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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
Satisfied Customers: 118809
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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Do you do bankruptcy advice? Got myself into a huge mess and

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Do you do bankruptcy advice? Got myself into a huge mess and need to find some way out.
Thank you for asking for me again. What can I help you with regarding the huge mess?
Customer: replied 4 years ago.

Well, husband makes good money but medical bill co payments have gotten out of hand - mainly because of putting grand in program in Utah and fighting with insurance company to pay the bill. So have about 30,000 in med bills - which they are now garnishing wages. Plus - IRS decided too many deductions so now forcing single 0 dependents. Cut the crap out of our income and we won't make it. We adopted youngest grand and have custody of oldest grand. We own home with 2 mgts. one has already been modified to 2% and other going to be modified. Or maybe can be discharged in bankruptcy as it is a line of credit.

1. We own a motorhome value 10,000 or so - on paper

2. We have a large refund from IRS because of adoption credit but have not filed return yet. From 2011.

Can we do this and not loose refund or motorhome?

Thank you for your response.

Unfortunately, if you file bankruptcy, the motorhome and IRS refund are assets of the bankruptcy estate and as such would be used to pay the bankruptcy estate debts as much as possible before the debts will be extinguished. I am afraid that the line of credit secured by the house is not likely to be extinguished because it is a secured debt, so they will likely get that reaffirmed or they can seek to foreclose on the line of credit.

Because you have assets and he has a good income, you are also going to need a debt/asset ratio calculation to determine your qualification for bankruptcy to begin with. Also, because you have some assets, you may want to try negotiation on the medical debts first as many times medical creditors will negotiate those bills down by a substantial amount if you keep on them and continue to push supervisors for help and you should really try this first if you have not done so already.

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Customer: replied 4 years ago.

Well, I can sell motorhome to my son with excuse we have to have money to live on because of IRS actions. Medical bills have already garnished my husband's wages. Have not figured out how they did that because the lawsuit and bill is in my name only. I had planned to do a modification on the 2nd/line of credit but the bank keeps getting sold.

Thank you for your response.

Selling to your son, you would have to prove you actually received close to book value or the creditors can seek to rescind the sale under the Fraudulent Transfer Act (FTA). Under the FTA, any asset transfer to avoid payment of debts within 2 years would be subject to recovery. Any money you get from the sale would have to go towards bills and expenses and if you can prove you received the money and spent it on bills and your marital expenses then you would be able to sell and use the money and it would not be questioned in bankruptcy.

They are garnishing his wages as medical debts are community or marital debs as each spouse has a duty to support the other spouse. You can still negotiate the bills even if they are garnishing his wages and that still should be your first step, although your bargaining power is reduced since they have a judgment they are garnishing on, but they will negotiate some in these cases if you are in the position to do so.
Customer: replied 4 years ago.

Normally, how long does it take to finalize a bankruptcy? Makes a difference on what I do about IRS filing. Only have till April of next year to do a revision.

Customer: replied 4 years ago.

It will be easy to show use of money from sale of motor home to survive and pay bills because IRS forced single 0 dependents cutting our income severely. Plus the garnishment. I read somewhere that lines of credit are possibly discharagable in bankruptcy. Even with collateral. With property develuations, there is nothing for them to foreclose on. No profit on paper. Not yet anyhow.

There is no real normally when it comes to finalizing, it all depends on the individual case. You need to do the IRS filing, it is an asset of your estate, so if you file bankruptcy they will make you do it.

The lines of credit MIGHT be dischargable if it is shown the primary mortgage is pretty much upside down, but there is no guarantee. The court may just forbid them from foreclosing and leaving the lien on the property if you reaffirm the house in the bankruptcy, unless your house is taken in the bankruptcy and then the line of credit would generally be extinguished.

Customer: replied 4 years ago.

I can file the IRS return with all the normal deductions and receive a small or no return. Then after the bankruptcy is finalized I can file a revised IRS return. Can they go back and pull that into the bankruptcy? File a "normal" IRS return without all the extra deductions that we could use - - before or during the bk and then when bk is final then file a revised IRS return showing things that we should have filed originally. That is why want to know how long it will take to finalize the bk. We will file revised after bk is final. Hope I am making sense.

Thank you for your response. If you file an amended return and did not file the return properly the first time, they could claim this was bankruptcy fraud I am afraid, so I could not suggest you do that.
Customer: replied 4 years ago.

OK, friends and pool are calling. 95 degree water with our heat wave. Will be back for more info later. Thanks so far. I at least have an idea where I am going with this.

I don't blame you. I have a friend in Phoenix who said it is almost 120 there too.
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Customer: replied 4 years ago.

Think I have a handle on this but don't have a whole lot of trust in "local" advice. Talked to bankruptcy attorney and he said we have $30,000 in protected assets and our motor home would fall under that. He said that our property value - the way the first is modified - would leave us upside down in property value and therefore the 2nd could be basically discharged under a 13. Modification took large chunk off amount owed but if we sell, refi or anything else within 3 years they add that chunk back on as owed. That takes us to our current property value plus. The lawyer said don't make any more payments on the second. I am a little uncomfortable with his advice and don't want to make a bigger mess. Also - do you know for taxes - can I claim my grown son who is not working - on my taxes? He is the one where all the court actions and custody court kept him from going back to work. BTW - update on that - mom is basically homeless with no car and no drivers license. Child is sleeping on a chair in boyfriend's parents house when with mother. ANd mother is leaving child with father 90% of the time now. So slowly pieces are falling into place. And not destitute - but would sure like to get this 2nd/line of credit deleted. Would make things much easier. Have husb, myself and 2 children we are raising. ANd both children with medical/FASD issues. OK got way off the point of bankruptcy. Will wait for you to be online for answers

Thank you for your follow up.

Quite honestly, if your bankruptcy attorney looked over the actual financial records, which is the only way to know for certain whether or not Chapter 7 or 13 is right for you, and they are saying you an qualify under a 13 and get a discharge on the 2nd, then they are likely right. The thing you have do decide is whether or not with the modification now if you would be able to make it through without the bankruptcy, if you cannot, then not paying the second mortgage and going on the bankruptcy is the best way to go.

As far as claiming him as a dependent, if he is not working and is supported by you, then under most tax situations you might be able to claim him as a dependent live in relative, but it is closely scrutinized by the IRS if he is older than 19 (24 if not in college). If you're supporting an adult child is over the age, the standard is that your son must have gross income of less than the amount of the personal exemption. This income test prevents a lot of parents from claiming older adult children as dependents because even a part-time job will render your son ineligible.
Customer: replied 4 years ago.

Lawyer said we are right at the edge - chapter 7 would not discharge 2nd. But chapter 13 we would have to make like 250 a month payments for 2 years and it would be over. So we are still borderline till he takes a good look.

One more question. We have a loan against our 401K. Had not thought about that. What happens to that loan?

Thank you for your response.

This type of decision is made only after reviewing your documentation. So you have to rely on the lawyer's review.

If the loan is secured by any property you have to reaffirm it or they can take the 401K.
Customer: replied 4 years ago.

Just to clarify so I completely understand - re the 401K. That loan is secured by the 401K itself. So, I would assume from what you say that we will have to pay back that entire amount. Don't mind paying back this loan, but if forced into this bankruptcy might as well discharge as much as we possibly can.

Thank you for your response.

Yes, you would have to pay back the secured debt or lose the security attached to it I am afraid.