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.
If you have been living in Florida for over 2 years, the homestead exemption can be used as long as there is less than $189,050 in equity for each person filing. For example, if there are two married people filing a joint bankruptcy, then you can double the exemption amounts so that amount would be less than $371,100 in equity you would be allowed to protect. You can have unlimited equity in your home if you have owned it for 1215 days prior to filing your petition.
This includes another home if you have bought and sold another homestead property within those 1215 days. Typically, this is not an issue since the home equity is usually lower than the allowed statutory amount. If you have moved from another state in the last 2 years, we cannot use the Florida exemptions and would have to perform an analysis on which exemptions apply. Some states allow non-residents to use their exemptions. Other states will require non-residents to use federal exemptions. Most states would not allow you to exempt property in Florida after you have moved from another state.
You must also be residing in your home to be able to claim homestead exemption. The homestead exemption would not protect or apply to an investment property or a property where you are on the deed but are not living in the residence. There are exceptions if you are away from your home temporarily but have full intention of returning. Some examples are being away for medical treatment or being active duty in the military. As long as you intend to return to your home and you are not renting out the property, it can continue to be exempt as your homestead.
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.
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
There are several rules you have to be careful to follow when you are giving or receiving gifts before filing your bankruptcy case. You must disclose any gifts over $600 to any one person two years prior to filing your bankruptcy case. For that reason, it is best to keep the gift giving to a minimum to avoid having to pay the trustee.
You may give towards charitable contributions such as your church up to 10% of your income. It is fine to receive monetary gifts. For example, if your uncle gives you two thousand dollars to help you pay bills, you can that use money on reasonable living expenses without it being a problem.
If you receive regular financial contributions on a monthly basis, that money might have to be considered as income for the purpose of determining your eligibility for a Chapter 7.
I would recommend consulting with an attorney prior to receiving a gift that would be considered an asset like a car. For example, say your parents buy you a $10,000 car that is now titled in your name. That asset would not be fully exempt and that might require you to pay the trustee several thousand dollars.
That could have been avoided by keeping the car in your parent’s name. Do not transfer property out of your name to avoid paying the trustee because any transfers of property would still need to be disclosed for up to two years.
We generally recommend not making any property transfers before filing your case if you can avoid it or definitely get advice prior to doing so.