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6151 Lakeside Dr.,  Suite 2100
Reno, NV  89511

Reno Bankruptcy Attorney

Stephen R. Harris, Esq.

Providing Financial Protection

for 46 Years

There is nothing easy about making the decision to file for bankruptcy. I welcome the opportunity to speak with you personally and confidentially to help you find the ideal solution to your financial challenges.

7 Ways Divorce Impacts Your Bankruptcy

7 Ways Divorce Impacts Your Bankruptcy

When a divorce is entangled with your Chapter 7 or Chapter 13 personal bankruptcy filing, thorough planning and timing are an integral component to legally keeping your assets protected from the bankruptcy trustee and creditors.

Obtaining the best outcome for both spouse partners is of paramount importance throughout the entire process. Since every divorce case is unique, it is difficult to give generalized advice in any concrete manner regarding the best course of action without a detailed evaluation of the circumstances in your individual case. This is another reason why hiring an experienced bankruptcy attorney is a must first step in any case, particularly those involving a divorce petition.

As with most of the legal aspects regarding divorce and bankruptcy it becomes imperative that both parties make a concerted effort to avoid the emotional entanglements that can so easily accompany a divorce specifically, and focus on how best your bankruptcy can benefit both parties.

The following 7 principles are important to understand before entering into divorce or bankruptcy proceedings, and may affect your bankruptcy timing and planning decisions:

  1. Generally speaking, if you don’t have any assets to divide, or joint credit card debt to allocate, and there isn’t child support or alimony issues, you need to file bankruptcy before your divorce.
  2. Bankruptcy proceedings only deal with debts and assets on the date you file for bankruptcy. If financial obligations are created by a divorce decree after the petition date, they will not be included in the bankruptcy.
  3. If you receive property in the divorce within 180 days, (6 months) of the bankruptcy you might lose it to the trustee.
  4. If you are to receive support obligations, such as child support or alimony when you file bankruptcy, all that money will be off-limits to creditors. But property division will probably not be exempt and therefore be subject to creditors.
  5. A bankruptcy court can overrule a divorce court decision regarding what is property division and which are support obligations.
  6. There is an inherent process that can create future debt accrued to either spouse partner.
  7. Property divisions completed prior to bankruptcy are debts that you can avoid. For example, if a divorce court orders a transfer of assets to one of you, insurers when your ex files bankruptcy. However, if a divorce court orders your extra transfer, the property and he hasn’t done so prior to bankruptcy he may be up to escape this kind of debt through bankruptcy.

The 2 Categories of Future Debt Creation Resulting From Divorce

1. Future Support Obligations

A divorce may create support obligations, usually referring to a commitment to provide for the necessary care, support, and maintenance of a dependent child or another person as required by law. Support obligations usually cannot be discharged in Chapter 7 or 11. Even though your individual situation is unique, generally you should plan on being held responsible for the following:

  • Child support
  • Alimony
  • Health and life insurance coverage, medical expenses, birth costs, and child care or special child-rearing expenses.
  • Attorney’s fees for your ex-spouse
  • Some of the debts that your ex doesn’t have to pay

One positive aspect pertaining to the above obligations is that you may be able to better afford them because other debt will probably be wiped out in your bankruptcy.

As a side note, when filing for Chapter 13 bankruptcy, you can make up any amount overdue or delinquent that you may have accumulated before bankruptcy pertaining to support debts. However, if you don’t fulfill your Chapter 13 repayment plan as agreed upon, the court may dismiss your bankruptcy in total. Then all of your past liabilities and debts will come due, none are wiped out and all your creditors and your ex-spouse can come after you with the full force of law.

2. Future Property-Division Obligations

This type of debt is usually created to pay for part of jointly-owned property that the court may award your ex-spouse. The property may be real estate or something like part of your retirement plan. In either case, these may become long term liabilities or require liquidation, the selling of the property, family residence, etc. to satisfy the court’s instructions. In addition, the court may place a lien on your property to secure the payment.

A property settlement obligation can be erased with a Chapter 13, but not a Chapter 7 bankruptcy. Also, with the Chapter 7 filing, your personal debts may be wiped out, but you will likely still have to deal with any liens that were put on your property by the divorce court. This kind of lien may be avoided to the extent it impairs your homestead exemption and should be discussed with your personal bankruptcy attorney.

Careful due diligence should be exercised when dividing up a property before filing for bankruptcy. The trustee will probably look at the property settlement to be sure it was fair and equitable. If a property was divided in a way as to be grossly disproportional and unfair to creditors, the lien-holder or mortgage lender for example will then have the power to recover the property from your ex-spouse to satisfy the debt.

In conclusion please call our office at (775) 786-7600 or (775) 690-9120 and set up an appointment for a free and confidential consultation with me to discuss your financial situation. We will investigate all of your options and alternatives, even those that don’t require you to file bankruptcy at all. Feel free to visit our website at www.harrislawreno.com to learn more about our bankruptcy practice here in Reno.

Credit Card Debt Strategies When Filing Bankruptcy

Credit Card Debt Strategies When Filing Bankruptcy

Almost everyone that declares bankruptcy has some credit card debt. Credit card debt may be your primary cause of bankruptcy or a side issue. Regardless, you will be able to discharge all or most of that debt. When you discharge credit card debt it will automatically give you more flexibility to deal with your other debts.

