Bankruptcy And Your BillsThe underlying policy of bankruptcy law is that the honest debtor who is in debt beyond his/her ability to repay the debt should be given a fresh start through the discharge of debts in a bankruptcy proceeding. Not all debts are dischargeable. Generally speaking, the following debts will not be discharged: Taxes, Spousal and Child Support, Debts arising out of willful or malicious misconduct, liability from driving while intoxicated, debts from a prior bankruptcy, Student loans, Criminal fines and penalties. Those debts which are secured will be discharged, however, expect the creditor to take the necessary legal steps to take back the property. In most cases if the debtor's equity interest in the property is exempt, the debtor may retain the property by redemption or reaffirmation.
Bankruptcy and Bill Collectors
One of the major benefits of filing for protection under Chapter 7 is that many creditor actions are stayed. This means that debt collection efforts and foreclosure is halted. Once a creditor or bill collector becomes aware that you have filed for bankruptcy protection, he/she must stop all efforts to collect the debt. After your bankruptcy is filed, the court mails a notice to all the creditors listed in your schedules. This usually takes a couple of weeks. If this is not soon enough, then you should have your representative inform the creditor immediately. If a creditor continues to use collection tactics once informed of the bankruptcy they might be liable for court sanctions and attorney fees for this conduct. After your bankruptcy is filed, the court mails a notice to all the creditors listed in your schedules. This usually takes a couple of weeks. If this is not soon enough, then you should have your representative inform the creditors immediately. Your attorney deals with your creditors. It may be the only time you ever have the luxury of saying "you'll have to talk to my lawyer."
Your Personal Property
Once the bankruptcy is filed, all the property of the debtor at the time of the filing and certain other property to be received in the future, becomes the property of the bankruptcy estate. This means that the bankruptcy trustee will take control of this property for purposes of satisfying the creditors. HOWEVER, there is certain property that is either excluded or exempt and the debtor will be able to keep it. Property or asset exemptions are determined based upon your situation, income and the laws of your state. The best way to determine which property to keep requires a detailed analysis of your situation. You need a good lawyer. As for real property in many states, dependent upon which exemption scheme is selected and your circumstances, you may exempt up to $100,000 in equity. When calculating your equity you should use a value that is based upon a forced liquidation as opposed to the best selling conditions to arrive at a value for your home. Once you determine this value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity. As for personal property, in California, you are permitted exemptions for variety of personal property. This includes, automobiles, household furnishings and personal effects, jewelry, tools of the trade, retirement plans, immature life insurance, personal injury awards, earnings, animals and some other miscellaneous property. The value of each exemption and which exemptions can be used are determined by the statutory exemption scheme is selected (State laws vary).
Protecting our House and Car
Depending upon which exemption scheme is selected and your circumstances, you may exempt up to $100,000 in equity. When calculating your equity you should use a value that is based upon a forced liquidation as opposed to the best selling conditions to arrive at a value for your home. Once you know the value, subtract the amount owed plus selling and transfer costs from the value to calculate the equity. In the depressed California market, liquidated properties are often valued less than what we like to think the property is worth. Depending upon which exemption scheme is selected, you make keep your car if your equity is equal to or less than the allowed exemption. Generally speaking, depending upon the exemption scheme selected, you may exempt as little as $1,200 or as much as $9,100. When calculating your equity you should use the Kelly Blue Book or a comparable guide. Once you know the value, then subtract the amount owed from the value to calculate the equity. Generally, most courts understand that you need a car to work to get back on your feet. Apply rules of common sense here: If you own vintage cars that are free and clear and worth thousands of dollars, you are probably not going to be able to keep them. If, on the other hand, you have a car worth $10,000 and you owe $8,000 on it, you will most likely keep it. Again, the need to talk to a good lawyer should be evident. Most leased vehicles have no equity and therefore are entirely exempt. If you owe money on your car or it is leased you must still make the payments. In those instances you will have to redeem or reaffirm the property to keep it. However, in some circumstance your representative can re-negotiate the loan or the lease to get a more favorable deal for you.
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