Articles Posted in Assets and Bankruptcy

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Perhaps you have heard the commercials. Some insurance company offers to put your money into an annuity and give you monthly pay-outs at some point in the future. An annuity contract may be entered into in order to save for the future – for expenses like college or retirement.

The definition of annuity, according to investopedia.com, is as follows:

“An annuity is a contractual financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase.”

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Filing for bankruptcy is a serious decision for anyone, but is often necessary in order to preserve your family and obtain a fresh start. As part of the process you must list all your assets and detailed financial information on the papers you file. Your attorney guides you through the bewildering paperwork that must be filed to make sure you get your discharge. However, you must be very honest with your attorney and tell him (or her) everything. If you do not list everything or try to hide something, it could result in a criminal bankruptcy conviction and jail time. This is just what happened to a Real Housewife of New Jersey.

Teresa Giudice, the star of “The Real Housewives of New Jersey” was sentenced on October 2, 2014 to 15 months in prison and fined $8000.00 for bankruptcy fraud. When she filed with her husband, they concealed on the bankruptcy papers filed the fact that they owned businesses, had income from rental property, and concealed Teresa Guidice’s income from the Housewives show. At her sentencing, the U.S. District Judge berated her stating,

“I’m not sure you respect this court. I’m not sure you respect the law. On the one hand you are a savvy businesswoman who writes successful cookbooks and markets herself so well. On the other hand you say you didn’t know how to cooperate. It defies logic. In the eyes of the law, it doesn’t matter who you are.”

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A Chapter 7 bankruptcy allows consumers overburdened by credit card and medical debt to discharge the debt and get a fresh start in life. In exchange for wiping out the debt the court appoints a trustee who takes certain assets you own and sells them to pay your creditors. However, the trustee cannot take certain property you need for living, e.g. a house you live in with $150,000 equity, a car with $6,000 equity, household goods, computer, retirement benefits and items that do not exceed a certain value, such as wedding rings, watches, bicycles, milk cows, poultry, and life insurance, to mention a few. However, many debtors try to use cut rate attorneys to file bankruptcy, thinking that all lawyers are the same, hoping to save a few dollars in attorney’s fees. Unfortunately, there are lawyers out there who claim to be bankruptcy lawyers who do not know what they are doing and just charge a small fee and then abandon their clients. Here are some disasters I have witnessed in my 36 years of practicing law caused by clients’ lawyers whose cheap fee seemed too good to be true:

1. The client had a car accident lawsuit pending when he filed bankruptcy. His attorney told him it was exempt from the trustee. It was not. The trustee took it over and settled it for $240,000, none of which went to the client.

2. Client lost his house with $110,000 equity. While this would have been exempt under Arizona law, because the client had not lived in Arizona for 2 years, the trustee was allowed to use North Carolina law which only allowed a $20,000 exemption. His attorney did not know this.

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When it comes to guns, motorcycles and prescribed health aides, folks get downright indignant if someone tries to take them away.

It seems people think the second amendment to the U.S. Constitution has something to do with guns. This amendment has been around for a long time. It was enacted by congress on December 15, 1791. It reads as follows: “A well regulated Militia, being necessary to the security of a free state, the

right of the people to keep and bear arms, shall not be infringed.”

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For the first time since 2001, Arizona has increased the exemptions that a Debtor may claim when he files a bankruptcy. When debtors file a Chapter 7 bankruptcy, they receive a discharge of their debts (with some limited exceptions). In exchange for this discharge, a trustee is appointed who takes and sells some of the debtor’s property to be used to pay his creditors. However, pursuant to the Arizona exemptions, there are some items the trustee cannot take. The debtor gets to keep these items to help with her fresh start. Beginning September 15, 2013, the new exemption law allows exemptions in more items of property and for increased values. Some of the highlight are as follows: [NOTE: Regarding a debtor’s home-This was unchanged. A debtor can still exempt equity of $150,000].

530305_cacti.jpg 1. All wearing apparel not in excess of a fair market value of five hundred dollars ($500).