1. Don’t Pay Off Your Credit Card Debt With the Following:

  1. A home equity loan. Credit card lenders may pressure you into taking out a home equity loan, pointing out that the interest rates are much lower and may be tax-deductible. The credit card debt will probably be discharged and your homestead will probably be exempt. When you take out a home equity loan, you are putting your house on the line for credit card debt that will be eliminated in bankruptcy anyway. 
  2. Part of your retirement IRAs or 401(k)s. In almost all cases your retirement plans are protected in bankruptcy. Also, you may be hit with heavy withdrawal tax penalties if you take out the money prematurely.
  3. Debt consolidation loans. In most cases, these types of loans only delay the inevitable. They lengthen the term of the loan to pay off the credit cards, usually with hefty interest rates.

2. Be Careful Not to Inadvertently Commit Fraud

Generally, credit cards are easy to discharge except when creditors allege fraud on your part.  Fraud is when you knowingly or mistakenly make false representations. Do not give any reason for your creditors to believe that you intended to deceive them. The creditor relies on your honest representation, and if because of your actions the creditor suffers damages your case may be dismissed as invalid. There are several actions that may give creditors grounds to charge you with fraud that I will discuss next. Remember this fact, If fraud can be proven to the bankruptcy judge, he may not let you discharge that credit card debt, or your entire filing may be put into jeopardy.

Here is a list of 6 items that have the potential to give credit card companies grounds to challenge your credit card debt discharge:

  1. Be careful about making a lot of charges before declaring bankruptcy. It may appear you had no intent to pay those charges and were aiming to use the bankruptcy process to put one over on the credit card companies. The closer to bankruptcy the charges appear, the more it appears that you had an intent to defraud.
  2. If after talking to your bankruptcy attorney you then begin making unwarranted charges, it may appear that you already decided to initiate bankruptcy.
  3. If your financial condition is particularly poor when you start making credit card charges, it may appear you have no intent to repay them. If you can point out there was a significant reason to believe your financial condition would change, like getting a new higher-paying job, this may not be a concern.
  4. Be careful of charging luxury items and cash advances in close proximity to a bankruptcy filing. Purchases of more than $500 to a single creditor within 90 days of bankruptcy or cash advances of more than $750 within 70 days are automatically presumed fraudulent. So it may be necessary to wait at least 90 days before filing your bankruptcy to avoid this problem.
  5. Avoid creating new credit card balances or transferring old balances to new accounts within 90 days of filing bankruptcy for the same presumed fraud reason as above.
  6. Be careful of what you put on written financial statements. Creditors can use inaccurate information to claim they relied on your statements to lend you money. If they can prove your statements were purposefully incorrect, they may be able to keep you from discharging their obligation.

Other Actions That May Adversely Affect The Discharge of Your Debt

Writing knowingly insufficient funds checks are considered fraud. Postdated checks are similar in that the creditor can claim he knew the check would be no good and for that reason, it should not be discharged. Writing bad checks not only makes it difficult to open new bank accounts, but also can also earn you a trip to jail.

If you have been receiving government benefits fraudulently, bankruptcy will not discharge this obligation. If you’re still receiving those payments, the government agency may attempt to recoup the excess payments by reducing your benefits and future.

Any conduct that is considered willful and malicious will not be dischargeable in Chapter 7 but may be in Chapter 13. Defining what is “willful and/or malicious” is not easy to pin down, but if the creditor is claiming this conduct you can be headed for trouble. You need to see a lawyer immediately, because if you do not address these allegations the person or agency suing you will win automatically and you’re stuck with that decision. There are separate provisions of the bankruptcy law about debts arising from embezzlement and larceny. These debts are also not dischargeable in bankruptcy.

Criminals’ fines also cannot be wiped out in Chapters 7 or 13. Most courts will not allow you to pay these fines in Chapter 13 while other unsecured creditors are left unsatisfied. The problem arises in that if you don’t pay your fines you may be subject to arrest by the court that imposed them. If you can pay the fines before filing, considering doing so.  Talk to your attorney about this sticky situation.

Noncriminal fines and penalties are usually dischargeable in Chapter 13, but not in Chapter 7.

Restitution is where you’re required by court to repay damages you have caused to another person. Restitution is not dischargeable in Chapter 7 or 13. If a victim sues you and obtains a judgment for restitution, you may be able to discharge it in chapter 13 if you did not cause any personal injuries.

Motor vehicle fines can fall into two categories, minor infractions or criminal violations. Minor infractions, such as parking tickets, are not dischargeable in Chapter 7 but are under chapter 13. Criminal violations are not dischargeable under either chapter. Drunk driving and driving under the influence are considered criminal offenses and therefore not dischargeable.

In Conclusion please call our office at (775) 786-7600 or (775) 690-9120 and set up an appointment for a free and confidential consultation with me to discuss your financial situation. We will investigate all of your options and alternatives, even those that don’t require you to file bankruptcy at all. Feel free to visit our website at www.harrislawreno.com to learn more about our bankruptcy practice here in Reno.

5 Categories of Debt-Relief That CANNOT Be Wiped-Out By Bankruptcy

5 Categories of Debt-Relief That CANNOT Be Wiped-Out By Bankruptcy

When considering debt-relief with a bankruptcy filing there are a number of obligations that cannot be wiped out. There are generally 5 categories that I will discuss in detail within this article. Some debts cannot be discharged because of specific statutes or prohibitions in the law, and will not be dis-chargeable just because of inexperience or plain sloppiness or timing of filing.

