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JoeLawyer, Attorney
Category: Bankruptcy Law
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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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Here are the assumptions pertaining to an individual who is

Customer Question

Here are the assumptions pertaining to an individual who is seeking expert advise with respect to bankruptcy: (1) and individual makes, say, 55k per yr; (2) individual owns 2 pieces of land and is current with payments and wants to KEEP said land (for future investment/gain); individual has a rental property with 400 a month negative cash flow, but wants to keep property (for future investment/gain)....in seven yrs., should be making money on said property..(3) individual owes 90K on credit cards and "can't" pay off.....(4) individual has a "return of premium" life insurance policy costing about 200 per month....Question: can said individual, if goes BK, keep properties???? If so, this would leave no money or very little money left over for other creditors....in short, wld individual HAVE to get rid of investments and instead of paying on investments (which will be of benefit in 10 yrs or so) pay on credit cards....
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  cortrightlaw replied 1 year ago.

cortrightlaw : The answer to your question rests more in wether or not your properties have equity in them and if so can tha equity be protect by your states bankruptcy exemptions. If they are upside down with no equity then it is usually not a problem to retain the property. But if there is equity ten that is what the trustee is looking for so I could be sold and paid to the creditors.
Customer:

Just so I understand....in the abstract, if one had 10 rental properties with 1000 per month negative cash flow (and no equity) and had 10 pieces of "investment land" with total payments of 1000 per month, then individual could make payments - in chap 13 - on these properties...If so, this would leave no money for other creditors...so, instead of paying credit cards back a portion of what is owed, it is okay to simply pay on "investments"?

cortrightlaw : No that is not correct, if you are talking about a 13 then the trustee would not allow the person to keep a investment property that was not generating a positive cash flow. In a 7 the trustee probably would not have an issue with one or two properties with a small negative but the scenario you suggest most likely would be considered bankruptcy abuse.
Customer:

K, real case situtation...have two rentals (and have had for over 10 yrs) with HIGH neg.....using credit cards to pay for repairs (new roof, furnance, etc)....both properties are underwater...but in 10 yrs will be good investments....could the negative on these two properties be counted as part of my monthly debt thus reducing amt. credit card companies would get?

Customer:

I am awaiting an answer..pls do not bill me until I get an answer..thank you!!!

Expert:  JoeLawyer replied 1 year ago.
HiCustomer

I would like to clarify a couple of things to be sure I understand you question.

First: Are you considering Chapter 7 or Chapter 13, because as cortrightlaw pointed out, whether you can keep properties that are losing money is different between the two Chapters.

In Chapter 7, the debtor can reaffirm essentially whatever he or she wants, as long as either their attorney signs the reaffirmation agreement or the court approves it, even if it is a "bad deal" (i.e. keeping a property on which the debtor owes more than it is worth, or that is bringing in less per month that it costs, etc). But, in Chapter 13, the Trustee will not let the debtor keep a property that is losing money, because that is seen as unfairly taking that money out of other creditors' pockets. In other words, in Chapter 13, the debtor has to pay a monthly Chapter 13 Plan payment each month to the Trustee, who then disburses the money to creditors. This Plan payment has to be as much as the debtor can afford after paying his or her reasonable and necessary monthly expenses. If the debtor is keeping a property that is losing money, then this monthly loss decreases how much the debtor can afford to pay to creditors, which ultimately decreases the amount of dividend creditors will get, and the Trustee will not recommend confirmation of the Plan since the debtor is, in essence, forcing his or her creditors to help fund the "bad deal" by those creditors recovering less money.

Second: I need to understand what you mean by "...have two rentals (and have had for over 10 yrs) with HIGH neg" and "using credit cards to pay for repairs (new roof, furnance, etc)....both properties are underwater...but in 10 yrs will be good investments....could the negative on these two properties be counted as part of my monthly debt thus reducing amt. credit card companies would get?"

