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Reno, NV  89511

Reno Bankruptcy Attorney

Stephen R. Harris, Esq.

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Bankruptcy Laws Specific to Nevada

Bankruptcy Laws Specific to Nevada

Bankruptcy Laws Specific to Nevada

Nevada State Flag

The Nevada State Flag

“If you are concerned about losing a lot of your personal property or real property assets because you are contemplating filing for Bankruptcy; in Nevada you may be able to rest a little easier. Nevada is known as a debtor-friendly state that protects many forms of personal property. Nevada has state exemption laws that protect certain amounts, and types of personal property and real property assets from creditors.”

Nevada State Exemptions 

When you file for Chapter 7 bankruptcy, Nevada bankruptcy law allows you to exempt certain personal property and real assets from being sold by the bankruptcy trustee to pay off your debts. This means that you can keep a certain amount of real property, such as your home, personal property, tools of your trade, including a certain amount of money. This allows people to truly achieve a fresh start after filing a chapter 7 bankruptcy, by helping to ensure that they can still maintain a decent standard of living

Nevada’s bankruptcy exemptions also play a role in Chapter 13 bankruptcy. You keep all of your property, but you’ll pay the value of nonexempt property in a Chapter 13 repayment planIf you choose to, or are required to file a chapter 13 bankruptcy, the exemptions help determine how much you will have to repay creditors through your repayment plan.

Exemptions are the laws that determine what assets and  personal property you can keep after filing bankruptcy in Nevada. Each state has its own specific exemption laws which dictate what type of personal property and real assets you can keep. The amount of protection, and the details vary from state to state.Specifically, Nevada has chosen to not use the federal bankruptcy exemptions. This means that if you file for Chapter 7 bankruptcy in Nevada you must use the Nevada state exemptions for your bankruptcy case.

hat happens to nonexempt property in a Chapter 13 bankruptcyThe trustee won’t sell your nonexempt property. Instead, you’ll pay an amount equal to the value of the nonexempt property to your unsecured creditors (creditors whose debt isn’t guaranteed by collateral). For instance, suppose that you aren’t able to exempt a boat worth $15,000 or a timeshare valued at $7,500. You’ll need to pay your unsecured creditors at least $22,500 over the course of your three- to five-year plan.

 

Nevada Residency Requirements

Nevada is known as a transient state. There’s a lot of people coming and going from in and out of state. I often meet with people that are new to the area, and they’re looking to file for bankruptcy. The rthe first question is how long do you have to live in Nevada before you can file for bankruptcy here.

The bankruptcy rule is that the court has jurisdiction over you as long as you have lived in Nevada over 90 days of the last 180 days. The actual rule states that the greater part of the last 180 days you have to have made Nevada your residence. If you’ve been here for three months continuously, you can file for bankruptcy here in the State of Nevada.

If you have been a Nevada resident for at least 730 days (2 Years) before filing a bankruptcy petition then the Nevada bankruptcy exemptions will apply. If however you were moving around frequently, say due to work and weren’t living in any one particular state during the two years before filing for bankruptcy. You would use the exemptions of the state you lived in for most of the 180 days before the two-year period immediately before your filing. You can check this link to learn more about filing for bankruptcy after moving to a new state.

Nevada Automatic Stays

When an individual files for bankruptcy – whether Chapter 7 or Chapter 13 – an automatic stay goes into effect. The automatic stay places a temporary hold on many actions by creditors, including bill collection and foreclosure proceedings. The automatic stay will therefore put a temporary hold on any foreclosure proceedings already in progress while the bankruptcy case is pending.

Additionally, if a foreclosure proceeding has not yet begun, no proceeding will be initiated while the automatic stay is in effect. Though the automatic stay during bankruptcy is not a permanent solution for homeowners, the automatic stay can give the homeowner a temporary reprieve from creditor harassment and give the homeowner time to make more permanent arrangements or repayment plans.

Nevada Non-Exempt Property

Nonexempt or non-dischargeable property is property that you own that isn’t protected in bankruptcy. However remember that the purpose of a Bankruptcy is to provide you with a fresh start, not to make your life more difficult. You will be able to exempt  property listed in your states exemption statutes. You will  likely be able to keep things that  you’ll need to maintain a job and  a home.

Nonexempt property won’t appear in the Nevada state exemptiona list. What will happen to your nonexempt property will depend on the type of bankruptcy that you file, most commonly either chapter 7 or 13. Usually chapter 7 if you can qualify.