2. All musical instruments provided for the debtor’s individual or family use not in excess of an aggregate fair market value of four hundred dollars ($400).

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In Bankruptcy and in life, a lesson you learned in the sand box, “honesty is always the best policy,” absolutely holds true. Federal Bankruptcy law requires that you include every asset that you own on the day you file your bankruptcy case, as in addition to every debt that you owe to any entity or to any person. You may not pick and choose which assets to list or which debts to include, you must include everything. However, just because you list an item of property on your bankruptcy schedules and statements that are filed on your behalf with the Bankruptcy Court does not mean that you will automatically lose that item of property to the trustee administering your Bankruptcy case. To the contrary, it is very possible that your state has a law on the books that would shield that particular item of property from being lost to your bankruptcy trustee, thereby making it “exempt.”

Some people attempt to come up with wild schemes that would make an unexempt item of property exempt or make that unexempt item of property “disappear” altogether. If you are tempted, please understand that it is NEVER a good idea to attempt to “game” the system and “sell” items of property to friends or family members just so those items are not technically titled to you or technically owned by you on the day you file your bankruptcy case (presumably to attempt to shield these items from your Chapter 7 or 13 Trustee who will sell those items of property for the benefit of your bankruptcy estate and your unsecured creditors). This type of game playing can end very seriously, as it did recently for an Iowa couple who will now spend some time in prison for bankruptcy fraud.

According to the attorneys who prosecuted Gerald and Fay Schuerer, this couple attempted to defraud their creditors out of approximately $380,000.00 of assets that the couple “sold” to friends and relatives with the understanding that the items would be reacquired by the couple after the bankruptcy case was filed. This type of dishonesty absolutely does not pay. Both Mr. and Mrs. Schuerer will spend time in jail, pay substantial fines and assessments to each defendant that was harmed (their creditors), and pay $394,984.00 in restitution to the United States Trustee. As a result of their dishonesty, the Schuerers are much worse off than they were before they filed for bankruptcy. No possession or item of personal property is worth the true price you will pay should you engage in this type of “gaming” activity.

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If you are considering bankruptcy and have an asset that may be of value and that may not be exempt in that bankruptcy case, it would be wise to speak with an experienced bankruptcy attorney before you transfer it to another person or entity.

Transferring assets to anyone prior to filing bankruptcy can result in the loss of the bankruptcy discharge, the loss of the asset or even jail time and fines under certain circumstances. In other words, the law has already “thought of that”.

Congress enacted specific provisions in the bankruptcy code (see sect. 548) which allows Continue reading

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Retirements accounts are usually safe from common creditors both inside and outside of bankruptcy. If the creditor can’t touch the retirement account, it would not be wise for you to do any of the following:

1. Take a loan out against the account
This is a common issue and it is typically a result of good intentions. Most people who are facing financial problems do not want to file for bankruptcy and will do almost anything to avoid it. This shouldn’t be one of those things except in very limited circumstances. Speak to an experienced bankruptcy attorney before signing the loan documents.
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Car Lenders don’t have to wait a certain number of months to repossess your vehicle if you are behind. They don’t have to wait at all. Making a partial payment won’t legally ensure the repossession doesn’t happen either and neither will the fact that you are struggling financially.

Having said that, most car lenders will attempt to work with you if you are late on payments. They typically don’t just take the car the first day you are late.

If you are late and do not see an easy way to catch the car up, here are some options:
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Most retirement accounts are protected from seizure by creditors. Therefore, if you have serious debt, a retirement account, and feel like bankruptcy may be in your future, you shouldn’t do the following:

1. Don’t Cash It Out The fact that you are having to pull money from the account is a sign that you should be talking to a bankruptcy attorney. Once you take the money out of it’s protected “cocoon”, it may not be safe from creditors and the bankruptcy trustee.

2. Don’t Borrow Against It Borrowing against the retirement account can create a number of problems. The first is similar to the “cash out” problem mentioned above. The cash in your hand is not protected. You have also created a new “debt”, that must be paid or you may suffer tax consequences.