I know this sounds really strange but  a bankruptcy case can get really messed up sometimes because of Christmas gifts. I absolutely love Christmas and I don’t like the Grinch but it is my job to tell you truth about how Christmas can really wreck a case.

Let me give you an example. Let’s say you have a married couple who is going through a difficult financial situation. Their parents decide to help them out during this Christmas season by giving them $5,000.00. I realize that very few people ever get this kind of gift from their parents but you would be surprised how often this happens when parents see their children struggling.

The problem is that this $5,000 gift must be counted on the median income test. Everyone who files for bankruptcy must list all of their income for the six month period that precedes the date of the filing of the case. Thus, if you receive the gift in December and we file your case in December, then this income won’t count because this six month period that matters is June through November.

However, most people delay filing bankruptcy until the last possible second. As a consequence, most people who receive gifts of money from their parents don’t file until a few months later.

Sometimes, even a small gift can mess us up on the median income test. For example, if you are right on the border of going over the median income test, a small cash gift may be just enough to change your three year Chapter 13 bankruptcy into a five year Chapter 13 bankruptcy.

What is the solution? The solution is to meet with me before you take the gift so that we can see where you land on the median income test.

In addition to the median income test, we need to take a look at the value of your assets. Under Georgia bankruptcy exemptions, you can claim up to $5,600 of a wildcard exemption to protect cash gifts. However, you may need this wildcard exemption for some other asset like your house.

If you have more than $10,000 equity in your house and you are a single filer, you most likely will not have any wildcard exemption that will be left over after you file bankruptcy.

Take advantage of a free consultation with me and call 706-295-0030 so that we can sit down and review your entire economic situation.

Other Posts:

1.  What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I stop a garnishment?

5.  How do I stop a foreclosure?

Before your bankruptcy case is filed in Northwest Georgia, it is super-important that both you and your attorney carefully review the petition before it is filed.  As a general rule, I spend at least two hours with my clients reviewing the petition before we file anything with the court.

If you are ever sitting in a bankruptcy attorney’s office and you feel like you are being rushed or that he is not paying attention, you need to run away as fast as your legs will carry you.  Rushing through a bankruptcy petition can cost you your house in Georgia.

I would like to tell you about a case where careful review of the bankruptcy petition saved a Georgia consumer from losing his house.

I recently met with a client who was absolutely positive that he had signed his house over to his son ten years ago.  When we got to the part of the petition where you have to list any real estate that is in your name, I grilled him with questions.

After he informed me that he used to have a house in his name that he gave to his son over ten years ago, I requested to see a copy of the deed.  As an experienced bankruptcy attorney, I knew that just because he says he signed the house over does not necessarily mean that he did no matter how confidently be believes this to be the case.

Fortunately for him, I was able to go online and get a copy of the deed.  To his shock and horror, we discovered that he had given his son only a half interest with a joint right of survivorship.  As a consequence, he still owned half of a house that was completely paid for!

If we had filed him in a Chapter 7 bankruptcy case, the trustee would have sold that house.  Since we caught this situation before filing, he was able to make the decision that he did not want anything to do with Chapter 7 bankruptcy.

He said to me, “Thank God I went to you and not some bankruptcy factory where the attorney just says sign here….sign here and then shews you out the door without ever explaining what you just signed.”

Haste makes waste but in bankruptcy haste can cost you your house.

Other Posts:

1.  What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  How do I stop a garnishment?

5.  How do I stop a foreclosure?

In a Chapter 7 bankruptcy case, a trustee cannot take away some types of income streams from you that are protected by the Georgia exemption statute.

Income streams that are protected by the Georgia exemption statute are:

• income received from unemployment
• veteran’s benefits
• disability benefits
• payments from a pension or annuity
• payment from an IRA
• payment from a 401k
• public assistance benefit
• social security
• a payment for loss of future earnings
• a payment from a life insurance policy that insured a person who supported you.

In contrast, some income streams are not protected.  For example, let’s say you sold a house five years ago.  Let’s say that the person who bought the house from you still owes you a payment of $2,000.00 per month for the next 10 years for this house.  In this situation, you will lose your right to receive these funds if you file Chapter 7 bankruptcy.

