Hello world! Please change me in Site Preferences -> This Category/Section -> Lower Description Bar

14

May 2016

Keep the Car In Chapter 7 Bankruptcy

Posted by / in After Bankruptcy, Weekly Posts /

Keep the Car In Chapter 7 Bankruptcy: What Are your Choices?

When you file Chapter 7 bankruptcy, you are “in the drivers seat” with some choices on how to keep the car.

One choice is to give it back.

One choice is to give it back.  Especially if you have a terrible interest rate on the car—and if you can put your hands on a junker—give them the car back. You are supposed to give the car back six weeks after you file your bankruptcy case. That gives you time to figure out another way to get around.

(Finding another way to get around is NOT going out and financing a car right after the bankruptcy. You’ll find car dealers eager to put you in a car at 24%—that gets you right back into financial trouble. But if you have a friend or family member who can give or lend you a car for a year or longer, you can then find some good financing deals. You can read about Alice, who got a 4.76% a year after bankruptcy. People who have a friend or family member who knows a lot about cars, also have good luck buying a car for cash, through a site like EBay.)

You can keep up the payments and keep it

Except for the special problems with Ford and Credit Unions, you can keep up the payments and keep your car. For most people, this is the best choice. No paperwork is required, you just need to be sure to make the payments on time. If you get late, they won’t call and yell at you. (That would violate the bankruptcy discharge.) They will just come and get the car.

Since they don’t want to violate the bankruptcy law, most car finance companies will stop billing you. You need to pay them on your own. Honda Financial Services has a good set of instructions. And here are sample instructions from USAA. Making the car payment will be like paying the rent—you gotta remember.

You can redeem your car.

If you owe more than your car is worth, but really like your car, you can redeem it. You can keep the car by just paying the book value. (Book value under the 2005 law is what you’d have to pay to buy it.) There are some honest lenders who will finance that straight out of bankruptcy.  One we use is called 722 Redemption. If you know your car is in good shape, this can be the way to go.

But you now have an after bankruptcy car loan. If you pay it, you are building up good credit. If you don’t, you are building up after-bankruptcy bad credit. You really don’t want after-bankruptcy bad credit.    

You can keep up the payments and change your mind later.

Keep the car

Suppose a year later, your car has mechanical problems. You can change your mind and give it back.

The good thing about keeping up the payments is, down the line you can change your mind. Suppose a year later, the car has mechanical trouble. You can give it back without owing anything and without damage to your credit.

Suppose a year from now, your uncle offers you his car. You can give the old one back, without owing anything and without damage to your credit.

Suppose two years from now, your credit union will offer you a car loan at 3.9%. You can give the old one back, without owing anything and without damage to your credit.

People often ask me, how long do I have the option to give the car back? My answer: Until it’s paid for. Once it’s paid for, you can’t give it back.

Is there any paperwork? None. Just call and tell them to come and get it. Or, stop paying and they will come soon enough.

Can I keep the car without making the payments?

The short answer is, No, you can’t keep the car without making the payments.  

At least, you can’t keep the car–unless the car finance company never bothers to come any get it.  Sometimes they never bother. If the car will bring good money at a car auction, they are going to come and pick it up.  But recently, a couple of people have told me nobody ever came and got their cars. Those were cars with about a hundred thousand miles on them–not junkers. But the credit union, in both cases it was a credit union, never picked them up.

So, you might get lucky. 

Can I reaffirm the car loan?

There are reasons why some people need to reaffirm car loans with Ford or with Credit Unions. Except for them, reaffirming a car loan is not a good idea.

The car loan people want you to reaffirm—because it benefits them, not you. When you call, they will tell you your lawyer should have reaffirmed—because it benefits them, not you.

Under the law, the judge will not approve a reaffirmation, unless I sign off that it’s a good idea. 

I don’t think it’s a good idea. So I’m not signing off. So the judge is not approving it. (The judge can, and often does, turn it down even if a lawyer signs off. Which I don’t.) 

I explain more on that, here. 

