Articles Posted in Exempt Assets

Those who file for bankruptcy in Florida may be surprised to learn it is possible to keep your pension and retirement funds you have worked so hard for.

 When someone files for bankruptcy, the bankruptcy estate can take the debtor’s nonexempt assets to pay off his or her creditors. What property is exempt will depend on whether the debtor files a chapter 7 or chapter 13 bankruptcy, and the bankruptcy exemptions of the state in which the debtor resides.

Congress overhauled the bankruptcy codes in 2005 under the Employee Retirement Income Security Act (ERISA). Since then, most retirement accounts and pension plan funds have been deemed property that is exempt from creditors during bankruptcy.

If you are deciding whether you should file a Chapter 7 Bankruptcy or not, the first question that needs to be answered is do you qualify? Whether a person can file a Chapter 7 Bankruptcy almost entirely depends on their current income and household size. As of April 1, 2015, the current household size to income ratio is as follows:

To determine if you qualify for a Chapter 7 Bankruptcy use the following example: You are married with two minor children. This would be considered a household size of four. Your income must equal or be less than $67,539 in order to qualify for a Chapter 7 Bankruptcy.

If you make slightly more than the income allowed, you might still be able to qualify if you have certain types of expenses that can be deducted from your income. If you still make more than the income allowed and still need or want to file bankruptcy, you will have to file a Chapter 13 Bankruptcy. A Chapter 13 Bankruptcy is a reorganization of your debts instead of a strict liquidation as is the case with a Chapter 7 Bankruptcy.

However, whether or not a Chapter 7 Bankruptcy is right for you is more than just a question of if you can qualify or not. If you have a lot of assets, you may want to stay clear of a Chapter 7. Any money sitting in a financial account that does not qualify for an exemption will be take from you by the Trustee and used to pay off your debts. This is also true for personal property and real property that is not your homestead. If you have lots of assets and still want to file bankruptcy and be able to keep them, a Chapter 13 Bankruptcy might be a better choice for you.

In other words, there are a lot of considerations to take in to account before deciding whether or not to file a Chapter 7 Bankruptcy. It is best to meet with a bankruptcy attorney who understands all ways you can qualify for a Chapter 7 and which assets may or may not be protected. The attorneys at the Law Office of David M. Goldman, PLLC are here to help you navigate the confusion that comes along with facing bankruptcy. Contact an attorney today by calling (904) 685-1200.

As tax season comes to an end, many of my bankruptcy clients want to know whether they can keep their tax refund. The answer is it depends. It depends on when you filed your bankruptcy,     how much your refund is, what bankruptcy chapter you filed, why you need your refund, etc.

Chapter 7 Bankruptcy

If you filed a Chapter 7 Bankruptcy, your tax refund is automatically deemed to be property of your bankruptcy estate and must be turned over to your Trustee ASAP. The Trustee will use the refund to pay off your creditors. You may be able to keep all or part of your refund if you are able to exempt it. When you file bankruptcy, you are allowed certain exemptions you can use to keep some of your property. You can use some of your exemptions to keep your tax refund if you choose.

When a person files for bankruptcy, they must list all of their assets and liabilities on their bankruptcy schedules. This is to help the court administrate and determine which assets the debtor should be permitted to keep and which assets will be subject to liquidation by the trustee for the benefit of the creditors. If someone is going to keep property during a bankruptcy case, it will need to be listed in their bankruptcy schedules with the proper exemption provision (if any) indicating why that property is allowed to be retained.

Often times, people forget what may be included as an asset. The following are commonly overlooked assets that if not listed in the bankruptcy schedules, could lead to seizure of the assets by the bankruptcy trustee: Accrued vacation pay, unpaid insurance claims, class action lawsuits, liquor licenses, timeshares, trademarks, season tickets, and security deposits.

I have even had the circumstance where the debtor disclosed at their 341 hearing that they had forgotten that their daughter’s home was in fact titled jointly in both their names. Fortunately for the debtor, that home had very little equity and the debtor’s bankruptcy petition was easily modified to protect the asset. Had the property had a lot of equity, this could have been a fatal mistake.

When one files for bankruptcy, a petition must be created. That petition is made up of several different sections called, “Schedules”. Each of these sections deals only with one specific issue, for instance, Schedule A deals with real estate, Schedule B with personal property, and so on. It is generally accepted that these schedules can be amended at any time, however a recent case out of the Middle District of Florida has limited this freedom somewhat.

Although every schedule is important, the schedule most debtors are interested in is Schedule C. Schedule C is where the debtor lists which property (s)he wishes to keep a exempt from collection by creditors. The rules allowing for property to be kept are called “exemptions” and are outlined by either state or federal statutes.

In Florida the use of one such exemption may forbid the use of another. As such, debtors can choose only door A or door B, but not both. Since there are so many rules in the bankruptcy code and because those rules are not always clear, it is often the case that people filing bankruptcy without a lawyer (pro se) mistakenly choose incompatible exemptions. This forces the Trustee to file an Objection to Claim of Exemptions, which requires a hearing for the judge to determine whether or not the objection is valid. If the objection is valid and the exemptions are denied, the trustee can then file a motion for turnover. The motion for turnover is the trustee’s way of asking the judge to force the debtor to surrender their rights in the property to the trustee. This is where the turning point is. Up to and until the judge orders turnover, the debtor can amend their Schedule C list of exemptions and change the amount and type of property they wish to keep, but once the judge signs an order requiring the debtor to surrender their rights, the debtor can no longer amend.