The bankruptcy estate is a term that you may hear referenced when you do research about bankruptcy. It could be a bit confusing to understand because the idea of a “bankruptcy estate” is not very intuitive. Why would the bankruptcy have an estate? What property is it referring to? Whose property is it?
Well, the bankruptcy estate actually refers to your property at the time of filing bankruptcy. Your property, at the time of filing, becomes property of the bankruptcy estate. This does not mean that you lose your property or access to it. It just means that all of your property has to be accounted for in the bankruptcy. Luckily, there are exemptions under federal and state law that allow you to protect your property and keep it away from your creditors. However, you still must disclose everything you own so that the Bankruptcy Court can determine whether or not any of that property can be used to satisfy the debts of your creditors. Hence, it becomes part of the bankruptcy estate.
So, what property must be disclosed? Pretty much everything. This includes any real estate that you own, such as your home or even a campground. It would include your cars, motorcycles, and ATVs. It includes personal items such as furniture, clothes, and jewelry. It also includes cash, savings, and investments. The bankruptcy estate even includes intangible things such as the right to a lawsuit, intellectual property, and inheritances. Your bankruptcy attorney will review schedules A and B of the bankruptcy petition with you in order to list everything of relevance.
Once again, luckily, also have exemptions to protect this property. Therefore, in the vast majority of bankruptcy filings, the debtor does not lose any of his or her property. It must be disclosed so that it should be protected.
However, in some cases the value of the property of the bankruptcy estate exceeds the exemptions available to protect it. In these cases you may be required to file a chapter 13 bankruptcy and repay some of your debts to your creditors. In some of these cases you may still file a chapter 7 bankruptcy if you surrender some property to the bankruptcy trustee.
Discussing these situations with your attorney will be very important to determine whether or not bankruptcy is the best option for you. Bankruptcy has many advantages and many protections for debtors in distress. However, you must abide by the court’s rules and regulations in order to enjoy those protections. Determining your bankruptcy estate is one of these requirements.
Call us at 412-461-4837 if you have any questions about bankruptcy, specifically whether or not all of your assets will be protected.
Investments and Bankruptcy
Daytrading and investment accounts are becoming increasingly popular as technology makes them easier and easier to use. It is possible to set up an entire portfolio on your laptop or even your cell phone, and you do not need a personal broker. While investing money is a prudent long-term decision, it sometimes leads to large losses and debt. Bankruptcy can help in these situations.
Over the long run, stocks and bonds trend upwards and generally increase in value. While it is not a guarantee, diversified portfolios will generally increase at a steady rate over the period of years and decades. However, in the short term, investments can decrease in value. Sometimes by large amounts.
Also, more complex investment instruments have the potential to lose large amounts of money in a short period of time. This includes flash trading (or daytrading) and also shorting stocks. When a stock is “shorted” an investor is gambling that the value of the stock will drop, not increase. However, if that stock goes up in value they can be stuck with massive losses to cover that increase in value. Sometimes these losses are greater than their ability to cover them.
In these cases bankruptcy may be an option. Bankruptcy can oftentimes wipe out balances in investment accounts or discharge debts related to such accounts, which may include credit cards and personal loans used to fund the investment accounts.
This does not mean bankruptcy will discharge all investment debts. Creditors may object if they believe the bankruptcy filer committed fraud or deliberately took unnecessary risks. Large investment that may be scrutinized by the court and the United States trustees office. The circumstances of your investment history will be important.
It is important to speak to an experienced bankruptcy attorney to see if your investment debts can be discharged. I am happy to speak with you and give you a free consultation regarding your investment debts. Call us at 412-414-9366.
A bad run of investing should not ruin the rest of your financial wife. Call me to see if these debts can be eliminated.
My office is happy to provide a completely free consultation to discuss your debt issues. To best be prepared for this discussion, here is a list of things that you should have ready either in notes or document form.
Paystubs- I will need to review six months of pay stubs for you and your spouse (if you are married). Bankruptcy has a “means test” which looks back at all forms of income for the six months previous to filing. If you are above the threshold, you may be required to file a chapter 13 bankruptcy. If you receive non-work income, such as Social Security, you will want to have ready so that your exact income can be determined. Be prepared to show all income.
