Planning for Bankruptcy
In a time of economic uncertainty, many begin to look for options to resolve financial issues. Each individual’s situation is different and requires a careful analysis of the options and impacts each particular path may take. The US Constitution provides a mechanism for bankruptcy protection allowing individuals to eliminate certain types of debt. Bankruptcy is generally a last resort, but if it something one is considering it should be strategically planned. Today we look at how to plan for bankruptcy and today we also launch our first Spanish translated newsletter. While we cannot translate every newsletter, we will be doing our best to provide more of this content in Spanish.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to set up a date and time.
Planning for Bankruptcy
By: Laura E. Ferret, Esq.
In this time of economic uncertainty, many are beginning to wonder what relief they may have for mounting debt. Unemployment has become far to common and financial stress is mounting. Bankruptcy can provide a fresh start to those who have become overwhelmed with debt and are finding it impossible to balance their bills and day-to-day expenses. By filing for bankruptcy, an individual can discharge certain debts so that they are excused from having to pay them. In unstable economies, the rates of bankruptcy filings tend to increase as people strive to adapt to unforeseen changes such as loss of employment. In light of the COVID-19 crisis which has left unemployment numbers at an all-time high, many may be wondering if filing for bankruptcy could provide them with relief. Although bankruptcy is often necessitated by exigent circumstances that force debtors to act quickly, the relief provided by bankruptcy can be maximized by careful pre-petition consideration and planning.
An individual should first determine what chapter of bankruptcy that they may qualify under so they can consider whether the bankruptcy can provide the relief they are seeking. Chapter 7 bankruptcies are the most common bankruptcies filed by individual debtors. In a Chapter 7 bankruptcy, all property owned by the debtor that is non-exempt under the law will be liquidated and paid to the creditors, and all debt that is dischargeable under the law will be discharged so that the debtor doesn’t have to pay it back. With some exceptions, Chapter 7 bankruptcies are only ideal for those who have an income that is less than the median income for their state and little to no equity in any non-exempt property. If an individual wants to file for bankruptcy but a Chapter 7 filing is not suitable because of their income or because they have property that they want to keep, they will need to consider filing under other chapters. Further, if most of the individual’s debt comes from a source that is non-dischargeable, such as child-support delinquencies, or difficult to discharge, such as student loan debts, bankruptcy may not be right for them.
The law exempts certain property from liquidation in a chapter 7 bankruptcy because the property is considered necessary to sustaining a normal life and allowing for a fresh start. This means that a debtor can file for a bankruptcy and keep their exempt property, even if other property is liquidated. Most chapter 7 bankruptcies end up being considered as ‘no asset’ bankruptcies after all the exemptions are applied, so that no property ends up being liquidated at all. California gives debtors domiciled within the state a choice between the state law exemptions found in Code of Civil Procedure section 704 and a set of bankruptcy-only exemptions in Code of Civil Procedure section 703.140 that mirror the Bankruptcy Code exemptions that were in the federal law when the California law was adopted. To optimize the relief from a bankruptcy, debtors should understand what property is exempt and consider prioritizing the funding of exempt assets over non-exempt assets in the years leading up to the bankruptcy. However, debtors must also be careful in this regard. Where the debtor converts nonexempt property into exempt property on the eve of bankruptcy with the intent to hinder, delay, or defraud creditors, the exemption may be denied, the transfer may be avoided, and the debtor may be precluded from receiving a discharge.
In general, the debtor’s actions in the 90-day period (known as the “clawback” period) before the bankruptcy filing will be carefully scrutinized and the debtor should plan accordingly. For example, consumer debts for luxury goods that are incurred within 90 days prior to the filing will not be discharged. Further, the debtor may not transfer property to prefer one creditor over another on the eve of bankruptcy. The debtor will face even more scrutiny if the transfer is made to an ‘insider’ like a family member. The “clawback” period for transfers made to insiders is extended from 90 days to one year. The debtor must also refrain from making fraudulent transfers. Even something as simple as selling a piece of personal property for less than it is worth or gifting property away can be considered a fraudulent transfer in the eyes of a creditor and in the bankruptcy court. Any transfer that is made with the actual intent to hinder, defraud, or delay a creditor will also be considered a fraudulent transfer. Careful consideration and planning will protect the debtor from making mistakes or wrongful transfers that will hurt or complicate their bankruptcy case.
The information contained in this article is for informational purposes only and not to be construed as legal advice. If you have questions, you should seek competent legal representation to assist you.
—-Spanish Translation—-
Planeando para una Bancarrota
Translated By; Jose L. Parra, Esq.