In another example, let’s say you sold a car and someone still owes you $15,000 on it.  Again, you will not be able to protect the income stream from this either.

It does not matter that an income stream is your sole source of income.  A Chapter 7 bankruptcy trustee can still take it.

It is not uncommon for  a person to come into my office with an expectation that they are going to be able to file Chapter 7 and eliminate all of their debts.  Then, after we have written down a list of all their assets, I sometimes have to give them the bad news that they are not going to be able to file bankruptcy without losing this stream of income.

I absolutely hate giving people bad news.  However, I would much rather give you bad news before a case is filed rather than have you find out in the middle of a court hearing.

It is extremely important that you disclose all of your assets to your bankruptcy attorney before a case is filed so that you will know if you are going to lose something beforehand.

Some people will choose not to file bankruptcy after they understand which assets might be taken away by a trustee.

One of the worst things about a Chapter 7 bankruptcy is that you can’t quit just because a trustee has decided to take one your assets.  Once you are in, you will stay in unless you can persuade a bankruptcy judge to allow you to dismiss the case.  If there is a possibility that a trustee is going to recover money for the unsecured creditors in the case, the odds of any bankruptcy judge letting you dismiss the case are pretty close to zero.

When you disclose all of your assets to your bankruptcy attorney before the case is filed, you will be able to make an informed decision as to whether or not you want to file bankruptcy.

Almost everyone who files Chapter 7 bankruptcy wants to a reaffirm their car.  When you reaffirm a car, you sign an document whereby you agree to treat the car debt as if you had never filed bankruptcy against it.  In some cases, this can be a bad idea.

In Northwest Georgia, it is not uncommon to see a client come into my office with a car note that has an interest rate of thirty percent or higher.  Even though many of the buy-here-pay-here auto dealers have gone out of business in Northwest Georgia, there are still enough operations around Northwest Georgia that continue to sell used cars at sky high interest rates.  Reaffirming a car note with a sky high interest rate is a bad move for many reasons.

1.  A person can file chapter 7 only once every eight years.  When you reaffirm the debt, what are you going to do down the road when that car breaks down and you still owe thousands of dollars on it because of the sky high interest rate?  The purpose of Chapter 7 is to give you a fresh start.  How are you getting a fresh start if you agree to be liable for a large balance on a car loan with thirty percent interest?

2.  If you have a car with a high rate that you absolutely must keep, Chapter 13 is a better option than Chapter 7 bankruptcy.  In a Chapter 13, you can lower the interest rate to around six percent.  The amount of money you can save over the long term can greatly outweigh the cost of the case.  Also, if you purchased car more than 2.5 years before filing the case, you only have to pay back the value of the car and not the entire balance owed.  Once again, the amount of savings can greatly exceed the cost of the entire case.

It is also important note that in Northwest Georgia, your bankruptcy attorney must sign the reaffirmation agreement stating that it is in your best interest.  If the finance charges are sky high, your bankruptcy attorney will not be able to sign off on it.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

6.  What is a Reaffirmation Agreement?

Almost everyone who files for Chapter 7 has some fear that the trustee is going to take away some important possession.  The truth is that Georgia bankruptcy exemptions protect almost everything that a normal family owns.  However, there are a few exceptions.

1.  Repayment of a loan to a family member- This is the Chapter 7 trap that catches the most people.

The trustee will start off by asking, “How much was your tax refund last year?”

“Three thousand dollars” responds the person who filed.

“What did you do with the money?” the Chapter 7 Trustee asks again.

“I gave it all to my mother,” responds the person who filed.

“Why did you give it all to your mother?” the Chapter 7 Trustee asks.

“Because I owed her the money,” responds the person filing.

In the situation described above, the Chapter 7 Trustee will be suing the mother for all of the money that her child paid to her.  In the bankruptcy world, this is called a preference.  Once the Chapter 7 Bankruptcy Trustee recovers all of the money that was paid to mother, he will then distribute it evenly among all the bankruptcy creditors.

2.  Transfer of property to a family member- This one usually happens because a person filing bankruptcy decided to take legal advice from some coworker that knows absolutely nothing about bankruptcy.