Your nonexempt property in a Chapter 7 bankruptcy will be sold by the bankruptcy trustee – a court appointed  official responsible for managing your case—will sell your nonexempt property for the benefit of your creditors. The trustee will use the sales proceeds to pay your bills in the order required by bankruptcy law. Priority debt, such as domestic support obligations (child or spousal support) or tax debt, will get paid first. If you don’t have priority debt, or if funds remain after paying it in full, the trustee will pay your nonpriority unsecured debts, such as credit card balances, personal loans, and utility bills.

A chapter 13 filing property will prevent the trustee from selling your nonexempt property. Instead, you’ll pay an amount equal to the value of the nonexempt property to your unsecured creditors; those creditors whose debt isn’t guaranteed by collateral. For instance, suppose that you aren’t able to exempt a boat worth $26,000 or a timeshare valued at $9,500. You will need to pay your unsecured creditors at least $35,500 over the course of your three- to five-year plan.

Please see this link for a more details within the Nevada Revised Statutes:  statute 11 523(a)

Nevada Non-Exempt Property . . . Continued

The following debts cannot be discharged in either Chapter 7 or Chapter 13 Nevada bankruptcies:

  1. Back child support, alimony obligations and other debts dedicated to family support.
  2. Debts for personal injury or death caused by driving while intoxicated.
  3. Student loans, unless it would be an undue hardship for you to repay.
  4. Fines and penalties for violating the law, including traffic tickets and criminal restitution.
  5. Recent income tax debts (within 3 years) and all other tax debts.
  6. Debts you forget to list in your bankruptcy papers, unless the creditor learns of your bankruptcy case.

The following debts may be declared non-dischargeable by a bankruptcy judge in Chapter 7 if the creditor challenges your request to discharge them.

  1. Debts you incurred on the basis of fraud.
  2. Credit purchases of $1,150 or more for luxury goods or services made within 60 days of filing.
  3. Loans or cash advances of $1,150 or more taken within 60 days of filing.
  4. Debts from willful or malicious injury to another person or another person’s property.
  5. Debts from embezzlement, larceny or breach of trust.
  6. Debts you owe under a divorce decree or settlement unless after bankruptcy you would still not be able to afford to pay them or the benefit you’d receive by the discharge outweighs any detriment to your ex-spouse (who would have to pay them if you discharge them in bankruptcy).

Federal Non-Bankruptcy Exemptions

To confuse things a little more, federal law also has bankruptcy exemption laws in place. Since as I explained previously, Nevada has chosen through the state legislation to not use these federal mandates. Nevada therefore requires people filing for bankruptcy to use these state exemptions instead.

Although you may not use the federal exemptions in Nevada, you are entitled to federal non-bankruptcy exemptions. These federal non-bankruptcy exemptions protect federal programs like veteran’s benefits and federal retirement accounts.

 

Married Filing for Joint Bankruptcy

Keep in mind, if you are a married couple filing for joint bankruptcy, you and your spouse may double the state’s exemptions.  Each of you would be allowed to claim the entire exemption amount allowed by Nevada state law for personal and real property that belongs to both of you.

This applies to any Nevada state exemption unless it is specifically noted that you can’t do so, such as with the homestead exemption. Nevada is one of the few states where the homestead exemption is an exception to the rule and married couples cannot double the amount of the state exemption.

 

Specific State Exemptions in Nevada

Below is a  list that includes some of the more commonly used Nevada bankruptcy exemptions, but there are numerous other exemptions available to protect specific property. Nevada updates its exemption figures periodically. You can verify the current exemption by reviewing the complete text of the specific statute within the Nevada Revised Statutes or by consulting with an experienced local bankruptcy attorney. 

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.

1.   Your Homestead/Primary Residence or Mobile Home

The exemption for your homestead/primary residence or mobile home is up to a valaue equal to a maximum of $605,000 in equity. In order to qualify for this Nevada bankruptcy exemption, you must file a homestead declaration with the county recorder’s office prior to filing for bankruptcy. The home must also be your primary residence and you are current on your mortgage payments. You may then continue to keep making those payments during your bankruptcy proceedings.

To figure the equity or real value you have in your home simply the amount of your mortgage(s) minus what you still owe to the mortgage lender. If your home is worth $385,000 and you owe $125,000 your equity is $260,000 and you would qualify for that exemption since it is less than the $605,000 limit.

The Nevada definition of a homestead accounts for multiple types of homes, including condominiums, manufactured housing, or mobile homes. This would include real property which commonly consists of a parcel of land with a particular type of home on it.

