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I hope this is a useful guide for anyone considering filing. This is general advice, and for SPECIFIC legal advice, talk to a lawyer. That being said, if this helps prevent a future catastrophe for you and your family, that makes me happy!
RENTERS: It's typically much easier in my jurisdictions (MI and CO) to get a place before you file than after, and very tough during the process. Secure your housing before you file, and make sure you have a plan B. Foreclosure coming up?
If you have the right to sue someone for any reason, class action, personal injury etc, let your lawyer know right away so it can be listed in your schedules. Leaving it out could be bad - look at 'Judicial Estoppel'. NEVER hide assets or income. This includes side cash jobs. Make sure your tax documents match your bankruptcy documents. Don't mistake bad credit with the expense of paying your debts back. Far too often people outweigh the negative credit hit against the tens of thousands of dollars they will pay back to creditors by NOT filing. Use this calculator to determine the costs of not filing. This is a financial and business decision. Treat your creditors how they treat you! https://www.bankrate.com/credit-cards/tools/credit-card-payoff-calculator/ With rare exception, vehicle-based Chapter 13s are a nightmare for everyone involved. With the higher interest rates, cost of insurance, 'adequate protection', if the vehicle was purchased sooner than 910 days ago, it's almost always extremely expensive. If you're in a Chapter 13 and you have a wage deduction, make sure it is working every time you get paid. Expect that there may be a mistake on the part of your employer in terms of frequency or amount. Contact your lawyer if something is amiss! Public student loans can now be credited in IDR plans through Chapter 13: https://library.nclc.org/article/new-rule-gives-chapter-13-bankruptcy-debtors-credit-toward-student-loan-forgiveness Additionally: Credit Unions are not your friend, or your family, even if they call you 'member'. They're in it to make money. Cash Advance/Payday Loans are satanic. Avoid them. In general, don't make any big money moves, buying, selling, moving stuff around. There may be exceptions to these statements, and for LEGAL ADVICE talk to a lawyer in your jurisdiction.
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The real estate industry is standing at a pivotal crossroads due to a recent settlement that has upended the age-old commission model. The customary 6% realty fee, traditionally split between buyer’s and seller’s agents, is no longer a market standard, paving the way for new negotiation dynamics and fee structures.
This paradigm shift prompts a critical examination of the old incentive system where higher property prices resulted in heftier paychecks for buyer’s agents, ostensibly benefitting both parties. However, today’s market-savvy buyers often commence their property searches online, making one wonder about the value proposition of a buyer’s agent who is not financially motivated to press for a lower price. Take the instance of purchasing a $1 million house. A $60,000 commission—once evenly split between agents—raises eyebrows when questioning the true cost-to-service ratio. The reformation opens the door for attorneys to step in as negotiators for buyers, working at hourly rates with a clear directive to lower costs, potentially providing a more cost-effective and goal-oriented service. The shift could also lead to a significant exodus of buyer’s agents from the industry. The absence of predictable commissions might drive them to seek retainers, but buyers, especially those reliant on mortgage financing, may find such upfront costs daunting. A silver lining, however, emerges in the potential decrease of “steering”. Agents have been known to favor properties offering higher commissions, often bypassing FSBO (For Sale By Owner) listings. The new norm could democratize property exposure, offering buyers a more comprehensive view of the market and sellers, even without agents, a fair chance. In essence, while this transition challenges conventional practices, it heralds an era of transparency and equity in real estate transactions. The alignment of fees with actual service, the potential for more vigorous negotiation, and an equitable market for all listings, could redefine the value of a home purchase, placing the true interests of buyers and sellers at the forefront. Navigating the process of selling a home can be complex, particularly when intertwined with the intricacies of bankruptcy laws in Colorado. Whether you're considering a sale before, during, or after filing for bankruptcy, it's crucial to understand how Chapter 7 and Chapter 13 bankruptcies can impact this process. Let's delve into the specifics of each scenario and the strategic considerations involved.