In every Chapter 7 bankruptcy case filed in Northwest Georgia, the Trustee is going to ask, have sold or transferred anything of value within the last two years.  If you lie, you will be guilty of perjury which will land you in jail.  If  you have transferred something to a family member for little or no money, the trustee has the power to take it back.

The most common scenario involves “family land.”  Someone has land in their name that has been in the family for the two hundred years.  To protect it from creditors, they transfer the land to a cousin.  What they don’t realize is that the Chapter 7 trustee has the power to undue the transfer and sell the property for the benefit of the creditors.

3.  Life estate that was not properly valued-  I am shocked at how many people in Northwest Georgia own life estate interests.  Again, this usually involves family land.  For example, grandma has the legal right to live in a house until the day she dies.  Upon her death, the house transfers automatically a person who is filing bankruptcy.  What many people don’t realize is that the Chapter 7 Bankruptcy Trustee can sell the interest in the life estate to some crazy investor who is willing to bet the either grandma won’t live there that much longer or that some other relative will come along and try to buy out his interest.

Chapter 7 bankruptcy can get extremely complicated extremely fast.  Many nightmare situations like the examples listed above can be avoided with a Chapter 13 case.  If you would like to schedule a free consultation with my office, I would be happy to sit down with and review your entire situation.  Call today at 706-295-0030.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

When you file Chapter 7 bankruptcy, you expect to wipe out your debts and get a fresh start.  In some rare cases, HOA (Home Owners’ Association Dues) may prevent this fresh start because post petition HOA dues are not dischargeable.

Before the Great Recession, most mortgage companies would foreclose on properties as soon as they fell delinquent.  Now, many mortgage companies may wait up to a year or two before they get around to foreclosing because of the back log.  In the case of Sheryl Lynn Pigg, the stars lined up for a complete HOA nightmare.

In May 2010, Nashville, Tennessee suffered one the worst floods in history.  Ms. Pigg’s condominium was made inhabitable as a result of this flood.  With no flood insurance, she salvaged what she could and found another place to live.

After Ms. Pigg filed for Chapter 7 bankruptcy protection, Bank of America changed the locks on her condominium and posted a notice on the front window prohibiting entry.  Even though Ms. Pigg had a provision in her bankruptcy petition surrendering her interest in the condominium to Bank of America, the bank chose not to foreclose.  In the meantime, the HOA dues began to pile up.

To end this nightmare, Ms. Pigg’s bankruptcy attorneys filed an adversary with the bankruptcy court force Bank of America take the property.  Fortunately for Ms. Pigg, the Court ordered the Chapter 7 Trustee to auction the property and to pay the HOA dues.

The ruling in this bankruptcy case is extremely rare.  I think the most important factor was that the condominium was damaged by a flood and left Ms. Pigg with no option but to surrender the property to the bank.  If the Court had not ordered the sale of the property, she could have been stuck paying HOA dues forever on a property that she could not do anything with.  I doubt that the court would have reached the same conclusion if she had simply moved away because of a new job situation.

Any person filing Chapter 7 who wants to surrender a property to a bank must understand that they are almost always going to be held liable for future HOA dues.  If possible, the best course of action is to remain living in the property and pay all HOA dues until the property is foreclosed.

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

Many of my Chapter 7 bankruptcy clients in Northwest Georgia get the Chapter 7 bankruptcy trustee confused with the judge.  At the 341 meeting of creditors, its not uncommon to hear a debtor answer a question with “yes your Honor” even though there is no judge at this hearing.

Every single Chapter 7 case filed in Northwest Georgia will be assigned either to Judge Bonapfel or Judge Diehl and to a Chapter 7 trustee.  In the overwhelming majority of Chapter 7 bankruptcy cases, the debtor will have no interaction with Judge Bonapfel or Judge Diehl.  In contrast, every Chapter 7 debtor will attend a 341 Meeting of Creditors that is conducted by a trustee.

Who is this mysterious player in Chapter 7 called the trustee?  While the trustee is not a judge, it is her job to scrutinize the bankruptcy case and ensure that it complies with the Bankruptcy Code.  In addition, it is the trustee’s job to see if the debtor has any assets that can be sold for the benefit of creditors.  In most Chapter 7 cases, everything that a debtor owns is protected by Georgia exemptions (if you would like to know if your assets would be protected in Chapter 7 bankruptcy, call me at 706-295-0030 for your free consultation).