Please select the social network you want to share this page with:

14

May 2016

Filing Bankruptcy and Keeping Your Car with Your Credit Union

Posted by / in Weekly Posts /

The Small Print Says Your Credit Union Can Repossess Your Car If You Are Late on Your Credit Cards.

When you get a car loan from a credit union, you sign in small print that they can repossess your car if you don’t pay your credit cards.  (I have never seen a bank do this; I don’t know why they don’t.)  That would apply to a credit card you already had with the credit union, or one you get later.  This is usually called cross-collateralization. 

Credit union car loan

Credit Unions get you to sign in small print that they can repossess your car if you don’t pay your credit cards.

Credit Unions really do it, too.  If you get maybe three months behind on your credit card payments with your credit union, they will apply your car loan payments to the credit card, and send the repo man to your house, to pick up the car.

How Does Bankruptcy Change That?

The basic rule of law is that secured debts–debts attached to something like your car–pass through the bankruptcy unaffected.  So the deal may still be the same.  

In my experience, once you file for bankruptcy, the credit unions will usually allow you to just pay the car loan.  (Since the credit card is discharged, applying the car payment to the credit card would violate the bankruptcy discharge.)  But once the car loan is paid for, they won’t send you the title.  That’s because the credit card is still attached to the car and the credit card has not been paid off. So, you never really have a paid for car.

If they want to be mean about it, the credit unions can just pick up the car.  Because under the 2005 bankruptcy law, they are allowed to pick up your car when you file bankruptcy, even if you are current.  (I explain that, here.) I’ve seen Alaska Credit Union and Suncoast Credit Union do that.  (There are probably others that do. There are 7000 different credit unions; I barely know seven.)

The Credit Unions around here will give you a chance to reaffirm the loan.  That means you make a new, after-bankruptcy promise to pay, and they agree to accept it.  When that new promise is paid off, they should send you the title.  (They “should” send you the title. The reaffirmation form, set by law, says nothing about that. I got into a fight with Apple Federal Credit Union on that, once.  Apple, an outfit we like, then agreed to send the title.)

Ordinarily, I do not like to reaffirm car loans, as I explain here.  But you do get something when you reaffirm with the credit union. You get the title when the reaffirmed loan is paid off. So if you want to, I’ll sign your reaffirmation. (I charge $100 for doing the very annoying form.)

Do They Ever Negotiate?

Recently, I had a client who had two car loans with PenFed Credit Union. On one, he was about break even; on the other, he owed $11,000 and the car was only worth $8,000. He told me to tell PenFed, “I won’t reaffirm for more than the car is worth.” So, I crossed out his agreement to pay back $11,000, wrote in $8000, and sent it back to them.  They told me, “We’re not negotiating on the loan; we’re coming to get the car.” “Don’t do that,” my client said, “I’ll sign.”

As your lawyer, I have to sign on your reaffirmation, that I helped you “negotiate” the reaffirmation. I’ve never actually negotiated any change from what the credit unions demanded. They will drop the credit card cross-collateralization; beyond that, they won’t budge.

 

Please select the social network you want to share this page with:

05

Apr 2014

Virginia Chapter 7 Bankruptcy

Posted by / in Chapter 7 Bankruptcy, Weekly Posts / No comments yet

The Bankruptcy Law Office of Robert Weed led all attorneys in Virginia Chapter 7 bankruptcy case filings in 2013.

Virginia Chapter 7 bankruptcy

We did more Chapter 7 bankruptcies last year than any other Virginia lawyers.

That fact was announced just recently by 722 Redemption Funding, a company that finances cars for people in or just out of chapter 7 bankruptcy.   You can see their full report here.

For most people who are in financial trouble in Northern Virginia Chapter 7 bankruptcy brings immediate relief from financial pressure, and the chance to build back to good credit in three years.

Compared to Chapter 13, Chapter 7 for most people offers more immediate relief and quicker return to good credit.  (Happiness, too–a survey we sponsored with SurveyMonkey showed 93% of our clients said life was better after bankruptcy.  You can read that here.)