By "neg" do you mean you owe more than the properties are worth, or do you mean you are bringing in less per month than what the mortgage is costing you? If a debtor owes more than a property is worth, the Chapter 13 Trustee doesn't always object as long as the debtor can afford the payments and can argue that the property value will come back so the upside-down loan will eventually right itself. But, if you mean the properties are bringing in less per month than the mortgage and other expenses are costing you each month, so that you are losing money each month, there is practically no chance the Trustee will let this be confirmed since, as I explained above, you can't force your other creditors to fund your loss. Investments that are losing money generally always have to be abandoned in Chapter 13.

Good luck,
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.
JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
JoeLawyer and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 10 months ago.

If one is retired and receives a federal pension and has, say, $40K in credit card debt (on about four out of 13 credit cards), why would it not be better to simply NOT pay back the $40K to the four credit cards than to declare BK? I understand that a federal pension is beyond the reach of creditors and cannot be garnished....if so, credit is "destroyed," but do not have to go through the agony of BK

Expert:  JoeLawyer replied 10 months ago.
It is true that a person who is "judgment proof," which is one who has no garnishable income nor attachable assets, does not need to file bankruptcy to defeat collection efforts since there is little a creditor can do to collect from such a person.

However, you only mentioned that the income is a federal pension, but you did not mention whether there are any assets. If the person has real estate or other nonexempt assets, the creditor can sue the person and get a judgment lien on assets even though the creditor can't garnish income.

In other words, a creditor can elect to sue anyone who owes that creditor money, and the creditor has several collection options after obtaining a judgment in addition to garnishment of income, such as lien attachment. Also, the creditor can harass the person by dragging them back to court every so often to determine if that person has new income or assets. If the person fails to attend a hearing, the creditor (depending on state law) may be able to get a writ of attachment on that person, which is basically a warrant for that person's arrest due to that person's contempt of court for failing to attend the hearing.

So, whether or not bankruptcy is more agonizing that creditor harassment, even in regard to a judgment proof person, is arguable. I have had several clients elect to file bankruptcy even when I told them they technically didn't have to, just to stop the lawsuits, collection agency phone calls, letters, etc. Also, bankruptcy typically cleans up the credit report so the person's credit score is generally much higher in 15 months as opposed to being bad indefinitely as creditors continue to report unfavorable data to the credit reporting agencies.

I hope I’ve provided the information you were seeking. If you need more help, please use the reply tab to continue our conversation.

If you are happy with my service, please Accept my answer. If not, please let me know so l can continue to help you. Thank you!

Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.
Customer: replied 10 months ago.


thank you. so, assuming I have no other assets (excluding furniture and household items) and assuming I live in an apartment and lease a car (or have no car), and assuming I attend court (if I were to be served), then I am pretty much protected against credit card debt - is that what you are saying? also, I have a small amount of money in my TSP (the gov't version of a 401K), am I correct that this money, too, cannot be garnished? Also, wouldn't the credit cards "drop off" my credit report after a certain time (like 7 or 10 years)? Finally, would a credit card company really sue me, if I owe them, say, $9K?

Expert:  JoeLawyer replied 10 months ago.

Thank you for the Accept of my prior Answer, I appreciate it!

 

Now, on to your new questions:

Question: so, assuming I have no other assets (excluding furniture and household items) and assuming I live in an apartment and lease a car (or have no car), and assuming I attend court (if I were to be served), then I am pretty much protected against credit card debt - is that what you are saying?

Answer: I can't tell you if you are protected in particular since I can't make that determination on an online forum, but I am saying that essentially anyone who has no garnishable income nor unexempt assets (based on State law of the State in which the defendant resides) and who never becomes in contempt of court for any reason (such as failing to attend a hearing that person was ordered to attend), is generally considered to be "judgment proof." Assets which are generally safe in Virginia are listed here, though I do not know if that website is up-to-date. There are also federal laws protecting other assets in addition to those assets protected by Virginia law.

Question: also, I have a small amount of money in my TSP (the gov't version of a 401K), am I correct that this money, too, cannot be garnished?

Answer: Again, I can't tell you if your TSP is safe in particular for legal reasons (see here), but generally Thrift Savings Plans are an "exempt" asset, meaning they cannot be pursued by creditors for collection of a judgment. A government website, here, confirms that "The funds in your TSP account are held in trust for you by the TSP and, by law, are protected from the claims of creditors. Your TSP account cannot be garnished to pay debts."