Here are some examples of questions that a trustee in Northwest Georgia will most likely ask at a 341 Meeting of Creditors.

1.  Did you meet with an attorney and review your petition carefully?  (Its the unauthorized practice of law for someone other than an attorney to file a case for you).

2.  To the best of your knowledge, is everything in your petition true and accurate?  Did you list all of your assets and all of your debts?  Even the ones you didn’t want to list?

3.  Did you in fact sign the bankruptcy petition?

4.  Have transferred or sold any assets within the last two years?  (They are asking this question to see if you gave or sold something away to try to keep it out of the hands of creditors.  If you did, they have the power to take it back).

5.  Have recently inherited anything?  Do you expect to inherit anything anytime soon?  (If so, they may try to get it for the benefit of creditors).

6.  What caused you to have to file this bankruptcy case?  (They ask this question to see if you may have some type of claim against someone who caused this case.  For example, if it was a car wreck that caused you to miss work and file bankruptcy, they will want to know if you have a pending claim).

7.  Are your suing anyone or do you have any type of claim against anyone that was not listed in your bankruptcy petition? (In Georgia, if you have a claim against someone and fail to list it in your petition, you will lose your right to recover anything).

In the Rome division of the Northern District of Georgia, the Chapter 7 trustees are not out to get you.  I have found them to be professional and courteous.  However, if they ever get feeling that a debtor is not being completely honest, they will not hesitate to lower the boom.

Its absolutely imperative that you tell your bankruptcy attorney everything you can about your assets and debts so that there won’t be any surprises at your meeting of creditors.

Related Posts:

1.  What is chapter 7?

2.  Don’t roll the dice in a chapter 7?

3.  Tell your bankruptcy attorney everything.

4.  Should I sign my house over to someone before I file bankruptcy?

5.  What is Chapter 13?

After filing Chapter 7 bankruptcy, you will not be on hook for your first or second mortgage if you don’t sign a reaffirmation agreement.  After filing Chapter 7, many people move of their house thinking that they are finished with that stinker.  They have received a Chapter 7 discharge and believe that they have received their fresh start.

Then, a few years down the road, they get served a lawsuit  from a home owner’s association on a house they moved out of long ago.  Another possible nightmare is when some inspector issues you a fine for the grass that is now four feet tall in the house you surrendered in the bankruptcy.

How can this happen after filing Chapter 7 bankruptcy?  The answer is that the mortgage company never foreclosed on the house!  If the mortgage company does not foreclose, you are still the legal owner of the house.  As a result, you are responsible for all future homeowner’s association fees and any fines that may result from not taking care of the yard.

How do you avoid the possible nightmare situation after filing Chapter 7 bankruptcy?

First, don’t move out of the house until the foreclosure process has started.  After filing Chapter 7, you are living in the house rent free until they start the foreclosure   Why would you ever want to give up free rent?

After filing Chapter 7 bankruptcy, most mortgage companies will begin the foreclosure process shortly after they obtain an order on a motion for relief in the case.  However, in some situations, the mortgage company simply fails to foreclose.  What are they waiting for?  I have no idea.  Perhaps they don’t want to be the owner of that stinker house.  Maybe they are waiting for housing prices to rebound?  Who knows?

In court today, I spoke with another Georgia bankruptcy attorney whose client surrendered a house in Douglas County two years ago after filing Chapter 7   They thought it was behind them.  Then, out of the blue, they received a fine for tall grass in the house they moved out of two years ago!

How can you protect yourself if you have already moved out of the house and filed Chapter 7 bankruptcy?

My answer is that since you are still the legal owner of the house until it gets foreclosed, you have the right to rent the house out until your ownership rights are taken away.  You might be asking, “who in the world would want to rent a house that they may be able to get kicked out of next month?”  I believe that if the price is right, you will find someone willing to take the chance.

For example, if its a three bedroom house in Hiram, Georgia, I think you could easily find someone to rent it for $200 per month so that you would be able to pay all future HOA dues and hire some local kid to keep the grass mowed.