En estos tiempos inciertos económicos, muchos se preguntan qué tipo de ayuda tienen a su alcance para enfrentar la deuda. El desempleo es algo muy común en estos días y la presión financiera se aumenta. La Bancarrota puede dar un nuevo empiezo para aquellas personas que se encuentran abrumadas por la deuda. Por iniciando un caso de bancarrota, una persona puede descargar ciertas deudas para sean excusados de pagar esas deudas. Durante tiempos económicos muy inciertos, las tasas de casos de bancarrotas se aumentad debido a que las personas hacen lo posible para enfrentar tiempos no seguros económicamente como el desempleo. Enfrentando la pandemia causada por COVID-19, el desempleo ha llegado a un nivel nunca visto y muchos se preguntan si la bancarrota los podría ayudar. La ayuda que la bancarrota podría dar es dependiente a la planificación y preparación que uno hace antes de iniciar un caso.
Una persona debería de primero determinar cuál tipo de bancarrota es por la cual califican. La bancarrota bajo el capítulo 7 puede ayudar a personas de muchas maneras. Estos casos de bancarrota son las más comunes. Toda la propiedad del deudor que es no exenta bajo las leyes federales se liquidada y el dinero será usado para pagar las deudas retenidas por los deudores. La deuda que es descargada bajo el caso de bancarrota no tendría que ser pagada por el deudor. Estas bancarrotas son ideales para personas que mantienen un ingreso que es menos del número medio estatal y federal. Dependiendo en el ingreso de la persona, otro tipo de bancarrota sería ideal.
Además, si la mayor parte de la deuda del individuo proviene de una fuente que no es liquidable, como morosidad en la manutención de los hijos, o difícil de cancelar, como las deudas de préstamos estudiantiles, la bancarrota puede no ser adecuada para ellos.
La ley exime a ciertas propiedades de la liquidación en una bancarrota del capítulo 7 porque la propiedad se considera necesaria para mantener una vida normal y permitir un nuevo comienzo. Esto significa que un deudor puede declararse en bancarrota y conservar su propiedad exenta, incluso si se liquida otra propiedad. La mayoría de las bancarrotas del capítulo 7 terminan siendo consideradas como bancarrotas “sin bienes” después de que se aplican todas las exenciones, de modo que ninguna propiedad termina siendo liquidada en absoluto.
California les da a los deudores domiciliados dentro del estado una opción entre las exenciones de la ley estatal que se encuentran en la sección 704 del Código de Procedimiento Civil y un conjunto de exenciones solo de bancarrota en la sección 703.140 del Código de Procedimiento Civil que reflejan las exenciones del Código de Bancarrota que estaban en la ley federal cuando La ley de California fue adoptada.
Para optimizar el alivio de una bancarrota, los deudores deben comprender qué propiedad está exenta y considerar priorizar la financiación de los bienes exentos sobre los bienes no exentos en los años previos a la bancarrota. Sin embargo, los deudores también deben tener cuidado a este respecto. Cuando el deudor convierte la propiedad no exenta en propiedad exenta en la víspera de la bancarrota con la intención de obstaculizar, retrasar o defraudar a los acreedores, se puede negar la exención, se puede evitar la transferencia y se puede impedir que el deudor reciba una descarga.
En general, las acciones del deudor en el período de 90 días (conocido como el período de “recuperación”) antes de la presentación de la bancarrota se analizarán cuidadosamente y el deudor debe planificar en consecuencia. Por ejemplo, las deudas de los consumidores por bienes de lujo que se incurran dentro de los 90 días anteriores a la presentación no se cancelarán. Además, el deudor no puede transferir propiedades para preferir un acreedor sobre otro en vísperas de la bancarrota.
El deudor enfrentará aún más escrutinio si la transferencia se realiza a un “miembro interno” como un miembro de la familia. El período de “recuperación” para las transferencias realizadas a personas con información privilegiada se extiende de 90 días a un año. El deudor también debe abstenerse de realizar transferencias fraudulentas. Incluso algo tan simple como vender una propiedad personal por menos de lo que vale o regalar una propiedad puede considerarse una transferencia fraudulenta a los ojos de un acreedor y en el tribunal de bancarrota. Cualquier transferencia que se realice con la intención real de obstaculizar, defraudar o retrasar a un acreedor también se considerará una transferencia fraudulenta. La consideración y planificación cuidadosas protegerán al deudor de cometer errores o transferencias ilícitas que dañarán o complicarán su caso de bancarrota.
