Strategically Pre-Planning To Optimize A Bankruptcy Filing, Which I Call A Negative Estate Planning, Is Smart. Plus Some Big No-No’s To Avoid
The rules of bankruptcy can be used to gain the greatest benefit from filing while at the same time minimize any downside issues that can be avoided. This usually concerns exemptions. For example, if a client owns an automobile free and clear valued at $5,000 but he is only allowed a $1,000 exemption on the auto, they might take a loan against the car for $4,000, spend the money, and then with the $4,000 lien, they only have $1,000 in equity and it is exempt. Or they might sell it and lease a car. The same principle applies to liquid funds or an anticipated tax refund: if it’s not going to be exempt, then dispose of it before you file. As a Ft. Lauderdale bankruptcy attorney, I tell clients: “Would you rather spend it yourself or give it to the trustee?”
I had a client some years ago now who owned rental properties that would not be exempt because only a person’s homestead is exempt. This is when the great recession was just turning around. At that time, her rental properties had lost value and none really had equity (she owed lenders about the same as what the properties were worth). By filing back then, the trustee saw no value in taking the properties because the liens came with the properties rendering them valueless to her bankruptcy estate. She kept them all. If she had waited and the values had risen while she was at the same time paying down the mortgages, they would have then had value and the trustee would lay claim to them. That is what I mean by negative estate planning for bankruptcy.
There are several simple but important things not to do in planning a bankruptcy filing. In the big picture, most cases, I’ll go so far as to say the vast majority of cases I handle, are “no-asset” cases, which means there are no non-exempt assets (homestead, car, clothes; everything!) that must be turned over to the trustee, or, as is more common than an actual, physical turn-over of the asset, redeemed or bought back from the trustee by paying money, so my client still retains the asset. That equates to say that most cases involve simply preparing and filing the case, following the rules and complying with the trustee’s requirements in administering the case, and being eligible for receiving the discharge. You do not give up or buy back any property - you retain everything you own and only lose the debt you owe. How is that for the best of all worlds?
Understand that in the big picture, the trustee and sometimes a creditor is looking to see whether any property that would not be exempt was transferred prior to filing to avoid owning the property at the time of filing. That is not allowed, and the lengthy bankruptcy petition, which must be answered completely, correctly, and under oath and penalty of perjury, will weed out and uncover any improper moves. Not answering correctly or hiding assets is fraud. Again, this is why it is important for an experienced counselor at law should be used. Once you file the case it may be difficult or impossible to dismiss it.
So what do we not want to do?
PREFERENCES. If you owe a relative or friend money, you cannot pay them back in the year before you file while you are not paying the credit cards or medical bills. If it’s a substantial amount, the trustee can literally sue your uncle (or whomever) to recover the payments. Tell them you will pay them double when the bankruptcy is over, just can’t pay anything now.
MAX OUT CARDS. There is a 90-day “look back” period from the date of filing that any creditor can point to if a big cash advance or expensive vacation, or anything really involving thousands, has occurred. The cash advance, etc., is presumed to be an abuse and unless sufficiently rebutted before the bankruptcy judge that debt will be held as not discharged. This gives the creditor a leg-up to bring such a claim in the bankruptcy case. Just don’t max out a card. A trip to the grocery store is o.k.
There are many other nuances and technical rules that can effect a case in different aspects. There are “hard-knocks” lessons I have learned in over 35 years of practicing law and my clients benefit and have peace of mind knowing they are in good hands that have been around the block. What’s that saying? A good lawyer knows the law, a great lawyer knows the judge! That is true in many ways. As a South Florida bankruptcy attorney I know the trustees and we speak about any problems in a case and resolve it. I have trustee “cred”, if you will.
You will glean from my website that I am passionate about my bankruptcy practice and that I get great satisfaction in using my knowledge and expertise as a vehicle to help people, to help my clients. Desperate times call for desperate measures. No one wants to file bankruptcy, but thank goodness there is a lifeline that can be used, as President Trump has stated, to your benefit. That’s what it is there for.
I take your personal financial problems personally. I can help. Let me solve being mired in too much debt simply, quickly, and completely. That’s what I do.