1. Debt-Relief Cannot Occur After Your Bankruptcy Filing

Debts are created by the event, not when you get the bill. If you buy a car with a loan, the debt is created at that moment, not when you get your first bill for payment. If you’re considering or must have substantial medical treatment that is uninsured, the resulting debt will not be covered by bankruptcy if you file before the treatment. If possible, delay the bankruptcy filing until after the medical treatment, and then include the debt in the bankruptcy filing.

2. Debts That Aren’t Listed in Your Bankruptcy Filing

Many times you may forget to list a creditor in your bankruptcy filing. Occasionally you might not even know you have a debt because the creditor stopped sending you a bill. Prior to filing bankruptcy be sure to go to all three credit unions to get a list of all the creditors you may own. Even if you are not sure of the amount you may owe list the debt and the creditors address. If this amount is wrong it puts the creditor in the position to have to file a proof of claim to establish the amount that actually owed. The point is you have listed the debt to discharge.

For example in Chapter 13 cases, debts are dischargeable unless you amend your filing to include those creditors who you may have forgotten on the original application. You have 90 days from the 341 meeting to make the amendment.  Creditors then have 60 days to file a proof of claim.

In Chapter 7 cases, the unlisted debt is not technically discharged. In over 95% of non-asset Chapter 7 cases, the creditor would not have received any money even when the debt was listed. In this case, most courts, but not all, allow the debt to be discharged.

Comparison of Non-Dis-chargeable Debt: Chapter 7 Versus Chapter 13

  • Marital and domestic support obligations are not dischargeable under Chapter 7 and dischargeable if paid under Chapter 13 plan.
  • Marital property divisions are not dischargeable in Chapter 7 and are dischargeable under Chapter 13 plans.
  • Student loans are not dischargeable under either Chapter 7 or 13 unless undue hardship can be proved.
  • Claims made for investment or theft are not dischargeable in either Chapter 7 or 13.
  • Criminal fines and restitution are not dischargeable under either chapter.
  • Non-criminal restitution is dischargeable under Chapter 7 and Chapter 13 unless there was willful conduct causing personal injury, fraud, or embezzlement.
  • Personal injury claims from drunk driving are not dischargeable in Chapter 7 nor dischargeable in Chapter 13 and must be fully paid in Chapter 13.
  • Motor vehicle fines and tickets are not dischargeable under Chapter 7 but are dischargeable if a minor infraction. They are not dischargeable if the conduct was criminal.
  • Claims for willful or malicious contacts are not dischargeable in Chapter 7 but may be under Chapter 13 unless assessed by the court.
  • Pension loans are not dischargeable under Chapter 7 but are dischargeable in Chapter 13, but the debt amount can still be detected from the pension account.
  • Welfare and unemployment benefits that were wrongly received are not dischargeable under Chapter 7 or 13.
  • Debts resulting from fraud are not dischargeable in either Chapter 7 or 13. This would include debts created immediately before filing, like credit card charges and other debts where the debtor had no intension to pay.
  • Real estate and personal property taxes that were incurred less than one year before bankruptcy are not dischargeable in Chapter 7, and in Chapter 13 plans, must be fully paid.
  • Trust fund taxes are not dischargeable. Trust fund taxes are those taxes that were withheld from employee paychecks there were supposed to be paid. So if a business is shaky be sure to pay these employment taxes before anything else, because they will never go away.
  • Loans that were made to pay non-dischargeable taxes are not dischargeable in Chapter 7. They are dischargeable in Chapter 13 unless borrowed fraudulently. For example, if you used a credit card to pay taxes while planning bankruptcy.

3. Reaffirmation of Debts in Your Bankruptcy

Other than taxes, which we will look at in a separate chapter, the only other debt that is not dischargeable are those that are reaffirmed.  Reaffirmation is the process in which you agree to pay all or part of the debt.  It gives all the rights back to the creditor. Why would one reaffirm?

The major reason is that a debtor wants to keep the debt is he want to keep the collateral that secures the debt.

4. Your Bankruptcy Petition Can be Thrown Out – Revoked

Speaking of discharges, your bankruptcy petition can be revoked altogether. If that happens your filing is thrown out and you will not receive any relief from your debts. There are several reasons a bankruptcy may be denied:

Grounds For Revocation of Your Chapter 7 Bankruptcy Filing

  • Purposely fail to list an asset on your bankruptcy schedules.
  • Intentionally give false information in your bankruptcy schedules.
  • Lie or mislead trustee at the 341 meeting.
  • Fraudulently transfer property within one year before bankruptcy.
  • Fail to complete a financial management course after bankruptcy (required under BARF).
  • Refuse to cooperate with the trustee.
  • Disobey an order of the bankruptcy court.
  • Fail to file all federal tax returns that should be filed with the court.
  • Aggressively convert non-exempt assets into exempt assets.
  • Previously received a Chapter 7 discharge in a case filed within eight years of the current filing, or within six years if a Chapter 13 case
  • Failure to report or surrender property to the bankruptcy estate.

