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Last Updated on Monday, 07 September 2009 18:52 Written by Administrator Tuesday, 12 August 2008 09:26
1. Tax Refund:
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While your bankruptcy case is open, your tax refunds are property of the estate and your trustee is entitled to intercept your tax refund and distribute it amongst your unsecured creditors. Generally, a tax refund is a non-exempt asset belonging to the debtor. However, Nevada allows a debtor to exempt any portion of your tax refund that is derived from the earned income credit described in section 32 of the Internal Revenue Code, 26 U.S.C. § 32. Further, Nevada allows a debtor to exempt any non exempt asset belonging to the debtor, including, without limitation, the debtor’s equity in any property, money, stocks, bonds or other funds on deposit with a financial institution, not to exceed $1000 in total value, to be selected by the debtor.
2. Credit Card Usage/Debt:
Generally, if a debtor has accumulated credit card debts prior to filing bankruptcy, these debts are considered unsecured debts and are dischargeable in a Chapter 7 bankruptcy. However, credit card debt accumulated within 90 days from the date you filed your bankruptcy case will not be discharged. The 90 day timeframe was instituted in an attempt to stop debtors from charging and running their credit cards up because they knew they will be filing bankruptcy shortly.
3. Non-Dischargeable Debts:
Generally, most unsecured debts are dischargeable (cancelled) in a bankruptcy case. Further, if a debtor intends to surrender a home or an automobile, those secured debts are too dischargeable. However, not all debts are dischargeable. Examples of non-dischargeable debts include, but are not limited to: taxes, government fines, student loans, alimony and child support payments, debts derived from fraud, and co-signer’s liability.
4. Lien Stripping:
In a Chapter 13, it is possible to have a second and/or a third mortgage stripped (removed) from a secured status on your home. In order for this to occur, the value of the home will need to be upside down in a value greater than the total balance owed on the second and/or third mortgage. Therefore, if you have equity in your home, you will not be able to strip a second and/or third mortgage.
IF a second and/or third mortgage can be stripped, the total amount of the stripped mortgage will then be considered unsecured debt and will be included as further debt that would need to be repaid in your monthly payments to the trustee from your disposable income.
For example, if your home appraises for $200,000, but you have a first mortgage of $210,000 and a second mortgage of $50,000, it is possible to have the second mortgage “stripped” and you will only have the first mortgage left to pay on the home. However, if your home appraises for $200,000, but you have a first mortgage of $110,000 and a second mortgage of $50,000, you will not be allowed to have the second mortgage stripped because you have equity in your home.
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5. Difference Between a Ch. 7 and a Ch. 13:
Ch. 7: Liquidation. This chapter provides for an orderly court-supervised means of selling non-exempt assets to help pay your unsecured creditors. A court appointed trustee takes control of your “estate” consisting of all of your assets. You are allowed to keep all exempt assets and non-exempt assets must be turned over to the trustee so that he can sell those assets to pay your creditors. Typically, a Ch. 7 takes 90 days from the date you file before you receive your discharge.
Ch. 13: Personal Reorganization. This chapter provides a court-supervised method for a debtor to pay back creditors over an extended period of time of up to 5 years. The debtor files a plan for repayment with the bankruptcy petition. The amount of money to be repaid will be taken out of the debtor’s disposable income, after first paying all necessary expenses and secured debts. Payments must begin within 30 days after the case has been filed. The payments are made to the trustee who then will distribute the payments to your unsecured creditors after the plan has been approved.
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Are You Required To Go To Court?:
After you file your Ch. 7 bankruptcy petition, you are required to attend a 341 hearing, otherwise called Meeting of the Creditors. Your attendance is mandatory and if you do not attend, your case will most likely be dismissed. You will not have to go in front of a judge, but you will go in front of your trustee. The hearing is informal and typically lasts a total of 5 minutes.
The purpose of the hearing is to enable the trustee to examine you under oath regarding the information that has been filed and provided to the Court. The trustee, or a creditor, may inquire about your financial status, conduct and financial affairs, and any further information that is relevant to the administration of your bankruptcy estate.
7. Ability to Rebuild Your Credit After Your Bankruptcy:
A bankruptcy will appear on your credit report and will last for 10 years. Generally, the biggest impact a bankruptcy will have on your credit will occur within the first few years after filing your bankruptcy. You will be able to build your credit back up after filing. A quick way to rebuild your credit would be if you are able to reaffirm your home or your car during your bankruptcy and continue to make the monthly payments on time until the debt is paid in full. Another example would be by using your credit card(s) and paying your balance in full each month. Of course, keeping yourself out of debt is key to rebuilding your credit after bankruptcy.
8. Do You Need To Close Your Bank Account(s)?:
The simple answer to this is No, you do not need to close your bank account(s) because you are going to file bankruptcy. However, money kept in a bank account is a non-exempt asset and will most likely not be protected once you file your bankruptcy petition. The trustee may compel you to turn over any funds remaining in your bank account(s) on the date you file.
It is advisable to make sure that all of your necessary expenses, including but not limited to, mortgage/rent, car, insurance, food, phone, internet, cable, power, etc. are paid prior to filing your petition, in the event that you may have excess money left in your account on the day you file. However, please make sure that these payments have been cleared prior to filing. Simply drafting a check as payment for your necessary expenses is insufficient to deplete your account prior to filing.
9. Discharge:
Every bankruptcy case is unique and are hard to determine when, exactly, you will receive your discharge from bankruptcy. With that being said, if your Ch. 7 case is a no-asset case, you should expect to receive your discharge 90 days from the date you filed. However, delays in receiving a discharge do occur. Simple examples of this would be if objections are filed or if the trustee needs to keep your case open based on the filing of your taxes. If your Ch. 7 case is an asset case, it is possible that your discharge will not occur until the trustee is able to liquidate/sell your non-exempt assets, which may take several years to complete.
In a Ch. 13, your case remains open as long as plan payments are being made, generally from 3 to 5 years after the plan has been confirmed.
10. Can You Keep Your Car or Your Home:
In Nevada, you are allowed to exempt your primary residence, where the amount of equity in the home does not exceed $550,000 in value. A debtor is also allowed to exempt one vehicle as long as the equity does not exceed $15,000 or the creditor is paid an amount equal to any excess above that equity. Further, a debtor is allowed to fully exempt any owned vehicle for use by him or his dependent that is equipped or modified to provide mobility for a person with a permanent disability. Further, you may still be able to keep your property even if your property is not fully exempt by filing a Ch. 13 bankruptcy instead of a Ch. 7.