See this link for the actual law within the Nevada Revised Statutes; Nev. Rev. Stat. § § 21.090(1)(l), (m)

2.   Your Personal Property

One of the big fears people have when filing for bankruptcy is that they will lose all of their property in bankruptcy. As we stated above, Nevada is known as a debtor-friendly state that protects many forms of personal property through state mandated exemptions, these include the following:

  • Appliances, household goods, furniture, home and yard equipment to $3000 total.
  • Books to $1500.
  • Burial plot purchase money held in trust.
  • Funeral service contract money held in trust.
  • Health aids.
  • Keepsakes & pictures.
  • Metal-bearing ores, geological specimens, art curiosities or paleontological remains, must be arranged, classified, catalogued & numbered in reference books.
  • Motor vehicle to $1500; no limit if vehicle equipped to provide mobility for disabled person.
  • One gun.

The items listed below are personal property items that are 100% protected through the state bankruptcy exemptions:

  • Health aids (if medically prescribed.)

  • Keepsakes and family photos.

  • Burial plot or funeral service money held in trust. 

  • Escrow and mortgage impound accounts.

  • Collections of metal-bearing ores geological specimens, art curiosities or paleontological remains (these must be arranged, classified, cataloged, and numbered in reference books, Coin collections are not exempt.)

  • Victim crime restitution. 

  • Income tax refunds from state or federal Earned Income Credit.

  • Wrongful death awards to survivors (for the extent needed for support.)

  • Future earnings compensation (for the extent necessary for support.) 

3.   Your Automobile

Many people wonder if they will be able to keep their car in bankruptcy. The Nevada bankruptcy exemption for motor vehicles is up to a maximum of $15,000 of equity. This represents the value of your vehicle after you have paid off the cars loan. There is an unlimited equity in vehicles equipped for a disabled person. 

The Nevada bankruptcy exemption for motor vehicles is up to $15,000 of equity, or For example, someone who owns a vehicle worth $16,000 and owes $10,000 on it will have $6,000 worth of equity in the car. You can find values on websites such as Kelley Blue Book the National Auto Dealers Association. Your bankruptcy trustee will likely favor one of the two websites and expect you to provide a printout from that site as proof of your vehicle’s value.

The trustee might also do one of the following:

  • The trustee will often abandon the car if money wouldn’t be available for creditors after selling it. The trustee must pay off the loan, the amount of your exemption, the costs of sale, and the trustee’s commission. If little or nothing would remain, the trustee will abandon it, and you’ll get to keep it, versus going through the useless  effort of selling it.
  • Redeem the car. Pay the market value of the car to the lender in one lump sum.
  • Reaffirm the car loan. Sign a new loan that will remain in force after the bankruptcy is over and make up the payments in the new agreement. Understand, however, that while you have the right to enter a reaffirmation agreement if you’re current on your payments (and your lender might insist on it), the lender doesn’t have to agree to “modify” the loan in any way.

Many trustees will also allow you to pay for nonexempt vehicle equity. If you wanted to keep your vehicle, it’s likely that you may be able to negotiate a deal with the trustee to pay the amount the creditors would receive minus anticipated sales costs. The trustee might even give you a few months to pay.

So if you’re behind on your car loan before you file for Chapter 7 bankruptcy, and you don’t have the money to redeem it, you’ll be able to keep your car only if your lender is willing to work with you.

4.  Public benefits

  • Aid to disabled, aged, blind and public assistance
  • Industrial insurance (worker’s compensation)
  • Compensation to crime victims
  • Unemployment payments
  • Children’s public assistance
  • Benefits for vocational rehabilitation
  • Social Security Act payment
  • Public employees’ retirement benefits

5.  Tools of Your Trade

  • A maximum of $4,500 of equity in farm tools, trucks, equipment, seed, and stock.
  • A maximum of $4,500 of equity in a prospector or miner’s dwelling, cars, working mining claim, appliances, and tools.
  • A maximum of $10,000 of equity in library tools, equipment, supplies, and inventory.Any uniforms, arms, and accessories that you must keep.

6.  The Nevada Wildcard

There is a “wildcard” exemption of up to $10,000 of any personal property not already covered in the above categories. Available to protect any asset up to $10,000. Some individuals use the exemption to protect boats, RVs, money, or an inheritance. See: NRS 21.090(1)(z)

Although Nevada’s most common bankruptcy exemptions are listed above, several other exemptions exist to protect your property. The state also periodically revises the exemption amounts that is another compelling reason to hire an experienced local bankruptcy attorney. 

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.

6.  Insurance Exemptions

  • Life insurance policy or proceeds.
  •  Life insurance proceeds if you are not insured. 
  • Health insurance proceeds or avails.
  • Group life or health policy or proceeds.

  • Annuity contract proceeds.

  • Fraternal benefit society benefits.

  • Private disability insurance proceeds.

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 .