Grounds For Revocation of Your Chapter 13 Bankruptcy Filing

  • Failure to complete a financial management course while your bankruptcy was pending.
  • Failure to file all your federal tax returns that should be filed with the court.
  • Have not kept current with your post-petition support payments.
  • Received a discharge in a prior Chapter 7, 11, or 12 cases within four years of your present filing or in a previous chapter 13 case filed within two years.
  • Failure to cooperate with an audit after the discharge or you don’t satisfactorily explain mistakes in your paperwork.

5. How Income Taxes Are Handled in Your Bankruptcy

Income taxes fall into a special category, so we need to look at them in detail. Taxes due within three years are also priority items, which means they get paid before other items. Income taxes can be wiped out in bankruptcy under certain specific circumstances. To file bankruptcy, you will need to prepare the last four years’ income tax returns and have them available for the bankruptcy trustee. As a general rule, taxes that are less than three years old, you’re going to have to pay through a Chapter 13 plan or make arrangements with the IRS for payment.

Taxes that have not been paid that are more than three years old and were assessed more than 240 days prior to the filing date are dischargeable. Simple right? As with all things IRS there are a number of possible caveats:

  1. First, the taxes must be true, and you can’t have engaged in tax evasion. Your only excepted failure is not paying in a timely manner.
  2. Be careful of timing. The start of the 3-year period normally is April 15 of the following year of the period, but if you file an extension, it starts after the extension expires.

There are three possible reasons that the 3-year period can be extended:

  • If the IRS was prevented from collecting taxes because of a due process hearing, that time does not count, and an additional 90 days is added.
  • Similar to the above any amount of time that a taxpayer assistance order was in effect, also does not count, and an additional 90 days is added.
  • If you had a prior bankruptcy, the time the case is open does not count and 90 days are added to the three years.

If you never filed a tax return you will NOT be able to avoid paying them. There is no statute of limitations on non-filed returns.

How The Timing of Tax Payments Affects Your Bankruptcy

There are several timing decisions when dealing with tax payments that can affect the amount of taxes you may ultimately owe. When the IRS files a notice of tax lien with your county before you file bankruptcy it makes it even more difficult to discharge taxes. The lien gives the IRS a prior claim on all your assets, even retirement plans. So, they still encumber pre-petition assets.

When you file a Chapter 7, you may have the trustee use liquidate assets to pay your current taxes, but you must make an election to do so shortly after filing bankruptcy.

In Chapter 13, is critically important that you factor into your repayment plan the taxes the amount you do owe and that you expect to owe. If you don’t fulfill your plan agreement the entire bankruptcy can be revoked or denied.

Before filing bankruptcy, sometimes you want to consider paying non-dischargeable taxes by selling nonexempt property and paying off the tax debt. Always consult your bankruptcy attorney before taking this step.

State Income Taxes

Generally, the same rules apply to state income taxes that are covered by the IRS. If any of your federal tax liabilities change, be sure to file an amended state tax return also. You want to take advantage of any federal discharges that might apply to the state also. In Nevada, since there is no state income tax, this is one less thing to worry about.

Other Types of Taxes

Generally, non-income taxes are dis-chargeable in Chapter 7 or Chapter 13. The event that causes the tax liability must be more than three years before the filing date.

Property taxes are assessed against the property and land and only become an issue if you want to keep the real estate. You need to include provisions to pay these property taxes in any Chapter 13 plan.

Personal property taxes are not dis-chargeable if they are assessed against the owner and are less than one-year-old.

Please call our office at (775) 786-7600 or (775) 690-9120 and set up an appointment for a free and confidential consultation with me to discuss your financial situation. We will investigate all of your options and alternatives, even those that don’t require you to file bankruptcy at all. Feel free to visit our website at www.harrislawreno.com to learn more about our bankruptcy practice here in Reno.

4 Major Details of Filing for Bankruptcy

4 Major Details of Filing for Bankruptcy

To this point, we have given you a general overview of Chapter 7, Chapter 13, and Chapter 11 bankruptcy processes. Let’s look at 4 major details of filing for bankruptcy in order to determine how bankruptcy can best work for you.

1. Exemptions and Non-exemption Property

When you file bankruptcy, all your real and personal property  becomes section 541 property of the bankruptcy estate.

The bankruptcy law is designed to not leave you impoverished and destitute. It leaves you with the basic necessities of life in order to enable you to get a new start. These necessities are exemptions or so-called exempt property that are beyond the reach of creditors. The other assets that you have are the non-exempt properties. The non-exempt assets are the ones that the bankruptcy trustee may take or demand turnover on behalf of the creditors.

Determining which assets are exempt and which assets are nonexempt is a complicated process, especially under the amendments of the 2005 bankruptcy law.  Thirty-four states have opted out of the federal bankruptcy exemption scheme, and theoretically have their own list of exempt assets. Nevada is one of those states that allows you to use the state exemption instead of the federal exemptions. There are 16 states that allow you to use either the federal or the state exemptions, and you can then choose which ones are best for you. 