La información contenida en este articulo es solamente para propósitos informacionales y no puede ser interpretado como asesoría legal. Si tienes preguntas, deberías consultar con un representante legal para ayudarte.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business, and estate planning issues for over 20 years and have assisted numerous clients in probate, business, and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
In a time of economic uncertainty, many begin to look for options to resolve financial issues. Each individual’s situation is different and requires a careful analysis of the options and impacts each particular path may take. The US Constitution provides a mechanism for bankruptcy protection allowing individuals to eliminate certain types of debt. Bankruptcy is generally a last resort, but if it something one is considering it should be strategically planned. Today we look at how to plan for bankruptcy and today we also launch our first Spanish translated newsletter. While we cannot translate every newsletter, we will be doing our best to provide more of this content in Spanish.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing managing shareholder Keith Dunnagan at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation, please contact me to set up a date and time.
Planning for Bankruptcy
By: Laura E. Ferret, Esq.
In this time of economic uncertainty, many are beginning to wonder what relief they may have for mounting debt. Unemployment has become far to common and financial stress is mounting. Bankruptcy can provide a fresh start to those who have become overwhelmed with debt and are finding it impossible to balance their bills and day-to-day expenses. By filing for bankruptcy, an individual can discharge certain debts so that they are excused from having to pay them. In unstable economies, the rates of bankruptcy filings tend to increase as people strive to adapt to unforeseen changes such as loss of employment. In light of the COVID-19 crisis which has left unemployment numbers at an all-time high, many may be wondering if filing for bankruptcy could provide them with relief. Although bankruptcy is often necessitated by exigent circumstances that force debtors to act quickly, the relief provided by bankruptcy can be maximized by careful pre-petition consideration and planning.
An individual should first determine what chapter of bankruptcy that they may qualify under so they can consider whether the bankruptcy can provide the relief they are seeking. Chapter 7 bankruptcies are the most common bankruptcies filed by individual debtors. In a Chapter 7 bankruptcy, all property owned by the debtor that is non-exempt under the law will be liquidated and paid to the creditors, and all debt that is dischargeable under the law will be discharged so that the debtor doesn’t have to pay it back. With some exceptions, Chapter 7 bankruptcies are only ideal for those who have an income that is less than the median income for their state and little to no equity in any non-exempt property. If an individual wants to file for bankruptcy but a Chapter 7 filing is not suitable because of their income or because they have property that they want to keep, they will need to consider filing under other chapters. Further, if most of the individual’s debt comes from a source that is non-dischargeable, such as child-support delinquencies, or difficult to discharge, such as student loan debts, bankruptcy may not be right for them.
The law exempts certain property from liquidation in a chapter 7 bankruptcy because the property is considered necessary to sustaining a normal life and allowing for a fresh start. This means that a debtor can file for a bankruptcy and keep their exempt property, even if other property is liquidated. Most chapter 7 bankruptcies end up being considered as ‘no asset’ bankruptcies after all the exemptions are applied, so that no property ends up being liquidated at all. California gives debtors domiciled within the state a choice between the state law exemptions found in Code of Civil Procedure section 704 and a set of bankruptcy-only exemptions in Code of Civil Procedure section 703.140 that mirror the Bankruptcy Code exemptions that were in the federal law when the California law was adopted. To optimize the relief from a bankruptcy, debtors should understand what property is exempt and consider prioritizing the funding of exempt assets over non-exempt assets in the years leading up to the bankruptcy. However, debtors must also be careful in this regard. Where the debtor converts nonexempt property into exempt property on the eve of bankruptcy with the intent to hinder, delay, or defraud creditors, the exemption may be denied, the transfer may be avoided, and the debtor may be precluded from receiving a discharge.
In general, the debtor’s actions in the 90-day period (known as the “clawback” period) before the bankruptcy filing will be carefully scrutinized and the debtor should plan accordingly. For example, consumer debts for luxury goods that are incurred within 90 days prior to the filing will not be discharged. Further, the debtor may not transfer property to prefer one creditor over another on the eve of bankruptcy. The debtor will face even more scrutiny if the transfer is made to an ‘insider’ like a family member. The “clawback” period for transfers made to insiders is extended from 90 days to one year. The debtor must also refrain from making fraudulent transfers. Even something as simple as selling a piece of personal property for less than it is worth or gifting property away can be considered a fraudulent transfer in the eyes of a creditor and in the bankruptcy court. Any transfer that is made with the actual intent to hinder, defraud, or delay a creditor will also be considered a fraudulent transfer. Careful consideration and planning will protect the debtor from making mistakes or wrongful transfers that will hurt or complicate their bankruptcy case.
The information contained in this article is for informational purposes only and not to be construed as legal advice. If you have questions, you should seek competent legal representation to assist you.
—-Spanish Translation—-
Planeando para una Bancarrota
Translated By; Jose L. Parra, Esq.