The simple reason Chapter 7 is better than chapter 13, is Chapter 7 is over.  Chapter 13 runs on, usually for five years.

The 2005 bankruptcy reform law tried to push high income people into Chapter 13.  Northern Virginia is a high income–and high cost-of–living area.   Since Chapter 13 is much worse for your credit than Chapter 7–and much more likely to fail–I push back.

Usually if high income people are talking to a bankruptcy lawyer, there’s a reason why there’s a financial problem.  I try to find that reason–and use it to qualify people for Chapter 7 (if Chapter 7 is better for them).

 Virginia Chapter 7 Bankruptcy Automatic Income Eligibility

The median income figures for Virginia were just updated as of April 1, 2014.  Families that are below the median income automatically have income eligibility to file Virginia Chapter 7 bankruptcy.

Families with more income, do not have automatic eligibility.  They need to prove why they should be eligible.    That means carefully analyzing their budget under the bankruptcy means test.  I explain more about that here.

Here are the cutoff numbers, by family size.

                                                        One                              Two                             Three                            Four

VIRGINIA$52,576$66,470$76,884$92,277

 

Families with income over these numbers can still have income eligibility for Chapter 7.   But they have to work to prove it.  An experienced Virginia Chapter 7 bankruptcy lawyer can help.

(I should say here that for some people even with income eligibility for Chapter 7, Chapter 13 is better.  Chapter 13, for example, is better that Chapter 7 in dealing with student loans, or with unfiled taxes, and sometimes with divorce problems.  For most people who don’t have those problems, Chapter 7 is better.)

 

Please select the social network you want to share this page with:

26

May 2012

Before bankruptcy: How to put Mom on your car title as lien holder

Posted by / in Before Bankruptcy / 23 comments

Before bankruptcy, sometimes you need to borrow money from Mom.  You might want to borrow that money and put her on your car title.

Now Congress made it illegal for me, a bankruptcy lawyer, to advise you to borrow money.  But the Supreme Court said it’s legal for me to tell you that it’s legal for you to do it.  (You may have to read that twice.)

Please select the social network you want to share this page with:

21

Apr 2012

Virginia Bankruptcy Exemptions

Posted by / in Virginia Bankruptcy / 40 comments

Virginia Bankruptcy Exemptions

“What will they take?”  Your Virginia bankruptcy exemptions answer that question.

When you file a Chapter 7 bankruptcy, the Chapter 7 trustee can take and sell your non-exempt assets.  (The proceeds are used to pay your creditors.)

Most people don’t have “non-exempt” assets, so the trustee doesn’t take and sell anything.  But that happy result often requires careful planning and detailed knowledge of Virginia bankruptcy exemptions law.

Please select the social network you want to share this page with:

24

Sep 2011

Bankruptcy means test: how big families can pass

Posted by / in General Information About Bankruptcy Law / 12 comments

The 2005 bankruptcy law is unfair to families.   If you have children, you need to fill out your bankruptcy means test budget very carefully.  Here’s why.

The means test in the 2005 bankruptcy law is easy on singles, and hard on big families.    Here’s an example:  a household of one is allowed $300 for food.  A family of four is allowed $757.   That’s ten dollars a day to feed the first person in the family–$5.07 a day each for the next three.  (When you go above four, it drops to $4.80.)

Congress set this up so that just trying to take care of your kids is called bankruptcy “abuse.”

There’s not much we can do about the unfairness of what the bankruptcy law allows for food and clothing.   But, other things you spend money on for your children, you are allowed to claim your real cost.

Those are the areas where you need to focus when you fill in your bankruptcy means test budget.

Child care.  Most families pay for child care by the week.  And then multiply by four to calculate the monthly.  But you should multiply by 4.333.  Because there  are more than twenty eight days in a month–usually thirty or thirty one.   So don’t short yourself.  Budgeting those extra three days could be the difference between having your bankruptcy approved and having it turned down.

Besides pre-school or after school care, budget for baby-sitting.  Most families, maybe once a month, both mom and dad have to go somewhere, together, and you need a sitter.   That twenty bucks or so goes in your bankruptcy means test budget, too.

