The other alternative is to file under Chapter 13, in which you can actually save the home from foreclosure by paying back the amount owed in arrears throughout the life of a chapter 13 payment plan (3-5 years).  However, to qualify for a chapter 13 you must be able to show the court that you can afford to make regular monthly payments to the court to save the home.

In either case you get relief, if you have any questions about foreclosure & bankruptcy please contact our office and I will be happy to answer your questions!

If you are considering filing bankruptcy and you own a home or mortgage, consult a qualified bankruptcy attorney to advise you on how to best protect all of your assets.

Everyone who files bankruptcy in the United States must file a petition for bankruptcy and attach to that petition a set of ‘schedules’ that itemizes their real and personal property, income, expenses etc. Most debtors do their best to disclose “what they own and what they owe” because they want to be honest, but also because failure to do so is a federal crime.

The term ‘property’ for the purposes of bankruptcy is used broadly.  There are tangible assets like cars, bank accounts, real estate, guns and jewelry. There are also intangible assets that are considered property such as tax returns, social security, child support, workman’s comp, claims for personal injury and potential lawsuits.

On an elementary level, these assets should be disclosed to be honest and to comply with federal law, but there is another more encouraging reason: The doctrine of Judicial Estoppel.

Judicial Estoppel is a doctrine the Courts have adopted that can kill your claim if you do not disclose it. The bankruptcy courts have adopted the doctrine of judicial estoppel to uphold the the integrity of the court system.

The court enforces judicial estoppel to prevent debtors from stating they don’t have a claim in the bankruptcy court, and then turning around and trying to recover on the same claim in a different court. A defense attorney will check to see if a debtor disclosed their claim, and failure to do so can (and probably will) end up in a dismissal of the personal injury case.

If you have a personal injury claim and are considering file bankruptcy, be sure to discuss the personal injury claim with your bankruptcy attorney for advice on how to protect your  interest in a potential claim or lawsuit.

For more insight into the subject, read  examples of bankruptcy fraud investigations from the IRS website.

As most of us lawyers know, there is often no ‘right’ answer.  Each situation must be evaluated on a case by case basis, but the general consensus is bankruptcy. I will get into why in a minute, but first let’s hit on an issue that often comes up together with Bankruptcy and Divorce.

When a bankruptcy petition is filed it puts an ‘automatic stay’ on any debt collection attempts, meaning creditors cannot legally attempt to collect a debt from a debtor; it is the exceptions to the automatic stay that are important to the potential divorce client.  One exception allows actions to continue to establish paternity or to set up payment of alimony or support. The second exception allows actions to continue to collect alimony, maintenance, or support from property that is not part of the bankruptcy estate.

If the client is involved in an action to set up support payments (set up, not collect)  or establish paternity the automatic stay will have no effect on the case, and it can proceed without concern about the effect of the automatic stay. However, because of the limitations on collections, you may not get much money for your efforts short term, but the obligation to pay will at least begin to accumulate.

A second common issue that arises with bankruptcy and divorce can turn on the language of the divorce decree. For example, any form of support that comes from a divorce settlement whether it is alimony, or child support, is NOT dischargeable in a bankruptcy.  Property settlements on the other hand, are presumably nondischargeable, but that presumption can be overcome if the debtor can show he cannot pay the debt and still take care of himself, his dependents, and his business, or that discharging the debt would result in a benefit to the debtor that outweighs the harm that would be caused to the former spouse or child by non-payment 11 U.S.C. §523(a)(15). So the way the support is labeled in the divorce decree can make a difference.

So why bankruptcy first? You’ll know during  divorce which obligations will be discharged, and each party can negotiate with full knowledge. In addition, filing before divorce will save you some money, because the couple will pay for only one bankruptcy filing instead of two, and the divorce will be less complicated.

However; rebuilding your credit is an important part of the bankruptcy process, after discharge the debtor has a “fresh start” to begin anew.  Taking on credit and making regular payments to your creditors is a way to increase your credit score, as well as showing potential creditors your ability to make timely payments in the future.

Taking on lines of credit is part of “The American Way” as it enables us as citizens to live the lifestyles we want (and can hopefully afford), with the promise to repay in a timely fashion. But death, illness, divorce and job loss can (and almost always do) come at unexpected times, and can force debtors into bankruptcy.  That being said, there are still important reasons to rebuild your credit after a bankruptcy, and three common instances where your credit will be a factor are:

Employment: Unfortunately, many employers will take a peek at your credit score during the interview/application process when you are seeking employment.  There are legislators out there who are trying to amend the laws to prevent such practices, but for now it is the way it is. *Note – You CANNOT lose your job for filing a bankruptcy, this paragraph only applies to those seeking new employment.

