injury case? 

Can the trustee take the proceeds from my personal injury case? 

You must list your personal injury case as a potential asset for the bankruptcy trustee.

In a Chapter 7, the trustee can collect 100% of what a debtor gets from their personal injury settlement.  This applies to any dates of accident that occurred prior to filing the bankruptcy petition where the statute of limitations has not expired.

If you have already hired a lawyer to represent you in your personal injury case, you would want to ask them how much you might expect to receive from the personal injury case and how long will it take for it to settle or go to trial.  You might decide to either wait until your personal injury case settles and use it for reasonable expenses before filing your bankruptcy case so the trustee cannot take it.

Alternatively, you might decide to not wait and file your bankruptcy case and forgo your settlement proceeds.  It works a little differently in a Chapter 13. The trustee in a Chapter 13 case is entitled to at least 50% of your settlement proceeds whether your accident happened before you filed your case or while your case is pending.

Usually, the Chapter 13 trustees will agree to let the debtor keep 50% of the net proceeds of the case, where the Chapter 7 trustee’s will take 100% of the proceeds.  When you consult with your bankruptcy attorney definitely let them know about your personal injury case.  You wouldn’t want to file the case and then unexpectedly have the trustee take your money.  Also, communicating with your personal injury attorney is also critical.

Will gambling affect my bankruptcy case? 

Will gambling affect my bankruptcy case? 

The short answer is yes, it can. You are obligated to disclose the last twelve months of profits and losses from gambling on your bankruptcy petition.  If you do receive winnings and it’s listed on your tax return as income, that also needs to be shown on the bankruptcy petition for the last two years.  Gambling can affect your ability to file for bankruptcy.

The first issue is whether you have taken out credit lines or personal loans for the purpose of gambling.  This is a good faith issue in terms of whether you intended to repay your creditors or if you were purposely going to default.  The objective of borrowing money hoping you would make more gambling will not be a valid excuse.  Similarly, having a gambling addiction would not be a valid excuse either.

The trustee’s perspective is that if you have $12,000 a year spent on gambling that is $1,000 per month that you should have used to pay your unsecured creditors.  The case law also supports this as well.  A Chapter 13 might be an option if you have gambled since you are trying to pay creditors back to some extent.  Otherwise, depending on the amount you gambled you might have to wait a year of no gambling to file your Chapter 7 bankruptcy case.

If it’s minimal like a few hundred dollars that is less of a concern.  However, if you plan to file for bankruptcy, abstain from any type of gambling so you do not compromise your case.

What is does it mean to reaffirm a debt? 

What is does it mean to reaffirm a debt? 

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.

 

Who can I claim as a dependent for purposes of my bankruptcy filing? 

Who can I claim as a dependent for purposes of my bankruptcy filing? 

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.

 

What is cross-collateralization? 

What is cross-collateralization? 

Collateral is when your property can be taken if you do not pay on a debt.  It’s also commonly known as secured debt.  The most common example of this is a house or a car.  For example, if you don’t make your car payment the lender can repossess your vehicle.

If you do not make your mortgage payment, the lender can foreclose and take possession of your house.   The most common example of “cross-collateralization” that we see in bankruptcy cases is most commonly employed by credit unions.  People have a car loan and an unsecured credit card or personal loan with the credit union – the credit union will make you pay off the credit card or personal loan in order to obtain the title to your vehicle.  Its usually up to the amount of equity in the car.   For example, your car loan is for $15,000.

The value of your car is $20,000.  You have a signature loan with the same creditor for $10,000.  The creditor can make you pay $20,000 to obtain title to your vehicle.  You always have the option to surrender your vehicle if you don’t want to pay the extra amount added onto the loan by your credit union.  The good news is if you surrender your vehicle in the bankruptcy you owe nothing to the car company.

We always recommend having your checking and savings account and/or vehicle at a banking institution where you don’t have any credit lines.  If you have any questions or need to make a decision about whether its better to keep your vehicle or pay the creditor we can assist in letting your know the pros and cons.

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