Do you send the kids to summer camp?  That’s child care–and goes into your child care budget.

Are the kids lagging in school?  Let’s make sure we take advantage of that.  (In bankruptcy everything is upside down–bad is good; good is bad.)  So having trouble in school is an advantage in bankruptcy.

school boy

Kids struggling in school? Money for tutoring is allowed in your bankruptcy means test budget.

You are allowed to budget $125 per month to pay for schooling.  Now if the kids are in full time private school, at $125 a month doesn’t begin to cover it.  But if the children need tutoring to get through a tough class–or need to pay for summer school to catch up–that could be that $125 per month you are allowed in your bankruptcy budget.

(This schooling budget only covers kids up through age 17.  Congress says they are on their own for college.)

Are the kids having big trouble in school?  If the children are “challenged,” then the $125 per month cap doesn’t apply.  Your bankruptcy budget for education for employment of physically or mentally challenged children is unlimited.   (And goes past age 18, too.)

I see some parents who put their kids in private school because they couldn’t handle the public schools.  In that case, you can claim that whole expense.

Health and medical.   The bankruptcy means test allows you $60 per person for health and medical expenses.  Most people think they spend a lot less–but actually spend a lot more.

A lot of what you think of as grocery money can actually be counted at health care.  And for healthcare, unlike groceries, you can claim above the allowance.

Let’s start at Walgreens or CVS.    Vitamins–that’s health care.  Tylenol, allergy medication–health care.   Shampoo and toothpaste goes in the grocery budget–but anything stronger is health care.   Does your dentist recommend Listerine–that’s healthcare.

Lots of families are spending $20 or more per person on over-the-counter stuff that you can claim in your health care budget.

Prescriptions.  Should be obvious, but don’t leave it out.

Glasses or contacts.  According to the Vision Council of America, approximately 75% of adults use some sort of vision correction.   I’m spending over four hundred dollars a year–thirty five dollars a month–on glasses.  Your children may be spending more–because they lose or break them.

The dentist.  Just routine dental check ups can cost a couple hundred dollars a year.  Maybe half the people I talk to about bankruptcy tell me they are avoiding the dentist because they can’t afford what it will cost.  Budget that in.

You are allowed to claim the dental work you’ve been putting off  as health care.

Braces.  Approximately 4 million people are in braces in the US at any one time.    Orthodontics can cost a couple hundred dollars a month.  If the children need braces, put it in your budget.

Runny noses and broken arms.  In addition to preventive care, children (and adults) catch cold and flu, break their arms, and end up at the doctor’s one way or another.  Allow something for the unexpected in your bankruptcy health care budget.

Mental health.   A Gallup-Healthways Well-Being Index survey conducted in 2009 revealed that about 40 million American adults had recently been diagnosed with depression.

When life knocks you down, there can be changes in the chemistry of your brain.  People need help–counselling or medications or both–to get back to their right mind.  Things that caused your financial problems–unemployment, break-ups, other health problems–can also bring on depression.

If depression is impacting your family, be sure to add that to your health care budget.  (And be sure to take care of it, too.)

Don’t forget these categories

Charitable giving.  Most people have a good handle on what they give to their church, their favorite cause, or other regular commitment.

But if you have children (or even if you don’t), you get hit for donations for Girl Scout cookies, the high school band, and that kind of thing.  I’m guessing most families spend at ten dollars a month on these neighbor-to-neighbor charities.

Elderlies.  Along with the family in your home, many of us are helping out parents or grandparents.  One of the very few good changes in the 2005 bankruptcy law, help for elderly (or disabled) family members is now expressly ok.  (This includes family overseas.)  

To get your bankruptcy approved, we need to show the court where you need to spend your money.  People who come to talk to me about bankruptcy have been living from paycheck to paycheck–usually for a long time.  But they are often so stressed, they really don’t know where the money has been going.

I hope this article helps you think clearly about your budget–so we can get your bankruptcy approved.

 

 

Please select the social network you want to share this page with:

22

Jan 2011

Before bankruptcy: Don't pay off the car!