Property Rental:  Landlords and lenders will check your credit report to evaluate whether or not you should be given occupancy of a rental property, they base their decision on your past credit history and your ability to pay in the future.

Home Loans & Lines of Credit: In a debtor’s attempt to obtain a home loan or line of credit, the lender will review your credit history not only to see if they want to approve you for the loan, but also to decide the actual terms of the loan, i.e. interest rates.

I know what you are thinking.. “How is bankruptcy going to help me get loans in the future?”  The way I see it is like this; put yourself in the shoes of the lender who sees a bankruptcy on your credit report, now compare that with a debtor who has many bad/charged off debts, repossessions and foreclosures. Often times a debtor who has not yet filed bankruptcy runs the risk of being sued by their creditors.  A lawsuit by a creditor can lead to wage garnishments/judgment liens and can alter the debtor’s immediate financial circumstances.  The bankruptcy debtor on the other hand, does not run that risk and creditors know that, meaning you are a safer bet.

So don’t be afraid to get back out there after your discharge, but just remember to make timely payments!

What does that mean to you, the debtor?

It means you will now have an additional $6,000.00 in available exemptions to protect your personal assets such as your vehicle, boat, RV and/or your household goods.

Bankruptcy exemptions are laws which protect your assets from a sale by a bankruptcy trustee to pay a debt owed to one or several of your creditors.

There are federal statutes which protect assets such as Social Security Disability, 401K, and other various assets, but on top of these federal exemptions, Tennessee also has separate (from federal law) state exemptions which protect some of your personal and real property.

The amount of this exemption has just increased as of July 1, 2010 by $6,000.00 dollars, to an amount of $10,000.00 in personal property protection.  This is important because the bankruptcy trustee assigned to your case will sell your nonexempt assets if they have any monetary value that could be used to pay off your creditors.

Let me give you an example of how the personal property exemption works.  Let’s say you owe household goods (TV, DVDs, Bedroom Furniture, etc.) in an amount of $2,000.00.  You now have $8,000.00 dollars left in exemption protection. Now let’s assume you have a vehicle (which in Tennessee is considered ‘personal property,’ there is no separate exemption for vehicles, such as a ‘vehicle exemption’ for instance.)

Most people who walk through the doors of my office do not have equity in their vehicles, an example of this would be a debtor who buys a new vehicle from a car lot on a loan.  This purchase is now a secured debt, meaning the lender can come and repossess the vehicle if you fail to make timely payments, but the point is that the car instantly loses value when you drive it off the lot.  The loan is now worth more than the car, and you have no ‘equity’ in the vehicle.  Assuming you can afford the payments and they are current, you will be allowed to ‘reaffirm’ this debt in a Chapter 7 bankruptcy, meaning you will continue the relationship you had with the lender as if no bankruptcy were ever filed and you car can be repossessed in the future if you fail to make timely payments.

That being said, issues arise with the personal property exemption when the car has nonexempt value that a Trustee could sell the car for and use the proceeds to pay your creditors. A common example of this would be when a car is PAID IN FULL, meaning the car is worth whatever it can be sold for and there is no lender attached to the vehicle.  Going back to the remaining $8,000.00 on our hypothetical personal property scenario, let’s assume you owe a 2005 Mustang GT and the value of the car is around $15,000.00, you are now in possession of $17,000.00 in personal property, and only $10,000.00 of that amount is EXEMPT.  In a Chapter 7 bankruptcy a Trustee would sell the vehicle, return to the debtor and exempt amount they have, and give the remainder to your creditors to satisfy your debts.  This will leave you with $5,000.00 from the sale of your vehicle, in addition to the $2,000.00 you own in household goods, and the trustee will use the remaining $7,000.00 of nonexempt property to pay off your debts.

Now let’s look at the other end of the spectrum, instead of a Mustang, let’s say you own 2 older vehicles that are fully paid for but are only worth $5,000.00 combined.  You now sit at $7,000.00 in personal property, and you are exempt up to $10,000.00.  The Trustee in this case would NOT sell your vehicles, because it is you EXEMPT PROPERTY.  You will get to keep the vehicles because there isn’t any available nonexempt value in the property.  Whereas under the old law, you would have probably lost one (or both) of your vehicles because the sale would result in $3,000.00 in nonexempt property: $7,000.00-$4,000.00 (OLD EXEMPTION AMOUNT).

There are various exceptions to the new law and sometimes determining which property is exempt and which is not can turn on the fine details in the bankruptcy code, in which case you should consult an attorney. That being said,  now that you have a general idea about how the increase in the Tennessee personal property exemption can work for you, if you have questions please contact our office and we will be happy to assist you!