Every state allows different exempt assets. In Nevada,  exempt assets are listed under NRS 21.090, which is entitled, Property Exempt from Execution. Here is a summary of major Nevada exemptions:

  • $15,000 equity interest in an automobile, and in a joint filing up to $30,000 against one car or up to $15,000 for each car.
  • Up to $550,000 of equity in your homestead residence. To claim this exemption you not only have to own the home, but you also have to live in it at the time you file the bankruptcy petition.
  • One gun and two guns if a joint bankruptcy. You might have one gun that’s worth $50,000, but it would still be exempt from creditors, notwithstanding the high value on the one exempt gun.
  • Up to $500,000 in a retirement account or pension or unlimited exemption in ERISA per IRS Code 408 or 408a under the IRS Code.
  • $12,000 of household goods and clothing. Including a wedding ring. Usually, wedding rings are considered family keepsakes. That means you can have a wedding ring worth hundreds of thousands of dollars and argue that it is a family keepsake. If both husband and wife are filing for bankruptcy, you can stack (or double) the exemption for a joint filing. Valuations of these household goods are based upon the fair market value at the time of the bankruptcy filing. You can use thrift shops or auction values, which are usually a tiny fraction of their original retail value.
  • Up to $16,150 of personal injury awards and all other amounts would go to the bankruptcy trustee.
  • Social security and disability incomes are exempt.
  • Up to $5,000 in a private library, art, family pictures, musical instruments, keepsakes, and jewelry.
  • Up to $10,000 in tools of your trade or to carry on business.
  • Up to $4,500 in farm equipment and supplies.
  • Up to 75% of the disposable earnings per week, or 50 times the minimum hourly wage.
  • All money, benefits, privileges, or immunities accruing in any manner growing out of life insurance. The cash surrender values of that insurance would be exempt.
  • Any vehicle equipped or modified to provide mobility for a person with a permanent disability.
  • Any prosthesis or equipment prescribed by a physician.
  • The money for a 529 education plan.
  • All money and other benefits paid pursuant to the order of a court for the support, education, and maintenance of a child or a former spouse
  • Up to $1000 in a “wild card” exemption, of cash, stocks, bonds, etc.
  • Proceeds received from a private disability insurance plan.
  • Money in a trust fund for funeral or burial services.
  • Unemployment compensation benefits received pursuant to NRS 612.710.
  • Child welfare assistance provided pursuant to NRS 432.036.
  • Stock in a Corporation with less than 100 shareholders, but any dividends from that stock are not exempt.
  • Uniforms for doing your job.
  • Rent deposits that you have with landlords as security for rented property.

This is not all the exemptions, but you can see the list is quite extensive and will not leave the bankrupt petitioner destitute. Nevada residents will probably stay with their state exemptions, which in most cases are more generous than the federal ones, and probably more generous than most other state exemptions.

2. The Critical Concept of Valuation

Household goods and similar items are usually valued at what a secondhand or thrift store would ask for similar items. Automobiles can be valued by Kelly blue book or by numerous websites for automobiles in or similar condition. Real estate should be similar to properties that have sold for in the community. Assessed values can be obtained through your local tax assessor as an additional guide. Real estate listing prices almost always tend to be higher than real values, so don’t rely on them.

3. Secured Creditors and Your Assets

Some creditors have a great interest in your assets because you have given them extra protection when you made the original agreement with them. These are your “secured” creditors. A good example is your home. You may have bought it for $300,000, but you borrowed $250,000 along with your $50,000 down payment to purchase it. There may be a few other creditors, like the IRS, or support obligations that have special priority interest also (We will talk about those in a later section).

Chapter 7, Chapter 13 and Chapter 11 bankruptcy filings each treat  your assets differently. In Chapter 7, you will lose your non-exempted asset. In Chapter 13, you either make payments over the life of your reorganization plan to pay back the value of those non-exempt assets to the creditors, or you give the non-exempt assets  up to the  standing trustee.

The standing trustee then sells the non-exempt assets and distributes the net proceeds to your allowed creditors on a pro rata basis. The repayment plan may take as long as five years. In Chapter 11, your renegotiate the values of assets and make a plan to pay off the creditors  over a period of time, sometimes as long as 8 years.

Secured creditors are those that have liens on your real or personal property. A lien is simply a claim on the property that secures the lender’s interest until you fulfill your agreement to pay  for the loan in full. After the loan is paid for, the lien is released and you own it free and clear.

In bankruptcy, if the lender has a lien on your real and/or personal property, he has a prior right to be paid before bankruptcy wipes out your obligation to that lender. The lender usually “perfect” their security interest in the assets by recording their lien in public records, either a deed of trust for real estate or a UUC-1 for personal property.  If a lien is not perfected, the bankruptcy trustee has the power to eliminate non perfected liens.

There are two kinds of liens:

  1. Consensual liens are those that you voluntarily grant to someone else. They may be for personal property like furniture and automobiles, or they may be for real property, which is usually referred to as deeds of trust or mortgages. In both cases, you borrow money from someone and give them a lien or security interest in certain property until you pay the lender off.
  2. The other kind of lien is a non-consensual lien. This type of lien you never volunteered for, but the law gives creditors a lien to secure something. A perfect example of this is the real property tax on your home or investment property. Another example is when a court enters a judgment against you, they might receive a lien against your property to secure the judgment.

This is important because many times debtors filing bankruptcy have a judgment lien recorded against their homestead and that judgment lien prevents the debtor from claiming their full exemption. The bankruptcy court, the debtor can then file a motion to set that judgment lien aside, assuming that judgment lien impairs the debtor’s exemption.

