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Hello, I live in Ohio and Im currently considering filing…

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Hello, I live in Ohio and...
Hello,

I live in Ohio and I'm currently considering filing for bankruptcy, but I don't know which type I'm eligible for. I have 71k in credit card debt that is all in my name, with no student loan, or vehicles loans. I have been separated for two years, and reside in a home that is jointly owned with my spouse. There's slightly over 45k of equity in the home. My spouse does not want to file with me. I'm self-employed sole proprietor. I derive my income through trading stocks and commodities, and currently use a 10k brokerage account to generate an income. At the moment, this account is barely making enough money to pay for my living expenses, which forced me to live off my credit cards for the past several years. I have not used them for any luxury items other than to pay for necessary expenses while I find a stable and permanent job. Thus, I have several questions:

1. According to BK law, each filer's home equity is exempt of 20.2k. So If the equity in my home ends up being greater than 20.2k per filer, will I lose the home to the trustee? How will that affect my spouse's equity if it was determined that excess equity exists?

2. If I were to come up with the difference (exemption of 20.2k minus excess equity) by borrowing money from family, can I pay the trustee and keep it?

3. Will the brokerage account that I use to generate an income from be liquidated by the trustee to satisfy my credit card debts? If that's the case, it will leave me with no ability to generate any income.

4. I have 2 children age 18 and 22 driving vehicles used to go to school and work. Those vehicles are titled and registered in my name. Each vehicle is worth no more than $2200. I also own a vehicle that I personally use valued at $1500. My question is, will my vehicles be liquidated to satisfy the creditors?

5. If I fund my IRA account with the maximum contribution before I file, will that be considered a fraudulent act?

6. Will I have to pay taxes on the discharged amount in BK?

7. Will my name be published in the newspaper as I'm awfully embarrassed about filling?

Thank you for any assistance you may be able to provide.
Submitted: 8 years ago.Category: Bankruptcy Law
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Answered in 4 hours by:
6/19/2010
Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8,023
Experience: Bankruptcy professor.
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HiCustomer
How much could your house realistically sell for?
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Customer reply replied 8 years ago
Hi Christina,

My home can realistically sell for 70k. I owe 53.5k on it.
Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
1) If there is more than $20,200 equity (plus the cost to sell it) in the home, the Bankruptcy trustee could take the home. However, the equity in your home is only $16,500. ($70,000 - $53,500)
2) Yes - you could borrow money for this, but only after filing, and this will not be necessary for you since there is only $16,500 equity in your home.
3) The trustee could take some of this, as you are allowed only $2025 for "Tool of Trade" plus $1075 wildcard plus $400 cash = $3500. The trustee doesn't care that you need this money to make a living.
4) You are allowed to keep one car, but if the others have a Kelly Blue Book value of less than about $1500, the trustee in unlikely to take them because after deducting the cost to sell, it would not be worth it for him.
5) If this is something that is regularly done, it would unlikely be considered to be a fraudulent transfer.
6) No taxes are owed for debts discharged in a Bankruptcy.
7) Your name will not be published in the newspaper.
I think I answered everything. Please let me know.
Thank you!
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Customer reply replied 8 years ago
Hi,

Thanks for your response Christina. I didn't realize that you're a professor at CUNY school of law as I thought that responses come from attorneys practicing in the state the inquisitor is from.

I'm awfully saddened that the trustee will only allow $3500 for tools of trade! Is there a legal way around it? Starting a corp. for example? In regards XXXXX XXXXX vehicles, I checked their KBB value once again by including current mileage. I found that the two of the three vehicles are worth $2850 and $3100 respectively. If I title them in my children's name before filing, will that prevent them from being liquidated?