I believe the U.S. Code section protecting TSP's is 5 USC § 8346(a), here, but there are multiple government retirement systems (Social Security, FERs, etc) so I'm not sure if this is the right Code section for TSP's but I think it is.

Question: Also, wouldn't the credit cards "drop off" my credit report after a certain time (like 7 or 10 years)?


Answer: Yes, but there is a difference between dropping off the credit report and becoming uncollectible. Credit accounts fall off of your credit report after 7 years, and judgments fall off your credit report after 10 years (generally - see the Fair Credit Reporting Act, § 605 (15 U.S.C. §1681c), here). However, the length of time a creditor has to collect on a debt (i.e. the statute of limitations) does not follow the same rules regarding what is on your credit report. A credit card may be collected for a period of time as dictated by the law of the State in which you reside, or another State if your credit card agreement indicates that a particular State's laws apply to your account. A website, here, indicates that the State of Virginia gives credit cards only 3 years to collect, though I do not know if that website is current. If you go to the Code of Virginia, here, section § 8.01-246 (here) seems to imply the statute of limitation period on credit cards is 5 years. You would need to confirm with a Virginia attorney what statute applies to credit card lawsuits in that State.

Also, in most States, the statute of limitations runs from the last time the card is used or paid, so each time a person uses his or her credit card, or each time a person makes a payment toward his or her credit card, the statute of limitations period starts all over. Also, if the credit card company does file a lawsuit and gets a judgment, they will have another period of years to collect based on the statute of limitations that applies to judgments. A website, here, indicates that judgment creditors in Virginia have 8 years to collect on judgments, though again I don't know if the website is up-to-date - the actual Code of Virginia seems to imply the statute of limitations on judgments is actually 10 years (see Code of Virginia § 16.1-94.1, here). Judgments can often be "renewed" even when they do expire for another period of years in most States also.

Question: Finally, would a credit card company really sue me, if I owe them, say, $9K?

Answer: They certainly could and, in my experience, usually do eventually if they do not get paid. Credit card companies sue people quite frequently, and for all different balance amounts. I have seen credit card lawsuits as low as $500 before. Also possible is that the credit card company will sell the debt to some other company who will then file the suit. In other words, credit card companies often sell off debts they can't collect for reduced amounts to third party companies, and then those third party companies sue everyone and try to make money. For example, a credit card company may lump 1,000 accounts together on which they are owed a total of $1,000,000 and sell the accounts for, say, $20,000, to some company, and then that company will sue everyone and try to get more than their $20,000 back (which is often tough since the credit card company usually tried to collect prior to selling and couldn't).

If my Answer was helpful, please Accept.

Thanks,
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.

Customer: replied 10 months ago.


Final follow-up question....I do own a property with my fiancée which we own in joint tenancy...so, if I am sued by a credit card company (or co. debt was sold to) for non payment, I am assuming that if a lien was placed on the property and if it was sold that the creditors could only "take" one half of any monies (if any)upon selling....for example, if there is, say, a $25K lien on house, and we get, say, $35K upon selling, the creditors could only go after my half of house or one half of the $35K or $17.5K - is that correct. (of course, over time, house will have more equity...and, if I find myself in this situation, I have NO "problem" with creditors getting what is owed to them upon sale of house, realizing, too, there will be added interest, fees, etc.)...however, upon marriage, if we change title to the entities, I am assuming creditors would have no legal claim against me -- is that correct.

Expert:  JoeLawyer replied 10 months ago.

Question: Final follow-up question....I do own a property with my fiancée which we own in joint tenancy...so, if I am sued by a credit card company (or co. debt was sold to) for non payment, I am assuming that if a lien was placed on the property and if it was sold that the creditors could only "take" one half of any monies (if any)upon selling....for example, if there is, say, a $25K lien on house, and we get, say, $35K upon selling, the creditors could only go after my half of house or one half of the $35K or $17.5K - is that correct.