You usually cannot cancel a security lien, but you can reaffirm their interest, and pay it off over 3 to 5 years in a Chapter 13 case. In Chapter 7 bankruptcy you can redeem the property by paying for it within 30 days of the 341 meeting. In either case, you wind up by keeping the property.

The concept of liens is important because, in bankruptcy, your personal liability is eliminated, except the lien still secures creditor’s interest in the property. In other words, they can still repossess the property until you pay for it.

Bankruptcy gives you special powers and options to remove liens from some exempt items.

We said previously when you file bankruptcy, everything becomes property of the bankruptcy estate, unless exempt. This means not only “things”, but also any “interest” you might have in them. For example:

  • Any proceeds from the sale or rental of property. If you receive rents, they belong to the estate. The trustee will usually allow you to use rents to pay for the expenses, like the mortgage, taxes, repairs, insurance, etc.
  • Inheritance rights arising within 180 days of the filing date.
  • Martial property divisions with 180 days of filing.
  • Any property you transferred within two (2) years of the petition date.
  • Any debts or tax refunds that are owed to you.

4. What Do You Own?

Your “interest” in property may not be what it initial appears to be. For example, if you jointly own property, your interest is in the part, not the whole. You might be in a real estate partnership with three other people, and only your part is subject to the jurisdiction of the bankruptcy.

If you own a car worth $20,000, but you have secured loan against it for $15,000, then your interest is really only the difference of $5000. The loan has a priority or secured  claim on the balance.

A home is frequently owned by both spouses. In Nevada, because it is a community property state, the home become property of the bankruptcy estate (unless exempt), even if the other spouse does not file for bankruptcy (more on home ownership later).

In conclusion, there is always a lot to think about when contemplating filing for any type of bankruptcy. At Harris Law Practice we have been providing financial protection and guidance in the Reno area for the last 45 years. I am here to help. Bankruptcy may not be your only option. Let’s explore all of the alternatives to filing bankruptcy and possibilities that could exist for you.

Let me work with you. Please make an appointment at 775-786-7600 or 775-690-2190 for your free, confidential and personal consultation to talk things over .

8 Common Alternatives to Filing Bankruptcy

8 Common Alternatives to Filing Bankruptcy

First, we will look at the alternatives to filing bankruptcy and the pros and cons of each alternative for filing bankruptcy in detail.  Potential filers may use one or all of the below-detailed suggestions to restructure their finances in order to avoid filing bankruptcy.

1. Getting Help From Your Family

Family help may be an alternative for you, but you must be careful not to make a bigger mess and create a possible lifetime of resentments. Unless you change your habits and restructure your finances, the problems that got you into possible bankruptcy will likely not change. If you use your family’s money, be sure the money is used wisely and you don’t wind up in bankruptcy anyway. If you have a nonexempt asset, you might want to give them a security interest in the asset, so that if you are not able to pay them back and you wind up filing for bankruptcy, then the family loans are protected by the valid security interest in non-exempt assets.

2. Selling Assets

If you have significant non-exempt assets that can be sold to pay off your debts, it might be wise to do so, since you will probably lose them in the bankruptcy anyway, assuming those assets are not transferred out prior to the Petition filing. The assets that you should sell are known as nonexempt assets. These are assets that are not protected under the bankruptcy or State exemption laws.

If you do sell nonexempt assets, do so at a fair market price. Do not repay friends and relatives if there’s any possibility of bankruptcy prior to one (1) year filing bankruptcy. They may be forced to repay that money to the bankruptcy trustee.  Section 547(b).

Exempt assets are those that you will probably be able to keep even if you are filing bankruptcy. So don’t let the creditor force you into selling an exempt asset.

  • In Nevada, your home equity is protected up to $550,000.
  • Your individual retirement accounts up to $500,000
  • An automobile up to $15,000 in value
  • Household and personal belongings up to $12,000 in value.
  • One gun

Nevada property exemptions.  Property exempt from execution listings are found in NRS 21.090 and are briefly described as follows:

  • Pension, retirement, or IRA, 1 gun, private libraries, works of art, musical instruments up to $5000 in value.
  •  Farms trucks, farm stock, farm tools, farm equipment, and supplies not to exceed $4500 in value.
  • Professional libraries equipment supplies and tools, inventory, material seized to carry on the trade or business of the debtor not to exceed $10,000 in value;
  •  for any work income, 75% of the disposable earnings of a judgment debtor during that week, or 50 times the minimum hourly wage prescribed by certain federal fair labor standards act provisions.
  • all money benefits privileges or immunities occurring or in any matter growing out of any life insurance.
  • all money and other benefits paid pursuant to the order of a court of competent jurisdiction for the support, education maintenance of a child.
  • all money and other benefits paid pursuant to the order of a court of competent jurisdiction for the support and maintenance of the former spouse [alimony].
  • payments in an amount not to exceed $16,100, received as compensation for personal injury, not including compensation for pain and suffering an actual pecuniary loss.
  • payments received pursuant to the federal Social Security act.
  • any personal property not otherwise exempt from execution not to exceed $1,000 in total value, also known as the wildcard exemption.
  • the stock of the corporation described in subsection 2 of NRS 78.746 except as set forth in that section.

Every state is somewhat different in their approach to exemptions and the values for those exemptions.  Nevada is considered a more generous state for allowing the debtor’s exempt property. The other States that have generous homestead laws are Florida, Texas, Massachusetts, and Oklahoma.