I also forgot to mention that a week ago, I took out an 18k cash advance to tie me up for the next 5 months hoping to get hired by then. Will this action be considered fraudulent causing my case to be dismissed if I were to file in the next 3 months? Thanks in advance.
Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
Bankruptcy is pursuant to Federal law, so the procedure is the same in all states.
If you start a corporation, the assets of the corporation will still belong to you, because you own the corporation, so they will still be subject to the exemption limitations.
You can "gift" the cars to your sons, but will have to account for this if it is done within one year of filing.
The 18K cash advance will not look good, and will definitely be presumed to be an abuse - which can result in dismissal - if filing occurs within 70 days of receiving the cash advance.
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Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
You would be able to pay off the non-exempt portion of the broker account (about $6500) and the value of the cars (minus the estimated expense to sell) by borrowing the money from family.
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Customer reply replied 8 years ago
Thanks for your response. You have been helpful so far. Is there a better way than BK such as government programs or effective methods to settle the debts for 30 cents on the dollar?

I believe that If I don't report the existence of my brokerage account, I'm almost certain that it would be considered fraud. However, will the trustee know all my assets if I forgot to report some of it? I mean do they do a mandatory asset check in my state?

Also, must I show them bank statements of my checking and savings accounts when I meet them?

You also mentioned gifting my 2 used vehicles to my kids. Is that legal and would it be allowed? Thank you for your help.
Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
Some creditors will allow you to pay 50 - 60% of the outstanding balance, if you pay in full - they will not allow payments. There are no government programs that do this.
Trustees generally check property records to see if the debtor owns real estate. They have no authority to check banks to see if debtors have any accounts.
Trustees often do ask to see bank statements. If these are asked for, you do have to produce them.
You are not allowed to give the vehicles to the kids within one year of filing. (If you do, the trustee can take them back.)
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Customer reply replied 8 years ago
I see. So regarding giving the vehicles away, can I instead sell them to the kids instead since they are working and have their own income? Will that be ok by the bankruptcy court? Do I have to do in a certain time before filing? Thanks.
Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
Yes, you can sell the cars to your sons, and this can be at any time before filing.
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Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
HiCustomer
Please don't forget to hit the "ACCEPT" button.
Thank you!
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Customer reply replied 8 years ago
Hello,<br /><br />A few more questions please Christina, and I'm ready to pay you. you deserve it!! Please bear with me if you could.<br /><br />Regarding my home that is jointly owned with my separated wife, if I decide to NOT declare bankruptcy, but instead settle debts for 35-50 cents on the dollar in the next 6 months (which is the preferred method at this moment), does it make good sense to deed my home to her now to prevent creditors from placing a lien on it while I go through the process of settling the debts with them(in case they refuse), or should I sell out my portion of the equity right away instead (which comes to about 10k). I want to relinquish my rights to the home without acting fraudulent in the eyes of the creditors or a Judge in case a lawsuit is filed against me for transferring/selling my rights to the home while going through a default as I have read that transferring or selling property before/during a default can be considered fraud. <br /><br />But currently, my name and hers are on the mortgage, and the challenge of course is that it would be difficult for her to refinance the loan in her name only. I really want to do the right thing without losing our home. Any effective suggestions would be appreciated. Thanks.
Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
If you transfer to home to her without being paid for it, that transfer will be viewed as a fraudulent transfer, and could therefore be voided.
It would be acceptable for you to sell your portion of the equity - to your wife or anyone else - as long as you receive a price that is reasonably close to market value.
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Bankruptcy Lawyer: cfortunato, Attorney replied 8 years ago
HiCustomer
Please don't forget to click on the "ACCEPT" button. Thank you!
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Customer reply replied 8 years ago
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Customer reply replied 8 years ago

Hi Christina,

Rest assured, I didn't forget about paying you. I just have a lot on my mind regarding my situation, and I need to be clear on what to do before I decide if BK or settling is the best option, taking into account that my home doesn't get liened by creditors.

Now you mentioned that It's legal to sell my equity to my wife so long as it's sold at a reasonable price. I believe I know what the value of it is, but must I get an appraisal done in the eye of the court in case creditors contest the sale? The county tax dept. is showing a value very near what I want, and I have not done any upgrades to it since the county made an assessment to it a few years back.

Also, can I sell my share to her without the need for her to refinance and asume the loan in its entirety? Thank you.

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