Because of the complexity of bankruptcy laws and the nuances involved, it is essential that you hire a skilled attorney to assist you in the process.
We have found that our clients have common concerns and questions during the time period of considering bankruptcy to before the filing is official. Below are some examples:
How do I manage a bank account and loan from the same credit union?
If you have a bank account at a credit union and you have an unsecured loan or credit card with that credit union, draw down the balance of that checking account to $50.00 before filing. Because most credit unions cross-collateralize their loans to your checking account, they can take money out of your checking account to satisfy the unsecured debt you have with them. Open up a checking account at another bank that you don’t have a loan with before you file and have all of your direct deposits go to this account. Make sure that this has been accomplished before you file.
Can I transfer my non-exempt assets to a family member before I file?
Unfortunately, the answer is no. When you file for a bankruptcy, you have to disclose all transfers made within 4 years previous to filing the bankruptcy. If you have transferred assets to a family member within this time, the trustee can get this asset back. It also could raise the issue of bad faith. If it is determined by the Court that your case was filed in bad faith, your discharge can be denied, and you will prohibited from ever getting a discharge on the debts that you had before you filed for bankruptcy. So, it is just not worth the risk.
When considering filing for Bankruptcy, how can I know if I qualify or which Chapter to file?
Since the Bankruptcy Code was amended on October 17, 2005, you cannot file for a Chapter 7 Bankruptcy unless your income is less than the National average for your household size or after deducting all expenses as governed by the IRS guidelines, you have less than $100.00 per month to pay towards your unsecured debt.
So with this test in mind, it is essential to determine if you qualify now, or if will you qualify in the near future. This is where an experienced Bankruptcy Attorney’s services are so vital. If your case is filed and the presumption arises, then you can be asked by the US Trustee to either convert your case to a Chapter 13 and pay a percentage to your unsecured creditors, or you run the risk that your case will be dismissed, without obtaining a discharge!
Can I exempt any assets?
Another valuable service that an experienced bankruptcy attorney can perform for you is a determination of whether all of your assets are exempt. When you file for bankruptcy in the State of Texas, you get to keep all of your exempt assets. Your non-exempt assets are turned over to the Chapter 7 Trustee, and he or she turns these assets to cash and distributes these funds to your unsecured creditors pro-rata.
Case Study:
A few years ago I was attending a meeting of creditors for my client. We arrived early, and we sat in on another meeting of creditors. The Chapter 7 trustee was asking this debtor about their assets, and then the trustee asked about the debtor’s trust. The trustee asked the debtor if he could control the distributions of the trust. The debtor said, yes. At this point the Trustee correctly determined that since this was not a spendthrift trust, it was a non-exempt asset.
Everyone in the room could see the look of astonishment and dread on the Debtor’s Attorney’s face. It was clear that this Attorney did not know that this Trust was a non-exempt asset. The trustee informed the debtor that he would have to turn over this trust to him and that he would distribute these proceeds to the debtor’s unsecured creditors.
The debtor then told the trustee that the trust was his only source of income. After the meeting, in the next room, you could hear a very heated argument between the debtor and his lawyer. I am sure at this point the debtor asked his lawyer if he could just dismiss his case. The answer is no. You cannot voluntarily dismiss a Chapter 7 case without permission from the Court. And, here is the bad news for this debtor: the Judge is not likely to allow a dismissal of a Chapter 7 Bankruptcy case unless the Trustee agrees. And, the Trustee cannot agree to dismissal if there are non-exempt assets to distribute and fulfill their duty as a Trustee.
There are young, inexperienced attorneys out there who offer you a cheap price on filing your bankruptcy. But aren’t peace of mind and the knowledge that your case is being handled by an experienced, qualified Bankruptcy Attorney worth a little bit extra?
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