Chapter 7 Bankruptcy: Timing and Exemptions For homeowners contemplating a sale while under Chapter 7 bankruptcy, the timing and understanding of house exemptions are critical. In Colorado, if the property was acquired over 1215 days (approximately 40 months) before filing for bankruptcy, an exemption of $250,000 is available, or $350,000 for those who are disabled or senior citizens. However, for homes purchased within 1215 days before filing, the exemption limit is $189,050. Selling the home and segregating the exempted funds into a separate account for the purchase of a new property within a specified timeframe can be a wise decision. Nevertheless, it's generally advisable to postpone the sale until after the discharge of the Chapter 7 bankruptcy to avoid complications, such as valuation disputes or having to work with a realtor appointed by the bankruptcy trustee. Chapter 13 Bankruptcy: Payment Plans and Property Sales Chapter 13 bankruptcy, known for its payment plan structure, also presents unique considerations for homeowners looking to sell. It can offer a temporary reprieve from foreclosure, allowing homeowners additional time to secure the best possible sale price. Should you wish to sell your home after filing for Chapter 13, it's important to determine whether the proceeds must be contributed to the bankruptcy case or if dismissing the case before closing is more beneficial. Selling a property while under Chapter 13 requires careful coordination with your attorney to navigate trustee permissions and the potential allocation of sale proceeds towards creditor payments. Additional Considerations for Home Sellers in Bankruptcy The impact of bankruptcy on future housing options cannot be overstated. The challenge of securing loans or finding rental accommodations post-bankruptcy means it's essential for sellers to either have sufficient funds from the sale to purchase outright or secure a new residence in advance. Furthermore, it may be prudent to delay listing the property until the bankruptcy is discharged, enhancing loan or rental qualification prospects. Homeowners must also be aware of potential complications from judgment liens, IRS tax liens, and SBA liens, especially if the bankruptcy has not yet been discharged. These liens can significantly affect the profitability of a home sale, making it potentially more advantageous to wait until the conclusion of the bankruptcy case. Final Thoughts Selling a home in the context of bankruptcy in Colorado requires careful planning and consideration of various legal and financial factors. Understanding the nuances of Chapter 7 and Chapter 13 bankruptcies, alongside strategic timing and exemption rules, is paramount. By working closely with a knowledgeable attorney, homeowners can navigate these complexities to make informed decisions about selling their property amidst bankruptcy proceedings. Bankruptcy cases can be complex and challenging for both debtors and creditors. However, a recent Supreme Court ruling has shed light on an important aspect of consumer bankruptcy: the ability of consumer debtors to sue tribes for violating the automatic stay. In this blog post, we will explore the implications of the Lac du Flambeau Band of Lake Superior Chippewa Indians, et al. v. Coughlin case and discuss the specific requirements tribes must adhere to under the Bankruptcy Code. Background of the Case On June 15, 2023, the U.S. Supreme Court delivered its decision in the case involving Lendgreen, a tribal entity that had provided a high-interest, short-term (aka a cash advance or 'payday') loan to an individual named Brian Coughlin. Coughlin subsequently filed for bankruptcy under Chapter 13. Lendgreen, believing it was exempt from certain provisions of the Bankruptcy Code, including the automatic-stay provisions, continued its debt collection efforts despite the ongoing bankruptcy proceedings. In response, Coughlin filed a motion to enforce the automatic stay against Lendgreen, its parent corporations, and the tribe. The Court's Ruling The Supreme Court's ruling in Lac du Flambeau clarified that tribal sovereign immunity does not shield tribes from specific requirements of the Bankruptcy Code, as outlined in 11 U.S.C. § 106(a). The Court determined that the definition of "governmental unit" within Section 106(a) includes tribal governments, effectively abrogating their sovereign immunity for the enumerated provisions of the Bankruptcy Code. This decision resolved a circuit court split that had persisted since 2019. Important Provisions Implicated by the Ruling The Lac du Flambeau ruling has significant implications for various provisions of the Bankruptcy Code. It's essential for tribes and tribal entities to familiarize themselves with these provisions and seek legal advice when necessary. Here are some key provisions affected by the ruling:
The Supreme Court's decision in Lac du Flambeau Band of Lake Superior Chippewa Indians, et al. v. Coughlin has clarified that tribes are subject to certain provisions of the Bankruptcy Code. The bottom line is that while in the past, where tribe ownership has been used as a shield to prevent debtors from clawing back funds in excess of $600 taken during or within 90 days of filing bankruptcy, if you file bankruptcy you are protected and can get your money back and prevent further collections actions. If this has happened to you, contact me at 303.630.9641 immediately so I can help you! As a lawyer, I often receive questions from clients about debt settlement and debt consolidation as alternatives to bankruptcy. While these options may seem appealing on the surface, I firmly believe that filing for Chapter 7 or Chapter 13 bankruptcy is almost always a better choice. Here's why:
With all the COVID-19 related unemployment, evictions and credit card collections you would think that bankruptcies would have increased, right? In fact, just six months ago I thought with all of the new cases I would be flying my newly purchased corporate spaceship to Mars and back. But alas, the expected rise in cases has not transpired. How could that be? Consumer debt was high and jobs were being wiped out. Well, there are two major factors that have contributed to a decline in consumer bankruptcy cases.
The first reason for the decline is that interest rates have remained incredibly low. If you track historical bankruptcy filing rates they tend to rise and fall in concert with interest rates. So if inflation goes up and the Fed decides to raise interest rates you can expect that cases will also rise. But there’s something more insidious happening that has caused a reduction in bankruptcy cases. Consumers are cracking open their retirement accounts and using the money to pay off unsecured debts. At first glance you might think that’s an honorable or decent thing. Or you might surmise that it’s a good idea because later on if they have lower debt they can borrow more in an emergency. But the problem with this is twofold. First, as you may have seen, the stock market continues to rise. Opening the retirement piggy bank to take money out now deprives you of experiencing any gains in the stock market. Second, you’re basically allowing the banks to use your retirement money. I want you to think very carefully about that sentence. Say it again to yourself. You are giving away your retirement money. This is money that you have earned tax free for many years, possibly decades. This is money that you need to rely on in your old age. It’s money that will cushion the blow from higher consumer costs. It could keep you in your house. It could make sure that you’re eating or paying for hospital bills. Or it could mean the difference between you being a millionaire and a pauper. Why would anyone do such a thing? Well, the first answer is that it’s probably a lot easier to take the money out right now. Certain legislation has allowed people to borrow or even take out more money from their retirement accounts if they had a hardship related to COVID-19. The second answer is that people tend to be more worried about their credit cards than they are about their mortgages, or their future. I can’t count how many clients are more interested in paying down credit cards than staying current on their mortgage even though they don’t live in their credit card. That may be because credit card companies are very aggressive when it comes to collections actions. If you miss a payment or two they start calling right away and after three months they may hire a collection attorney and take you to court. So folks legitimately get worried about being yelled at or losing access to ‘emergency funds’. But in almost all situations it’s a terrible idea is to use your 401(k) or your 403B or any of your retirement accounts to pay off an unsecured debt. It’s ridiculous. And here’s why. In chapter 7 and chapter 13 bankruptcy your retirement plan is, in almost all cases, completely exempt. That means that creditors can’t take that money or count it against you when it comes to paying them back. You could file a bankruptcy and potentially pay zero back to your creditors and keep 100% of the money in your retirement account. Your future self will be so happy if you do that. But if you spend that money to pay off Capital One or any other Wall Street firm, your future self will be terribly upset, and possibly broke, homeless and hungry. So before you borrow from your future, contact your local bankruptcy attorney. While bankruptcy may seem like an emotional decision, it’s a financial one. And often times when you’ve lost income, it’s the best financial decision you can make not just now, but for your future. While it's a difficult decision to make, after going through your budget and realizing you can't pay off your debts before the year 3000, you decide to file bankruptcy. But what does it take to plan for a bankruptcy? Is there even such a thing? While there isn't a lot you need to do before filing, except speak to an attorney, there are some things you absolutely want to avoid to make your bankruptcy case as smooth as possible.
