Bankruptcy Solutions
Guess what? We voted and America decided that it would be alright if you filed for protection under the bankruptcy code. Bankruptcy protection is available to those who qualify for the relief. If you don’t take advantage of the bankruptcy protection that is available to you, then you have no one to blame but yourself.
Who qualifies? You qualify for relief under the bankruptcy code if the amount of your debts exceeds the value of your non-exempt property and assets. Additionally, you qualify for relief if you cannot meet your financial obligations as they come due.
What happens to your property? When you file for bankruptcy protection all of your property becomes part of the bankruptcy estate. Your property doesn’t really go anywhere. You just list what you own on the bankruptcy petition, schedules and statements that are filed with the court. The bankruptcy estate is like an invisible box created by the filing of your bankruptcy case. All of the property you own goes into the box. The bankruptcy estate includes property you own and possess, like: furniture, tools, cash, cars, boats, electronics, artwork and stock certificates, etc.
It also includes property you own but don’t possess, like: deposits with landlords, brokers, banks and investment companies. Additionally, the bankruptcy estate includes property you are entitled to receive but haven’t, such as: tax refunds, wages, royalties, commissions, vacation pay, severance pay, inheritances, insurance proceeds and payment for goods sold or services provided. Furthermore, if you live in a community property state, like Arizona, all property acquired during the course of the marriage is considered “community property” (subject to a few exceptions) and is included in the bankruptcy estate, even if one spouse is not filing.
Some property does not become part of the bankruptcy estate. The notable examples are: (1) property you acquire after you file for bankruptcy protection, (2) federally qualified retirement plans, (3) collateral for loans, where the licensed lender retains possession of the collateral (pawnbrokers), (4) wages withheld for employ benefit and health insurance plans, and (5) someone else’s property held by you.
What is your property worth? You will need to determine what your property is worth. The internet is a great tool for helping you determine the value of your property. You can find the value of your car or truck using the Kelley Blue Book at www.kbb.com. Use the private party value. You can find the retail value of the rest of your property using www.craigslist.com or www.ebay.com. If you only own a percentage of the property, the value using will reflect your percentage share. Some property is not easily valued and you may need to get the help of a professional to arrive at the appropriate value.
What’s property is exempt? Filing for bankruptcy protection would not provide you with a fresh start if it left you destitute. Accordingly, some property is exempt from the bankruptcy estate to get you started with a new financial beginning. What property is exempt is determined by the state in which you reside. You must use the exemption for the state I which w you are domiciled, if you have lived there continuously for at least 2 years. If you have been living in your current state for less than 2 years, then use must use the exemption of the state where you resided for the majority of the 180 days immediately preceding the 2 years prior to your bankruptcy filing (subject to some exceptions). Additionally, you must have lived in the state where you are filing for at least 91 of the 180 days immediately preceding your filing.
Exempt property can range from “the shirt on your back” to the extravagant, depending on your state laws. Arizona has fairly liberal exemptions, including: $150,000 equity in your principal residence, $5,000 equity per spouse for a vehicle, $4,000 equity per spouse for household furnishings, $2,500 equity per spouse for tools that you use in your line of business, $500 clothing, $150 equity per spouse in a bank account, unlimited exemption for funds and investments held in a qualified retirement account, $1,000 equity per spouse for a weeding or engagement ring, $100 equity per spouse for a watch, etc.
Property that is not exempt includes: interest in real estate other than your home, expensive musical instruments, stamp, coins and other collections, cash, stocks, bonds, and other investments, business assets, valuable artwork, expensive clothing and jewelry, antiques, etc. It is best to consult with an attorney to determine what property is and what property is not exempt.
Most people who have a choice of whether to file under Chapter 7 or Chapter 13 of the bankruptcy code opt to file under Chapter 7. Chapter 7 is typically a debtor’s first choice because it is fast, effective, easy to file and most importantly doesn’t require payments to creditors over time. A Chapter 7 case is usually closed within 4 to 6 months of filing and an order of discharge is entered relieving the debtor of his legal obligation of repayment. The debt emerges from the Chapter 7 bankruptcy process debt free except for secured debts the debtor chooses to keep like car and home loans and other debts that can’t be discharged (such as student loans, child support and recent taxes).