Posted by / in Before Bankruptcy / 174 comments

“In bankruptcy, everything is upside down.  Bad is good; good is bad.”  I tell people that all the time. What does that mean?

For the bankruptcy court to approve your bankruptcy, we have to show why you can’t afford to pay.  It’s good for your financial situation to be bad. Things you do to cut expenses to keep paying your debts–they usually come back to bite you.  It’s bad to be good.

Early January 2011, the Supreme Court, in a decision called Ransom, added keeping your junker car to the list of things that make it harder to get your bankruptcy approved.

I want to be really clear on what this means to people like you.  Suppose you could have traded in your old car two years ago on a new one.  But you knew you couldn’t afford the car payment and still pay your credit cards.  So, you kept the old car, and kept trying to pay your credit cards.   According to the Supreme Court, that can make you a bankruptcy abuser.   Good is bad.

If you got that new car–and then realized you couldn’t afford the credit card bills–the Supreme Court makes it much easier to get your bankruptcy approved.  Bad is good.

bankruptcy abuser driving older car

Still driving that old car while you try to pay your debts? The Supreme Court says that makes you a bankruptcy abuser.

The Supreme Court decision explains the car ownership expense in the bankruptcy means test.   In the budget you were assigned by Congress in 2005, you are allowed to claim $496 for your car payment–regardless of what the payment is.    You get twice that for two or more cars.

Most judges agreed that you got that $496 even if the car was paid for.  Their theory was even if you didn’t have a payment today you would need one sooner or later–and the means test is about whether the court will make you keep paying for five more years. (Also the IRS  standards referred to in the law say One Car and Two Cars.  Not One Payment and Two Payments.)

The Supremes disagreed.  You get the $496 as long as there’s even one payment left, but if it’s paid for, you don’t get it. That can make a big difference to a lot of people–having to keep paying the credit cards $496 a month for five more years.  That’s twenty nine thousand dollars!

OK.  So if you are in financial trouble, you now know to come to see me before the car is paid for.  And we’ll file your bankruptcy in a hurry.  That’s easy.

But suppose the car is already paid for.  Now what? That brings is to another Supreme Court decision, called Milavetz v United States.

Congress in 2005, when they wrote this complicated means test into the law,  also made it illegal for me to “advise” you to incur more debt in “contemplation of filing a bankruptcy case.”  Since lawyers are supposed to tell the truth to their clients, the Supremes gave me some wiggle room on that.

Some wiggle room.  I’m allowed to “talk fully and candidly” about incurring more debt.  I’m not allowed to “advise” you to abuse the bankruptcy system. But we can talk about the “legal consequences” of different courses of action.   So?

I’m not allowed to tell you to run up the credit cards just to have a bigger bankruptcy.  (That would be bad advice.  You’re not allowed to do that, anyway, and I never advise someone to do something they are not allowed to do.  They do often pick up on it, too.)

I am allowed to tell you it will be three years after bankruptcy before you can get a car loan at a good interest rate.  If your credit is still good now, and you’ll need a car soon, then I can advise you that now would be a good time.   I’m allowed to “advise” that, because you’re not incurring new debt “in contemplation of filing bankruptcy.”  You’re incurring new debt “in contemplation of” needing a car at a good interest rate.

But suppose your credit is bad already, and your junker car won’t get you through five years.   Am I allowed to tell you that you’re looking at a five year payment plan, driving around for five more years in that junker, unless you finance a car now?  Am I allowed to “talk fully and candidly” with you that?

I never advise anyone to get a car loan when they have bad credit–unless there’s no other way at all to get to work.  But, to be fully candid, I have to talk to you about the “consequences.”

Getting a car while your credit is bad may mean a $500 a month payment for five years on a 2002 Pontiac.  Not getting the car may mean making a $500 a month payment for five years to the bankruptcy court to pay your credit cards.   Which is worse?

Of the two choices, getting the car is better for your credit.  Getting the car means you might be able to get a mortgage loan in less than three years.  Otherwise, you’re talking seven years.