Yes. A non-defendant co-owner can usually assert ownership of one-half of the equity and would normally be awarded one-half of the liquidation proceeds, with the other proceeds going to the creditor foreclosing the judgment lien.

However, creditors can't always foreclose judgment liens if the equity owned by the defendant is exempt. In that case, the lien just sits against the property for 10 years and only has to be paid if the property is sold or refinanced (since the title company/bank would require the lien(s) to be cured before they would issue the title insurance/new mortgage).

If the equity is partially exempt, the creditor may foreclose the judgment lien but has to pay the defendant their exempt portion from the sale proceeds.

Question: however, upon marriage, if we change title to the entities, I am assuming creditors would have no legal claim against me -- is that correct.

Answer: I believe this depends on timing. If a creditor obtains a judgment before the marriage, then the lien attaches and will survive the subsequent marriage. However, if the marriage takes place before the lien attaches, AND the property is thereafter owned as tenants by the entireties (i.e. just getting married is not usually enough; generally, the deed has to be changed to contain the language "Husband and Wife") before the lien attaches, then the lien will not likely be able to attach.

And just to clarify, even if you get married the creditors would still have a claim against you, but they won't likely be able to obtain a lien against the real estate if you get it moved into a tenancy by the entireties ownership prior to the judgment.

Finally, fraudulent transfers are void. So, getting married and transferring the property to a tenancy by the entireties ownership may or may not work if the creditor can convince the court that you transferred the property ownership to an entireties property only to defeat their lien attachment (see Code of Virginia § 55-80, here). I'm not saying it is very likely that a creditor could convince a court that you got married just to defeat their lien, but stranger things have happened. So, I'm mentioning it for the sake of thoroughness.

Good luck!
Joe

LEGAL NOTICE: I am only licensed to practice law in certain state(s) and I cannot give legal advice to someone who does not reside in a state in which I am licensed, nor shall anything I say in the above answer or elsewhere on this site be deemed legal advice, even to someone who resides in a state in which I am licensed. Funds I receive from JustAnswer.com are gratuities paid to me for taking the time to respond to questions, not for legal advice. This forum is designed to provide general information only, and information herein is not warranted to be correct or applicable in any way since laws may have been misinterpreted herein, since laws change from time to time, and since the impact of those laws on any particular situation varies. The information presented in this site shall not be construed to be formal legal advice nor the formation of an attorney-client relationship. Persons accessing this response are encouraged to seek independent legal counsel in their jurisdiction for guidance regarding their individual circumstances. Do not take any action or inaction based on information presented herein since it is informational and may not be accurate or applicable to you; it merely attempts to give you a basis of knowledge to help you formulate questions to ask a legal or other professional in a face-to-face meeting in your jurisdiction. JoeLawyer is an attorney but does not hold himself out to be a specialist or expert in any area, regardless of assertions made by any third party, and any implication of being an expert or specialist herein is made in error. I hope the information presented above is useful to you. Answer above is (c) JoeLawyer. All rights reserved.

JoeLawyer, Attorney
Category: Bankruptcy Law
Satisfied Customers: 767
Experience: Attorney in the practice of Bankruptcy Law since 1996
JoeLawyer and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 9 months ago.

(I would like to "work" with JoeLawyer, please).....a follow-up question: I understood you to say that I am at least somewhat "judgment proof.," and if I understood you correctly, in the hypothetical situation where I owe, $20K on a credit card AND default on payments, the credit card co. (or collection agency) CAN put a LEIN on my house.....fair enough.....my question is: can said credit card co. FORCE the SALE of MY house I own jointly with my finance????????? I did click on one of the links you provided and it seems to me that they cannot....however, I would like your professional interpretation of this.....................so, question one: I FULLY understand that a credit card co (or collection agency can place a lien on my personal residence...FAIR enough....BUT CAN THEY FORCE THE SALE OF SAID HOUSE....(say it is paid off in 30 yrs, CAN THEY FORCE SALE).....that is question ONE....Question TWO.....I understand that my gov't TSP is protected from BK and creditors......WOULD IT STILL BE PROTECTED IF I ROLLED IT OVER --- SAY TO VANGUARD OR FIDILITY:


 


 

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