1. GIVING AWAY ANY PROPERTY One of the biggest mistakes I see before people file bankruptcy is that sometimes they decide to sign the title over to their home or car to a friend or relative 'to protect it from creditors'. Not only won't this protect your property from creditors, but it could put those items at greater risk. In bankruptcy you have the ability to protect some personal property and real estate with state or federal exemptions to a certain extent, and if you cannot protect all of it in a Chapter 7, you can typically in a Chapter 13 case. Even if you don't file a bankruptcy, giving away your property to a family member or friend when you owe your creditors money can be completely set aside by those creditors. Instead, before you act rashly, contact an attorney to go over what you need to do with your big ticket items to ensure they are protected. If you want to see what could go wrong when transferring your property to someone else, check out Tiger King on Netflix. 2. SELLING PROPERTY As a corollary to the first mistake, this isn't the time to start raising cash. This can present two problems: first, the sale might be closely scrutinized to determine if it was at fair market value. That could mean the trustee in your case contacts the buyer and sets the sale aside. Second, assuming you sell the property and it was exempt, converting it to cash may not protect it at all. Exemptions are different for each type of property. For example, you may be able to exempt thousands of dollars for your personal residence, but much less once it is sold, depending on the circumstance. So do yourself a huge favor – talk to an attorney first before you make any major moves. 3. BORROWING MONEY If you're filing bankruptcy, now is not the time to borrow money. Why? It looks bad if you borrow on the eve of filing, especially if it's unsecured debt like a line of credit or a credit card. If you borrow money and then file bankruptcy right away, creditors may object to your discharge unless you exclude them from the filing. Moreover, what are you borrowing money for exactly, and where will that money go once it is borrowed? If it's going to buy food, that may not be as big of a problem as going to Disney World, but before you borrow a penny, talk to an attorney. As a corollary to this, don't co-sign on any debts, whether it's for your friend or family member. Not only could you put their co-signed collateral in jeopardy, it may make you chose between your relationship and getting a fresh start from your debt. 4. PAYING FAMILY, FRIENDS OR ASSOCIATES BACK Borrowing before filing is one thing, but paying back your relative or your buddy who loaned you more then $600 could be a problem. Paying back an 'insider' as they are called, more than $600 in the prior year before filing means that the payment can be clawed back by the trustee and distributed to your creditors. Worse? You may feel morally compelled to pay them once your case is over, and then you'll wind up paying twice. Instead, let your friend or family member know you cannot pay this debt, or any debts and you are filing bankruptcy. Do you believe you must pay them back, no matter the consequences and you don't want the trustee to take this money from then? You can do that, but you're going to need to wait another year to file bankruptcy. 5. GOING ON VACATION It's certainly not illegal to go on vacation before filing your bankruptcy case, but understand that your bank accounts may be subject to careful examination, and if they see you dropped $1500 to go to Europe a few weeks before filing, they might have reason to believe your case was not filed in good faith. Also, did you have to borrow money to go on that vacation? See number 3 above. In summary, these are the top 5 things you don't want to do before filing bankruptcy. There are more than these above, but in general, if anything you're trying to do involves more than $600, stop, wait, and seek legal advice. Big moves arouse suspicion. Lay low, and you'll stay under the radar. For more information about proper bankruptcy planning, feel free to contact me. |
AuthorJesse Sweeney is an American Board Certified consumer bankruptcy expert licensed in Colorado and Michigan, both Federal and State courts. A graduate of Michigan State University, Jesse has been practicing bankruptcy law for over 20 years and has helped consumers save millions of dollars. Archives
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