3. Lower Credit Card Interest Rates

There is a possibility you may be able to move credit card balances from high-interest rate cards to lower ones. Sometimes this can have a significant effect in lowering your monthly cash outflows, but what ultimately happened is that you wind up extending the terms of the balances that you do owe. Be careful about opening new credit card accounts to pay off old ones. If the new account was opened within the year of your filing bankruptcy, the credit card company may attempt to claim it was fraud and tried to prevent you from discharging that debt.

4. Restructure Your Home Mortgage

Usually one of the largest expenses that you have is mortgages on your home. If you can restructure the mortgage terms, it may give you more cash to pay your regular monthly bills. Begin negotiations with your lender as soon as possible. Most banks and mortgage companies don’t really want your house back, they want the money that is outstanding on the loan. Foreclosure is a huge hassle for everyone involved, so they are usually willing to look at alternatives.

Every government agency has programs designed to avoid foreclosure. If your home is insured by the Federal Housing Administration, Veterans Administration, Farmers Home Administration, or HUD, contact them to see what programs they may have available that is best for your situation. Since the 2008 housing valuation bust, these governmental agencies and bank lenders have created numerous new programs for homeowners to avoid foreclosure.

If you have significant equity in your home, you will almost always get more proceeds by selling it yourself rather than letting it go into foreclosure.  But remember, the equity in your home will be protected in bankruptcy up to the state homestead amount.  If you’re facing foreclosure, it’s well worth the attorney’s fee to discuss your home and the bankruptcy ramifications on your house.

Be careful about using home equity loans to pay your debts. Home equity loans are secured by your home and may place it at risk if you cannot pay the loan. Home equity loans do have the advantage that they are usually tax-deductible and the interest rate is lower than credit cards. The trap that many people fall into is that they pay off their credit cards, increase their mortgage payments, and then begin using the credit cards again. So, they eventually wind up with more debt than they had started with and now their home is at risk also.

5. Negotiating With Your Creditors

Although this sounds good, in most practical situations, especially with credit cards and consumer debt, renegotiating with your creditors seldom works.  Work out agreements are the most valuable when you have significant nonexempt assets available to pay off your debts, but you need time to make the appropriate arrangements.

6. Using Retirement Plans

Using retirement plan monies is almost always a bad idea for several reasons.

  • Retirement plan monies are almost always protected in bankruptcy.
  • Most debts that you would pay with your retirement plan monies would be wiped out in bankruptcy anyway.
  • If you withdraw retirement plan monies early, there may be serious tax due.
  • If you don’t repay retirement plan loans, that non-repayment will also incur tax penalties.

7. Threat of Bankruptcy

Part of negotiating with creditors can include the threat of bankruptcy. Sometimes the threat of bankruptcy will give you additional leverage in an offer to pay less than you owe. If the creditor thinks the bankruptcy will completely wipe away the debt he might be willing to accept a greatly reduced settlement on the balance you owe. If you hire a bankruptcy attorney to handle the negotiations, it becomes evident to the creditor that you might fulfill your threat.

Be careful about threatening bankruptcy to secured creditors where you are behind in payments, like automobile loans, because you might wake up one morning and find the car has been repossessed.

8. Moving to Another State

Finally, one of the last alternatives to filing bankruptcy is the simplest but can be fraught with many problems in the future. Occasionally, moving to a different state and simply ignoring the bill collectors, can make financial sense.

Moving to a different state requires a creditor to comply with a different set of laws to collect the debt. If you have few assets, do not care about your credit rating, and most of your income comes from social security benefits, welfare or unemployment, you might decide to totally ignore your past financial problems. This decision will probably require you to change your lifestyle, by not having assets in your name, limiting bank accounts, and dealing more with cash and money orders.

If you are sued, and a judgment is entered against, you may have to worry about bill collectors finding what little you do have. You must be careful about having bank accounts because the judgment holder or a collector can seize all the money in them. In some cases, these judgments can go on for as long as 20 years. So, do not make this choice lightly.

In conclusion, there is always a lot to think about when contemplating filing for any type of bankruptcy. At Harris Law Practice we have been providing financial protection and guidance in the Reno area for the last 45 years. I am here to help. Bankruptcy may not be your only option. Let’s explore all of the alternatives to filing bankruptcy and possibilities that could exist for you.

Let me work with you. Please make an appointment at 775-786-7600 or 775-690-2190 for your free, confidential and personal consultation to talk things over .

The Chapter 7 Bankruptcy Processes You Should Know . . . Continued

The Chapter 7 Bankruptcy Processes You Should Know . . . Continued

This article will primarily deal with the processes involved with the filing of chapter 7 bankruptcy, sometimes called ‘consumer,’ or ‘personal’ bankruptcy and is a continuation from the article of the same name.

Step 7 – Notification of Creditors

About 7 days after the court receives your chapter 7 bankruptcy petition, it will notify all those creditors that you have listed on your filed pleadings that you have filed bankruptcy. The court will announce the case trustee and the date and time for the section 341 first meeting of creditors.

Step 8 – Supplying Copies of Your Federal Tax Returns

At least one week before the 341 meeting, you must supply copies of your most recent federal tax returns to the trustee and certain financial documentation, such as three months bank statements incurred prior to filing.