A summary of your debts- It is important to discuss all of your debts with your bankruptcy attorney. Your bankruptcy attorney will be able to tell you whether or not all (or any) of your debts are dischargeable in bankruptcy. It will be best to determine at least a rough idea of how much (and to whom) you owe money. Types of debt may include credit cards, medical bills, mortgages, taxes, alimony or child support, leases, car payments, and secured loans.
Any lawsuits or credit your actions taken against you- You should make sure that your bankruptcy attorney is aware of all actions taken against you by creditors. This may include lawsuits in the Court of Common Pleas or the magistrate court, or simply collection letters sent by creditors. This will be important for your attorney to know in case there are imminent response dates. Also, your attorney will need to list these lawsuits to make sure that they are stayed (or stopped) by the bankruptcy filing.
The value of your important assets- All assets must be disclosed in bankruptcy. Your bankruptcy attorney will be able to exempt these assets from your creditors in most cases. It will be important to discuss the value of your assets because the exemptions are not unlimited. For instance, there is an exemption for your home. You will need to be prepared to tell your bankruptcy attorney how much equity you have in your home. Equity is the value of the home minus what you owe. Therefore you should know these numbers when you meet with your bankruptcy attorney. It will also be important to know how much money you have in savings, a summary of your retirement accounts, and the year, make, and model of any vehicles you own.
A list of questions- While your bankruptcy attorney will need to get a lot of information from you, you should also get a lot of information from your bankruptcy attorney. A good free consultation should answer any questions you have about the process. It’s a good idea to write these questions down and ask your bankruptcy attorney directly. Searches for information about bankruptcy on the Internet often provide information that is either inaccurate or not relevant to the individual. It’s best to ask your bankruptcy attorney before hiring him or her.
Feel free to contact us directly to set up a free consultation. I will be happy to discuss all of this and more and to make sure bankruptcy is an option for you. You can reach us at 412-414-9366.
Federal Unemployment Payments
President Biden’s $1.9 trillion COVID relief bill will extend Federal unemployment benefits until at least September 6, 2021. This will continue to act as a $300.00 per week top-up on state unemployment benefits. This is important for bankruptcy purposes for a couple reasons.
First, this additional $300.00 can be used to meet current obligations in Chapter 13 bankruptcy. This has helped many people maintain there payments, or keep their mortgage current. But for this payment, many Americans would not have been able to keep secured payment obligations such as cars and homes. Not only has it been important for people in bankruptcy, it has been important keeping people OUT of bankruptcy.
The second issue is more problematic, however, for people in the process of filing bankruptcy. The $300.00 a week in addition to state unemployment occasionally provides them with too much income to file. This is especially true of the income and expense analysis in Schedules I & J of the bankruptcy forms. (NOTE: It will not push you above the “means test” threshold if your income is being calculated with a spouse who is still working).
One solution is to wait. The benefits are scheduled to end in September. At that point, they may be renewed, reduced, or eliminated. Chapter 13 could also be an option. However, it is not a great option, as it costs more, and with the benefits likely to end in September, it may not even be feasible.
Federal stimulus benefits are an important part of the American financial recovery. Call us at 412-414-9366 to see if they will affect your ability to file bankruptcy.
Update Means Test Income Thresholds
The United States Trustee means test thresholds have been updated as of April 1, 2021.
These tables are used to determined if household income is too great to file a Chapter 7 bankruptcy. They are updated every year to account for inflation and the increased cost of living.
Household size is largely determined by the number of people living in the home who are claimed for Federal income tax purposes (with some exceptions). Most sources of income count towards the means test, and one-time payments or bonuses also count in the look-back period. Benefits derived from the Veterans Administration of Social Security do NOT count.
As an experienced bankruptcy attorney, I will be happy to discuss your income and whether or not you qualify under the means test.
The annualized income threshold as of April 1, 2021 are as follows:
Household of one: $57,919.00
Household of two: $71,448.00
Household of three: $88,293.00
Household of four: $105,138.00
Household of five: $114,138.00
Household of six: $123,138.00
Household of seven: $132,138.00
Call me at 412-414-9366 if you have questions about the means test, and how it applies to you. I would be happy to do a free consultation and see if bankruptcy is an option for you.