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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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My wife and I are seniors on SS disability with a small VA

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My wife and I are seniors on SS disability with a small VA pension. We have lived in AZ for 7+ yrs. Three years ago joined a class suit against house builder for construction defects. Experts identified 60-70K to repair defects. Suit may settle in 90-120 days but I will have to claim bankruptcy in 60-90 days due to medical and CC bills over 68K. If we get a settlement from law suit will I loose it because of bankrupcy filing??
Please help.
Thank you
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 3 years ago.
Hi JACustomer,
Will you be getting the money from the lawsuit, or is the money spearheaded for the company who did the repairs?
Customer: replied 3 years ago.
All monies are to come to us. We then will select contractors to repair individual defects.
Expert:  cfortunato replied 3 years ago.
If you have not already received the settlement money when you file a Bankruptcy, the Bankruptcy trustee can take that money when you do receive it - no matter how long it takes for you to get it.
If you have already received the money, and have already spent it on necessary repairs to your home, the trustee would then not be able to take it.
In any event, if your only source of income is Social Security and a pension, you may be "judgment-proof", which means there is really nothing your unsecured creditors (credit cards and medical bills) can do to you if you stop paying, unless you own valuable assets, such as a car worth more than $10,000 (after deducting the balance - if any - on the car loan), or a house with more than $150,000 equity.


I think this is what you wanted to know. If not, please let me know.
Thank you!
Expert:  cfortunato replied 3 years ago.
Additionally, if all the money in your bank accounts is from disability and your pension, creditors cannot garnish those bank accounts. However, if there is any money in those accounts that is not from disability, those accounts can be garnished.
Also, if all the money is from disability and your pension, you should inform the bank - in person and in writing so you have proof - that they should never allow your account(s) to be garnished because all the money is from disability and your pension. If you don't notify the bank, they will not know all the money is from disability and your pension (even if it is direct-deposited), and your account can be garnished.
Customer: replied 3 years ago.

If I understand your answer there is no time limit on how long the trustee has the right to take the money from the law suit after we file, what about other monies we may get from sale of the house or my car, worth less that 10K? Also it appears that if I wait, get the funds and use them to repair my home before we file BK we should be ok? But that still doesn't answer the other question, how long after we file can the trustee take any funds we get ?

 

 

Expert:  cfortunato replied 3 years ago.

There is no limit on the amount of time a trustee can wait to get settlement money. I know a trustee who kept a Bankruptcy open for 7 years for a lawsuit that took that long to be resolved.

If you sell your house, the proceeds (up to $150,000) are protected for up to 18 months after the sale.

However, if you sell your car, the proceeds would not be protected, except that a married couple is allowed to keep up to $300 cash if a Bankruptcy is filed.

 

 

Customer: replied 3 years ago.
Law suit aside, when does the BK close so we can resume our life??
Expert:  cfortunato replied 3 years ago.

Are you planning on filing a Chapter 7 or a Chapter 13?

(Probably the only reason to file a Chapter 13 is if you want to "strip" [discharge] one or both equity loans. If you are not sure if you can or want to do this, what is the current market value of your home, and what are the balances of the mortgage and the equity loans?)

Customer: replied 3 years ago.

Law suit aside, after we file for BK how long does it take for the BK to close so we can go back to living without fear of phone calls, judgements etc...

 

Didn't know we could discharge the equity loans??? Does that put the house into foreclosure?? Current total of all loans is $ 430K house value at best is 460K.

Thank you

Expert:  cfortunato replied 3 years ago.

Since the house is worth more than the total of the loans, you would not be able to have the equity loans discharged. (If a house is worth less then the first mortgage, the equity loans can be discharged as unsecured debt. This cannot happen if the house is worth more then the first mortgage.)

Therefore, you would want to file a Chapter 7, which usually takes 6 months from filing to discharge. However, all creditor must stop all collection attempts - including phone calls - as soon as you file the papers.

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
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