And getting the car means you’re driving that 2002 Pontiac with 70,000 miles, which is at least better than the 97 with 120,000 miles that you’ve got now.

“Candidly,” I have to tell you that you can figure that out for yourself.

Maybe I should stop here.

Some lawyers have told me privately that they think their clients should get a title loan on that older car.

I’d never “advise” getting a title loan.  Title loans mean you get $3000 on your car, and you have to pay $500 per month FOREVER.  That’s never a good idea.    But if we discuss it fully, suppose you could use your tax refund to pay off the title loan after one month.  Then it costs you $500 to borrow $3000 for just one month.  And as a bonus, you avoid having to pay the bankruptcy court for five years.

Any better ideas?  Suppose the junker really needs work, which you can’t afford.  And mom has offered to let you borrow her car for a few months, for free.

Free is usually good.  But, talking candidly now, if you offered to lease mom’s car for six months, rather than borrow it, now we can get your bankruptcy approved.  I’m allowed to tell you that in a “robust discussion.”  But I have no advice on the matter.

Just before the Milavetz decision came down, I had some clients ask me if they were “allowed” to buy a car before filing bankruptcy.  I told them I couldn’t tell them to do it, but I could tell them they were allowed to do it. The enforcement people from the Justice Department asked some very pointed questions about that.   With help of the Supreme Court, they finally agreed I was allowed to tell my clients they were allowed to finance a car.

Keep this in mind.  If you decide to trade in the 96 Chevy on the 2002 Pontiac, it’s not because I told you to.   I’d never tell you to do that.

If you do it, it’s because you decided.

Remember, you didn’t read it here.

Please select the social network you want to share this page with:

14

Oct 2010

Filing bankruptcy in Virginia gets harder November 1

Posted by / in Weekly Posts / 1 comment

You can thank the bank lobbyists who wrote the 2005 bankruptcy law for this cute trick.   When times get tough, filing bankruptcy gets harder and more expensive.

How’s that?  Eligibility to file bankruptcy is much harder for people who are over the median (average) income in each state.  When times get tough, the average income falls.   That makes eligiblity harder.

Check out these numbers, just released today.  Right now, a family of two in Virginia making less than $64,890 has automatic income eligibility to file Chapter 7 bankruptcy.   November 1, that drops to $62,686.    It’s the same for a family of three.  Right now a three person family making less than $73,887 has income eligibility.  On November 1, that drops to $72,078.

The unfairness to people with big families gets worse.  Right now a family of four is allowed to make $37,443 more than a single person with no kids.  Starting November 1, that drops to $36,102.  The law thinks taking care of kids should get cheaper in a recession.

When I look at that, I get mad all over again at the supposedly pro-family values political party that gave us this law in 2005.

While incomes are falling for average families across Virginia, the banks are doing great.  Earlier this week, JP Morgan Chase announced third quarter profits jumped 23%.

Here’s the complete chart, from the Office of the United States Trustee.  This chart shows how incomes are falling in Virginia for families of two, three, and four people.  Making it harder for people to get their bankruptcies approved.

Family size    Now      Nov 1

1            $48,190  $49,484

2            $64,890  $62,686

3            $73,887  $72,078

4            $85,633  $85,586


Please select the social network you want to share this page with:

08

Aug 2010

Year after bankruptcy, Beth Ann still in house

Posted by / in After Bankruptcy / 1 comment

Beth Ann (not her real name) asked me to be her Virginia bankruptcy lawyer in December, 2008.   She was self employed, a single mom, with not much income.  She was in one of those two year teaser rate loans, and when the real rate hit, there was no way she could afford the house payment.

In February, 2009, she came back and asked if bankruptcy could help her keep the house.  Her brother had lost his house to foreclosure, and his family was now living there, too.

Still not enough income to afford that house payment, but I had hope.  Barrack Obama had just been inaugurated two weeks before, and changes in bankruptcy law had been part of his platform.  Obama had promised to change the law so the bankruptcy judge could adjust the balance on a home mortgage to what the house was now worth.  (Bankruptcy judges can do that on an apartment, an office building, or one of Donald Trump’s casinos.   But homeowners can’t use bankruptcy the way businesses can.)