En estos tiempos inciertos económicos, muchos se preguntan qué tipo de ayuda tienen a su alcance para enfrentar la deuda. El desempleo es algo muy común en estos días y la presión financiera se aumenta. La Bancarrota puede dar un nuevo empiezo para aquellas personas que se encuentran abrumadas por la deuda. Por iniciando un caso de bancarrota, una persona puede descargar ciertas deudas para sean excusados de pagar esas deudas. Durante tiempos económicos muy inciertos, las tasas de casos de bancarrotas se aumentad debido a que las personas hacen lo posible para enfrentar tiempos no seguros económicamente como el desempleo. Enfrentando la pandemia causada por COVID-19, el desempleo ha llegado a un nivel nunca visto y muchos se preguntan si la bancarrota los podría ayudar. La ayuda que la bancarrota podría dar es dependiente a la planificación y preparación que uno hace antes de iniciar un caso.
Una persona debería de primero determinar cuál tipo de bancarrota es por la cual califican. La bancarrota bajo el capítulo 7 puede ayudar a personas de muchas maneras. Estos casos de bancarrota son las más comunes. Toda la propiedad del deudor que es no exenta bajo las leyes federales se liquidada y el dinero será usado para pagar las deudas retenidas por los deudores. La deuda que es descargada bajo el caso de bancarrota no tendría que ser pagada por el deudor. Estas bancarrotas son ideales para personas que mantienen un ingreso que es menos del número medio estatal y federal. Dependiendo en el ingreso de la persona, otro tipo de bancarrota sería ideal.
Además, si la mayor parte de la deuda del individuo proviene de una fuente que no es liquidable, como morosidad en la manutención de los hijos, o difícil de cancelar, como las deudas de préstamos estudiantiles, la bancarrota puede no ser adecuada para ellos.
La ley exime a ciertas propiedades de la liquidación en una bancarrota del capítulo 7 porque la propiedad se considera necesaria para mantener una vida normal y permitir un nuevo comienzo. Esto significa que un deudor puede declararse en bancarrota y conservar su propiedad exenta, incluso si se liquida otra propiedad. La mayoría de las bancarrotas del capítulo 7 terminan siendo consideradas como bancarrotas “sin bienes” después de que se aplican todas las exenciones, de modo que ninguna propiedad termina siendo liquidada en absoluto.
California les da a los deudores domiciliados dentro del estado una opción entre las exenciones de la ley estatal que se encuentran en la sección 704 del Código de Procedimiento Civil y un conjunto de exenciones solo de bancarrota en la sección 703.140 del Código de Procedimiento Civil que reflejan las exenciones del Código de Bancarrota que estaban en la ley federal cuando La ley de California fue adoptada.
Para optimizar el alivio de una bancarrota, los deudores deben comprender qué propiedad está exenta y considerar priorizar la financiación de los bienes exentos sobre los bienes no exentos en los años previos a la bancarrota. Sin embargo, los deudores también deben tener cuidado a este respecto. Cuando el deudor convierte la propiedad no exenta en propiedad exenta en la víspera de la bancarrota con la intención de obstaculizar, retrasar o defraudar a los acreedores, se puede negar la exención, se puede evitar la transferencia y se puede impedir que el deudor reciba una descarga.
En general, las acciones del deudor en el período de 90 días (conocido como el período de “recuperación”) antes de la presentación de la bancarrota se analizarán cuidadosamente y el deudor debe planificar en consecuencia. Por ejemplo, las deudas de los consumidores por bienes de lujo que se incurran dentro de los 90 días anteriores a la presentación no se cancelarán. Además, el deudor no puede transferir propiedades para preferir un acreedor sobre otro en vísperas de la bancarrota.
El deudor enfrentará aún más escrutinio si la transferencia se realiza a un “miembro interno” como un miembro de la familia. El período de “recuperación” para las transferencias realizadas a personas con información privilegiada se extiende de 90 días a un año. El deudor también debe abstenerse de realizar transferencias fraudulentas. Incluso algo tan simple como vender una propiedad personal por menos de lo que vale o regalar una propiedad puede considerarse una transferencia fraudulenta a los ojos de un acreedor y en el tribunal de bancarrota. Cualquier transferencia que se realice con la intención real de obstaculizar, defraudar o retrasar a un acreedor también se considerará una transferencia fraudulenta. La consideración y planificación cuidadosas protegerán al deudor de cometer errores o transferencias ilícitas que dañarán o complicarán su caso de bancarrota.
La información contenida en este articulo es solamente para propósitos informacionales y no puede ser interpretado como asesoría legal. Si tienes preguntas, deberías consultar con un representante legal para ayudarte.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business, and estate planning issues for over 20 years and have assisted numerous clients in probate, business, and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.