If you are considering Chapter 7, it is always best to have a qualified Georgia bankruptcy attorney review your entire situation so that they can warn you about any potential pitfalls.

1.  Why will I be liable for future HOA dues after bankruptcy?

2.  How soon do I have to move out of my house after bankruptcy?

3. Can I Wipe Out My Second Mortgage in Bankruptcy?

4. Bankruptcy and the Taxation of My House by the IRS

5.  How much does it cost to file bankruptcy?

One of the scariest things about Chapter 7 for many debtors is the fact that a trustee may choose to put your house on the market to see if she can recover money for your creditors.  As a general rule in Georgia, if you have less than $10,000 equity in your house and you are single or if you have less than $20,000 equity and you are married, the trustee is not going to waste her time trying to sell your house.

However, who determines the value of your house?  The first place a Chapter 7 trustee may look is the tax assessors value of your house.  A second source of valuation would be for her to have her real estate expert conduct a drive by appraisal of your house to see if they agree with your valuation.  If they disagree, they have the right market your house and test the waters.

In this current depressed real estate market, Chapter 7 trustees rarely try to market anyone’s house.

About seven years ago, I had a bankruptcy client from Dalton, Georgia whose property had significantly declined in value since she purchased it.  After she moved into the house, the local power company installed high power electrical lines right next to her home.  Then, to make matters worse, the local gas company installed an above ground gas line right along it as well.  This new gas line was right next to her master bathroom!  What kind of person in Dalton would ever want to purchase a house like this?

Even with all these problems, the Chapter 7 trustee wanted test the waters by putting the property on the market because it was in a nice area of Dalton.  In this case, I tried to convince the client to let the trustee market the property because I believed that no one in their right mind would ever buy it for a price that was higher than she paid.

This client did not want to risk her home being bought out from under her.  As  a result, we ended up converting the case to Chapter 13 and paying the unsecured creditors the same amount of money that they would have received if the trustee had obtained his unrealistic sales price.

If you ever think your home might sell for more than what you owe plus the exemption amount you are allowed under Georgia law, don’t file Chapter 7 unless you are willing to give the trustee a chance to sell it.

Other Posts:

1.  What is Chapter 13?

2.  What is Chapter 7?

3.  What is the Means Test?

4.  How much does it cost to file bankruptcy?

The biggest myth about Chapter 7 bankruptcy is the belief that you will be able to keep your house and car without having to pay for them after you file.  I’m shocked that I hear this at least once month.  In fact, I spoke with a potential Dallas GA bankruptcy client today who became quite upset after I informed him the truth about this myth.

I suspect that this myth comes from bankruptcy adds in the yellow pages that say “keep all property.”  This type of advertising is misleading because you don’t get to keep property that you owe money on unless you keep making the payments directly or through a Chapter 13 plan.

Another myth is the belief that a creditor cannot take your only house or your only car.  Again, if you don’t either make the contract payments or pay for it through a Chapter 13, your house and car can be taken.

The truth is that Chapter 7 has zero effect on your future mortgage or car payments.  If your mortgage payment or car payment is too expensive for you to afford, chapter 7 is not going to help you.  Chapter 7 eliminates unsecured debts like credit cards, medical bills and signature loans.  The only way you can wipe out a secured debt in a Chapter 7 bankruptcy, is if you surrender the collateral that secures the debt.

For example, let’s say you have a car that you owe $30,000.00 and the car payment is 600 per month.  If you want to eliminate this debt in a Chapter 7, you  must be willing to surrender the car back the creditor.

In contrast, if you want to keep this car after you file Chapter 7, you must sign a reaffirmation agreement.  A reaffirmation agreement is basically a contract between you and the creditor that says that you will agree to treat this specific debt as if you have never filed bankruptcy.  A reaffirmation agreement puts a creditor in a strong position because you can file Chapter 7 only once every 8 years.

If you want to know how the law applies to your situation, call me today for your free consultation.

Other Posts:

1.  What is Chapter 7 all about?

2. What is Chapter 13 all about?

3.  How much does it cost to file?

4.  What are the top ten myths about bankruptcy?