In chapter 13 cases, you must supply the standing trustee the last four years of your tax returns. If you fail to supply these tax returns, your case may be dismissed.

Therefore, it is important to file your tax returns prior to filing the bankruptcy.

Step 9 – Chapter 7 Bankruptcy 341 Meeting; First meeting of Creditors

Most petitioners dread the 341 meeting because they do not know what to expect. This fear is usually way overblown. Since these meetings are open to the public, we suggest that you attend a meeting for other positioners prior to attending your own. Since 341 meetings are little different between Chapter 7 and Chapter 13, be sure to attend the correct kind of filing meeting. This will give you a complete and accurate picture of what actually goes on at a 341 meeting and enables you to be thoroughly prepared for your own.

In Chapter 7 cases, seldom do any creditors show up at the meeting, although one or two might. They do have the right to ask questions, but this does not frequently happen. The 341 meetings are not emotional affairs. There are conducted to gather, clarify and affirm the statements that you made in your bankruptcy filing documents, with respect to assets and liabilities.

The 341 meeting usually takes place 30 to 40 days after you file. The trustee conducts the meeting, and you and your attorney must attend. Also bring proof of your Social Security number and a photo identification document, like a driver’s license.

Typically, the trustee will ask you if you have any nonexempt property that can be sold to pay off creditors. They may also ask about any payments or transfers you made in the two years preceding the bankruptcy. They will probably also ask about the value of your home, value of your car, any retirement plans, and other questions that meet the requirements of the state you live in.

They may also ask about nonexempt assets that you may want to keep, and if so, arrange for you to pay for them. If you do not want to keep nonexempt property, the trustee arranges to have those assets evaluated and picked up. They will then be sold for the benefit of creditors.

Your attorney will review 341 meeting questions with you before the meeting. An experienced attorney can usually anticipate any areas of uncertainty and will usually deal with those before the 341 meeting. In most chapter 7 cases there will be little or no nonexempt assets. Usually this is the end of 341 meetings. In about 60 to 90 days after the 341 meeting, the bankruptcy debts are discharged, assuming the debtor passed and file their post condition credit counseling certificate.

There are a few milestones and chapter 7 bankruptcy processes that you want to keep in mind:

  1. The trustee has 10 days after the 341 meeting to decide whether you passed or failed the Means test. If you fail, the trustee will ask the court to dismiss your case.
  2. The trustee and creditors have 30 days after the 341 meeting to object to any of your claims of exempt property. If you have amended exemption claims, the 30 day clock starts from the time of any amendments.
  3. Creditors have 60 days to object to the discharge of certain kinds of debt. If they don’t file objections, it’s too late for them to do it later, and you are over the last bankruptcy hurdle.

All these deadlines assume you have supplied accurate information and have answered questions accurately.

Section 341 first meeting of creditors are important for the debtor filing the petition,  in that they will have the opportunity to answer questions the bankruptcy trustee for their case might have with respect to the extent location and availability of assets to pay creditors’ claims, as well as information regarding the liabilities of the petitioner.  For creditors, some opportunity to ask questions of the petitioner with respect to his available assets and liabilities in the case as well as asking questions about inconsistencies found in the schedules of assets and liabilities, and statement of financial affairs filed by the debtor.  

Additionally, this section 341 first meeting of creditors date triggers the time for filing complaints objecting to discharge then go 90 days after the time first set the 341 meeting, as well as time for the debt of the bankruptcy trustee to object to the debtor’s claim of exemptions – 35 days from the date last set for the section 341 meeting.  Extended 341  first meeting of creditors are not encouraged  by the bankruptcy trustee and the debtor’s attorneys, especially if the question becomes too intense at the 341 meetings specific to a creditor’s particular issue  concerning the debtor.

After 15 to 60 minutes of questioning the chapter 7 bankruptcy trustee will more than likely suggest and/or recommend to the creditor or the creditor’s attorney asking the questions to notice  a rule 2004 examination in order to ask the debtor questions in a formal atmosphere with no time constraints.  Normally there are time constraints at a section 341 first meeting creditors because there are other scheduled debtors to give testimony and to answer questions to the bankruptcy trustee, normally anywhere from 3 to 8 cases every half hour.  

 Assets in Chapter 7 cases 

In a few Chapter 7 cases that have assets that need to be liquidated or distributed for creditors, the case will remain open until all those assets are dealt with. Sometimes, depending on the kind of assets, their disposal can take quite a long time, sometimes years. Once your case is filed the non-exempt assets are turned over to the trustee and those assets become property of the bankruptcy estate, and no longer yours to do what you want.

You must, of course, cooperate with the trustees to dispose of those non-exempt properties and assist with collecting any monies or properties that might be owed to you. You may have tax refunds that are outstanding at the close of bankruptcy, or outstanding real estate or personal notes that needs to be collected or sold to pay your creditors.

Those are the steps that you must go through to finalize your Chapter 7 bankruptcy case. Barring any foreseen complications, you should be done with your bankruptcy case in about 120 to 180 days after the 341 meeting.

I know there is a lot of information here so my advice is to call our office at (775) 786-7600 or (775) 690-2190 anytime to set up a complimentary and confidential consultation with me at your earliest convenience. You can also visit our new business Facebook Page for more information.