Can You Protect Your Assets Through A Chapter 7 Bankruptcy?
If you dread opening the mail or answering the phone due to past due debts, it is time to consider obtaining the protection available from a bankruptcy. Although the decision to declare bankruptcy is a big one that will impact your credit for years, it also can provide you with a blank slate. That blank slate can allow you to keep qualifying assets and removes much of your debt.
Be Sure Of The Type Of Debts That Can Be Included In A Bankruptcy Application
You may be surprised to learn that regardless of how much you owe or your current financial position, there are certain kinds of debt that can almost never be disposed of with a Chapter 7. The only exception to that would be if a judge made an exception and allowed its inclusion, which is very rare. It would usually happen only in extreme situations, such as a debilitating illness that will prevent you from ever earning enough money to pay those bills off.
Those exempt items include past due child and spousal support, federally guaranteed student loans and other federal funds that were received at a college, such as an over-payment for federal academic grants. In addition, do not expect to dispose of state or federal taxes in a bankruptcy.
Know What You Can Do To Improve Your Financial Situation After Bankruptcy
One of the more common misconceptions is that when you declare bankruptcy, you lose everything, including your home, vehicles and money in the bank. The reality is that a Chapter 7 bankruptcy allows you to safeguard some of your assets, and if done correctly, can also allow you to convert some of your money in the bank into exempt property. However, it is important to do so only on the advice of your attorney, as there is a thin line between converting assets and bankruptcy fraud.
Specifically, you may be allowed to some of your money in the bank to reduce your outstanding mortgage debt or to get an adequate life insurance policy. Conversely, if you do not already own an exempt car or truck, you might be allowed to purchase one. It is also helpful to remember that because some debts are not eligible for inclusion into a Chapter 7 bankruptcy, you might also be allowed to use your money to reduce the dollar amount owed on those debts,
Can You Transfer Funds Or Assets To Other People?
Although it is possible to protect your assets prior to a bankruptcy, it is only allowed for the specific situations listed above, or when advised to do so by your attorney. Unfortunately, giving money to your friends or family members and transferring assets into their name will usually be seen as an example of fraud. As part of your bankruptcy application, it is common for courts to look at your financial position and transferring assets to someone else could result in criminal charges.
It is crucial to remember that in a Chapter 7 bankruptcy, the protected value of your home, vehicles, bank accounts and other belongings will vary based on your family size and the state you live in. You will also be limited as to the amount of protected assets, so you can usually protect only your primary residence or vehicles at or below a certain value.
In conclusion, if you want to start fresh and escape from constant creditor phone calls, bankruptcy may be the solution you need. Most bankruptcy attorneys, such as Liviakis Law Firm, provide a free initial appointment, so determining whether you should declare bankruptcy does not have to cost anything.