I was faced with an interesting question from a client this week. Up until recently ago he lived in California. For six years he has owned a condo in Utah. Four months ago he moved to Utah and now lives in the condo. He needs to file bankruptcy and wants to know which state's exemptions, Utah or California, he can use. He wants to use California because their homestead exemption is $75,000 whereas Utah's is $20,000.
Section 522 of the Bankruptcy Code says that a person uses the exemptions in the state where he has had his domicile for the past 730 days (two years), unless the person hasn't lived in a single state for that time. If, like this person, a debtor has lived in two or more states in the past two years, then he uses the exemptions in the state where he lived the longest portion of the 180 days immediately preceding the two year period. This convoluted and confusing statute is part of the BAPCPA enacted in 2005 and its purpose is to prevent debtors from moving to states with more liberal exemption laws and then filing bankruptcy.
In this case, section 522 helps my potential client because he lived in California for the full 180 days prior to the two year period back to August 2009. So he will get to claim the California exemption even on his condo in Utah.
Tuesday, August 30, 2011
Thursday, August 18, 2011
Bankruptcy Preparers
I recently joined an online forum dedicated to answering questions about bankruptcy. One of the more common questions is along the lines of "Can I do a bankruptcy myself?" Underlying this question is the concern that a person already strapped for money is being asked to pay $1,000 - $3,000 or more to have a lawyer handle the bankruptcy. What clients often see is only the finished product, a stack of papers about 1/2" thick, that constitutes their petition and supporting schedules. How hard can it be to fill out some papers, they ask?
Some want to go even farther and get someone, called a bankruptcy preparer, to fill out the papers for them. Bankruptcy preparers are expressly permitted by the Bankruptcy Code, but there are a number of things preparers can't do, if they're following the rules. First, they can't give legal advice. In other words, they can't tell you what to put down. They can only put down what you tell them. Secondly, they can't go with you to court. You're on your own there. Third, once they finish preparing your schedules, they are done. They have no further interest in you or your case because they can't have an interest. All they can do is fill out paperwork.
Bankruptcy is one of the most complicated legal processes there are. It is far more complex than a divorce, a will, a DUI or most litigation. The 2005 Bankruptcy "Reform" Act made it even more complex. If you don't know what you are doing, you can fail to claim exemptions you're entitled to, meaning you can lose property you are able to keep; you can incorrectly fill out the Means Test, meaning you might think you don't qualify for Chapter 7 when you really do; you can fail to respond to a motion, resulting in something bad happening, such as having your discharge denied; and you can even be guilty of bankruptcy fraud, meaning you can lose your right to a discharge and even go to prison.
Think of it this way. You're trying to get rid of maybe hundreds of thousands of dollars of debt and gain a chance at starting your life over, a chance that comes along only once every eight years at best. Isn't it worth $2,000 to get it done right?
Some want to go even farther and get someone, called a bankruptcy preparer, to fill out the papers for them. Bankruptcy preparers are expressly permitted by the Bankruptcy Code, but there are a number of things preparers can't do, if they're following the rules. First, they can't give legal advice. In other words, they can't tell you what to put down. They can only put down what you tell them. Secondly, they can't go with you to court. You're on your own there. Third, once they finish preparing your schedules, they are done. They have no further interest in you or your case because they can't have an interest. All they can do is fill out paperwork.
Bankruptcy is one of the most complicated legal processes there are. It is far more complex than a divorce, a will, a DUI or most litigation. The 2005 Bankruptcy "Reform" Act made it even more complex. If you don't know what you are doing, you can fail to claim exemptions you're entitled to, meaning you can lose property you are able to keep; you can incorrectly fill out the Means Test, meaning you might think you don't qualify for Chapter 7 when you really do; you can fail to respond to a motion, resulting in something bad happening, such as having your discharge denied; and you can even be guilty of bankruptcy fraud, meaning you can lose your right to a discharge and even go to prison.
Think of it this way. You're trying to get rid of maybe hundreds of thousands of dollars of debt and gain a chance at starting your life over, a chance that comes along only once every eight years at best. Isn't it worth $2,000 to get it done right?
Tuesday, August 16, 2011
Living Reality?
I follow a number of bankruptcy blogs and today read a great post by a bankruptcy attorney in Kansas City, Missouri, about reality and bankruptcy. Rachel Foley makes the point that the so-called "reality" shows have twisted our view of the world. Many of us try to emulate any number of people in these shows and end up both spiritually and financially bankrupt. You can read Rachel's entire post here:
http://www.bankruptcylawnetwork.com/trying-to-live-like-a-reality-star-may-lead-to-bankruptcy/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BankruptcyLawNetwork+%28Bankruptcy+Law+Network%29
One of the key points in her post is that bankruptcy is designed to give people a fresh start, and you can't make a fresh start by continuing to spend more than you make. You can get rid of your debt, but if you continue to live beyond your means, in five years you'll be in debt again. Bankruptcy requires some hard decisions and may involve some pain as you give up a lifestyle that you can't support. The client who says, "I want to get out of debt but I don't want to give up my boat" won't make a fresh start because he hasn't realized that owning a boat just isn't in the cards for him right now.
If you're not willing to engage in some soul-searching and make some hard choices, bankruptcy isn't a fresh start. That might sound harsh, but that is reality.
http://www.bankruptcylawnetwork.com/trying-to-live-like-a-reality-star-may-lead-to-bankruptcy/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BankruptcyLawNetwork+%28Bankruptcy+Law+Network%29
One of the key points in her post is that bankruptcy is designed to give people a fresh start, and you can't make a fresh start by continuing to spend more than you make. You can get rid of your debt, but if you continue to live beyond your means, in five years you'll be in debt again. Bankruptcy requires some hard decisions and may involve some pain as you give up a lifestyle that you can't support. The client who says, "I want to get out of debt but I don't want to give up my boat" won't make a fresh start because he hasn't realized that owning a boat just isn't in the cards for him right now.
If you're not willing to engage in some soul-searching and make some hard choices, bankruptcy isn't a fresh start. That might sound harsh, but that is reality.
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