Bankruptcy is a viable solution for many individuals and businesses, but there is items you should know before filing or you may lose your personal or real property. When a bankruptcy is filed, a debtor is entitled to claim certain bankruptcy exemptions. Exemptions are values in personal and real property a debtor in eligible to retain. Most debtors are eligible to retain all property. Below are some of the property Debtors have trouble disclosing or handling exemptions properly.
- Do you have a personal injury claim? Only portions of that claim are protected in a bankruptcy.
- What is the value of real property? A debtor is entitled to certain exemptions in a primary residence only. Under the federal exemptions, a wild card exemption may be used on other real property.
- Tax refunds due? May be exempt through wild card exemption,
- Household goods? Must be itemized out as there us limits to the amounts of one particular exempt item.
- Retirement account? Must be tax exempt to gain qualifications for full exemptions. (there may be timing issues as well),
- Future interests? An interest the debtor does not have until a future even occurs.
- Prepaid cards? These are assets of the Debtors case.
- Dissolution decree orders and transfers?
- Any assets not listed on the bankruptcy petition? If you do not list assets, they are not yours. If the failure to list was negligent, the debtor may have the opportunity to amend the list of property to add it after the case was filed.
Ultimately, a person contemplating bankruptcy filing should consult with a bankruptcy attorney.
Saving my underwater Property.
Many homeowners are still underwater on their mortgages despite the recent increase in the housing market. There are many ways to avoid losing an underwater property or rid oneself of the underwater property without harsh implications. Below are a few of the options available:
- Negotiate with subordinate lenders for a release of its lien: Many times this can be completed for pennies on the dollar
- Short sale the property: With most short sales, the seller does not bring funds to closing and rids themselves of all liabilities from the property. Many times there are no tax consequences and minimal credit damage for a short sale.
- Waterfall Loan Modifications: Many investors have signed on for loan modification programs whereby certain amounts can be forgiven, interest rates lowered, and foreclosures stopped.
- Chapter 13 bankruptcy: As the laws stand now, a homeowner is able to strip off unsecured liens on a primary residence and will only be left with the secured or under secured first deed of trust.
- Refinance: There are many refinance programs where an individual may be able to lower interest rates to maximize the amount paid for principal and reduce the payments.
How will Bankruptcy affect my credit?
Bankruptcy generally has a positive outlook on a credit score once completed. Why? Most individuals contemplating bankruptcy are either behind on their debts or their debt to income ratios are upside down. This leads to decreased credit scores even for those making timely payments. From what I see in my day to day business, consolidation companies are the biggest culprits damaging individuals credit scores.
What are the major factors… in determining a credit score? High balances on credit cards, delinquent accounts, collections, lawsuits, dissolutions, foreclosures, evictions, repossessions and etc. Typically, settlement of one account at a time or settlement through consolidation companies will help with debts slowly, but will generally not fix all debts in a timely fashion and may be more detrimental to your credit score than a bankruptcy. A bankruptcy handles this for you all at once.
The filing of the case will place a stay on all collections, foreclosures, repossessions, etc. A Ch 7 bankruptcy will discharge all debts at once and within 12 months after discharge, an individual’s score will increase approximately 100 points on average. An individual is eligible for various portfolio mortgage programs the day after the filing of a bankruptcy, pending other qualifications are met.
If you are contemplating bankruptcy in Seattle, Bellevue Kirkland and surrounding areas, it may be wise to consult with a bankruptcy attorney. Here is 5 Things to Always Avoid When Getting Ready To File. Make sure you read this so you are prepared.