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HCLegal
HCLegal, Attorney
Category: Bankruptcy Law
Satisfied Customers: 423
Experience:  I have filed over a thousand bankruptcy cases.
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Dear Fritz: I have a different situation regarding the potential

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Dear Fritz:

I have a different situation regarding the potential filing of personal Chapter 7 bankruptcy that I would like advice on. These are the facts:
I am 65 years old and live in California.
I receive $775 monthly in social security benefits.
I am self-employed, and my total monthly income averages around $2,000.
I have no assets whatsoever.
I have a car lease of $325 per month, with 25 payments remaining on the lease. The pay off for my car at this time is $14,354. There is a residual payment of $7,600 at the end of the lease.
I will probably be able to work only another year or two at best due to physical disability.
I currently owe $37,450 in credit card debt.
I have made no payments to any creditors for the past year and a half.
I am getting phone calls and letters from my creditors but as yet no one has served me with a lawsuit.
I just yesterday found out that this coming week I am going to receive a very unexpected inheritence of $23,744.

That is the background. My questions are as follows:
If I use the inheritence to pay off my car now in order to eliminate the $325 monthly payment and balloon payment at the end of the lease, and then file Chapter 7 bankruptcy (3, 6, 8 months down the line), is this going to be a problem with my creditors? And if I do pay off my car, will it then become an asset that the creditors can take? If I can pay off my car, is there a way to protect the remainder of the inheritence from my creditors? Basically, I want to know how to protect this money as I will need it to simply live on.

Thank you!

Sherry
Customer: replied 4 years ago.
Relist: Other.
Fritz is apparently not online today as was originally stated and I have not received an answer to my question. I'd like to open my question to another Ch. 7 personal bankruptcy expert.
Customer: replied 4 years ago.
Relist: Other.
Fritz is apparently not online today as was originally stated and I have not received an answer to my question. I'd like to open my question to another Ch. 7 personal bankruptcy expert.
Hello and thank you for your question today. I am a licensed attorney and I will be the one assisting you with your question.

I have some good news for you!!

Using the California "wild card" exemption (Code of Civil Procedure Section 703.140(b)(5)) you would be able to protect up to $23,250 of the inheritance. Also known as the "wild card exemption" provides the following exemption protection: The debtor's aggregate interest in any property up to $1175.00 in value, plus any unused amount of the homestead exemption, which is $22,075.00.

I would NOT pay off your car just yet!! Paying off your car would be considered a preferential payment and that could VOID the exemption.

Your best course of action is to file the chapter 7 bankruptcy listing the inheritance as an asset and exempting it using the wild card referenced above.

Also, I would strongly suggest that you hire an attorney to help you with the bankruptcy. It will cost you $1500-$2000 but at least you will have the peace of mind knowing that it is done right and you will not lose your inheritance.

You can find an attorney in your area by going to www.NACA.net

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Thanks,

HCLegal
Customer: replied 4 years ago.

Dear HCLegal,


 


Thank you for the information. The information regarding the car and the exemption was very helpful. Just so that I am clear, if I file Chaper 7 bankruptcy and the inheritance is protected under the wild card exemption, can I use the inheritance to pay off the car AFTER my BK is discharged? Also, will there be any issues with the bankruptcy court if I spent some of the money on everyday living expenses BEFORE filing BK? For example, I have some serious dental issues that need to be addressed. Can I spend any of the money on this?


 


Thank you!

You are correct, once the bankruptcy is over you can do whatever you want with the money.

Yes, you can spend the money on every day living expenses and dental work without any problems. You should keep receipts for everything.

Also, again I strongly suggest that you a least consult with a local bankruptcy attorney as there may be other issues that I do not know about since I do not know all of the facts of your case.
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