The bank set a foreclosure sale on February 28, 2010, so we filed a bankruptcy for Beth Ann the day before.  We hoped to save her house with the change in the bankruptcy law that President Obama promised but hadn’t been voted on yet.

On March 5, that change in the bankruptcy law passed the House of Representatives.  It looked like Beth Ann and Obama were on a roll.   We filed our bankruptcy reorganization plan two weeks after her bankruptcy was started.  And the change in the law we needed was half way there.

That’s as far as it got.  On April 30, the bill failed in the U.S. Senate.  Commentators blamed Obama for going silent when he needed to speak up.

On July 13, 2009, her mortgage company got permission from the bankruptcy judge to foreclose her house.  (Called “relief from the automatic stay.”)

On September 30, my office got a copy of the notice sent to her of the upcoming foreclosure sale.  Beth Ann’s luck had run out.

Or had it.  Beth Ann came to see me last week about a problem in her credit report.  (I’m one of a handful of bankruptcy lawyers in the country who sues the credit bureaus to fix people’s after-bankruptcy credit reports.)

She mentioned that she is still in the house.  A year after the mortgage company got permission from the bankruptcy judge–seventeen months after the first sale date was blocked by her bankruptcy–there was no foreclosure.

As a bankruptcy lawyer, I file a lot of bankruptcies for people on the eve of foreclosure.  I tell them it gets you at least three more months to live in the house, sometimes more.

Beth Ann’s experience is on the long end of the sometimes more.

Here’s the lesson.  If you want to keep your house and they’ve set a foreclosure sale, file bankruptcy.  (That’s if you have eligibility–you certainly want to talk to an experienced bankruptcy lawyer, first.) At the least, you’ll get several more months to live for free.

And landing your file on a different person’s desk might work in your favor.  That new person might offer you a deal you didn’t get offered before.  Or, they might not know what to do with you, and you just sit there.  That seems to be what happened to Beth Ann.

Please select the social network you want to share this page with:

06

Jul 2010

Before bankruptcy, can I spend down my money?

Posted by / in Virginia Bankruptcy / 1 comment

Suppose, when you are filing bankruptcy in Virginia, you have too much cash.  You can turn it over to the bankruptcy court to divide among the people you owe money to.  Or you can find legal ways to spend it.

(When you file bankruptcy in Virginia, you are only allowed to have $5,000.00 in cash.  That’s about the lowest in the country.  It’s $10,000 if you are over age 65.  Also, your paid for car valued at more than $2,000.00 counts against that limit. )

A lot of people have too much.

Here are some things you can do:

Need to spend down cash? See the dentist

1.   Postponed dental work.  Many people in a tight spot financially haven’t gone back to the dentist to get necessary things taken care of.  You might need three or four thousand dollars worth of dental work.  And they can’t repossess your teeth.

2.  Laser vision correction.  Same as the dentist if you need it.

3. Roth IRA.  Everyone who is working is allowed to fund a Roth IRA–whatever other retirement you have (or don’t have.)   the limit is $5000 per person–$6000 if you are over age 50.  During the January – April 15 (tax deadline) time frame, you can contribute for both the current and the prior year.  Although I cannot give you investment advice, I can saw that I have IRA’s with Fidelity and Vanguard.

4.  Repairs around the house.  If you are planning to keep the house, maybe the gutters need to be replaced, or the a/c unit needs an upgrade.  The court can’t repossess fixtures–things that are attached to the house.

5.  The Virginia College Savings plan.   The 11 USC 541(b)(5) of bankruptcy code protects college saving plan money if it has been in the plan for more two years.  ($5000 one to two years.) But, Virginia law gives an immediate, unlimited exemption for the Virginia College Savings plan.  (The one set up by the state.)  One of the bankruptcy trustees here is challenging that,  so we need to be cautious until the court rules.

Please select the social network you want to share this page with:

NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES