If I’ve used credit cards before filing bankruptcy, do I have to wait? Too many people considering filing think there is some sort of waiting period between financial activity and filing bankruptcy. So, let’s look at the issues in play surrounding recent credit card charges and seeking bankruptcy relief. There’s no 90 day rule Everyone talks about a 90 day rule in bankruptcy. The rule, as reported, is that you can’t buy anything, or maybe, can’t pay anyone, or charge anything. Not so. The only 90 day rule in bankruptcy applies to creditors, not debtors. Nothing in bankruptcy law or practice r ..read more

Worried that a bankruptcy trustee will examine your sitution and somehow disqualify you from bankruptcy because of something you did (or didn’t do) right before you filed? Not to worry. Your bankruptcy discharge does not depend on the trustee’s approval of your money choices in the run-up to bankruptcy. There is no subjective do-we-approve-of-the-debtors-money-management test to get a discharge.  The bankruptcy system makes no subjective judgments about how you’ve lived your life before filing. What’s important is something else, entirely. What trustees look for Trustees routin ..read more

Worried that a bankruptcy judge or trustee is going to scour your spending before bankruptcy, looking for behavior that would disqualify you from bankruptcy relief. It’s not so. Yet there seems to be real anguish that “they” are going to toss your case out of bankruptcy court because of some “fault” in how you’ve handled money. So, let’s look at the real and the invented constraints on prebankruptcy spending. Your money is yours Before bankruptcy, you can spend your money wisely or not-so-wisely, without real fear of negative repercussions in your case. You can spend cash lavishly, invest rec ..read more

Your future living expenses may be the key to passing the bankruptcy means test. Those who are under median income for their state have already passed the means test. Those over median income move on to the expense portion of the test to calculate whether they have more than the allowed disposable income. Most often, your expenses are the escape hatch from being funnelled into Chapter 13 to get bankruptcy relief. The allowable expenses Understand that the expenses on the means test are a mix of real and artificial expenses. The budget may bear little relationship to your actual budget. They a ..read more

Convincing clients that all of their debts must be included in bankruptcy is one of the hardest parts of being a bankruptcy lawyer. The struggle often seems Herculean. Sometimes, they will tell me they don’t want to include their car loan in the case because they “need the car”. Sometimes I find the student loan payment in the budget but not on the list of creditors. Or there’s a creditor they don’t want to know about the bankruptcy. Part of the issue, I’ve figured out, is confusion between scheduling a debt and discharging the debt. Listed not the same as discharged When you file bankru ..read more

Every campaign needs a logo. Make the logo of your retirement planning a turtle, rampant. Rampant, you say?  Turtle? In the Middle Ages, knights put their ID’s on their shields in  elaborate heraldry that told bystanders who he was, what his birth order was, and which side of the blanket he was born on. Heraldry featured animals, real and mythic, on coats of arms.  While they were sometimes lying down (couchant), striding (passant), or sitting (sejant), most four legged animals were shown rearing (rampant). While not very heroic, consider the power of the rearing turt ..read more

Is the Chapter 7 trustee going to sell your house when there’s $5000 in non exempt equity? Do you have to pay the total of the equity in your assets to creditors in Chapter 13 under the liquidation test? Far from it. Yet too many people image their assets confiscated by a Chapter 7 trustee when the value is slightly over the exemption. In Chapter 13, they image paying creditors every dollar of value over the exemption. In ech case, they don’t understand bankruptcy liquidation. Let’s look at the bankruptcy liquidation test in Chapter 13, since it is one branch of the plan confirmation tests: i ..read more

Bankruptcy exemptions vary from state to state, but everyone gets an exemption of $1.5 M for money in an IRA. It’s part of the Bankruptcy Code (section 522(n)) that applies to all filers, wherever they live. The exemption covers both classic, before-tax IRA’s and Roth IRA’s that are funded with after-tax dollars. Roll-overs into an IRA are covered, too. The only significant limitation is that the IRA was funded with contributions that were within the IRC limitation for the year in which they were made. You can’t dump tens of thousands of dollars into an IRA (unless it’s a rollover) and expect ..read more

Getting credit after bankruptcy is the most frequent search term that bring visitors to Bankruptcy in Brief, my encyclopedic sister site on bankruptcy. In these visitors’ minds, the impact of bankruptcy on their credit score is critical. It’s ironic that readers, saddled with enough debt to consider bankruptcy, worry about their credit score. After all, credit is what got them in their current situation. It’s the same face to face. …often in the first 5 minutes of our meeting. Others  proudly tell me that they have “perfect credit”: that translates as “never having missed a minimum payme ..read more

May I suggest a 2024 New Year’s resolution?  It doesn’t involve diets or workouts or commitments to huge personal transformation. Take a hard look at your financial situation. How much of your available income goes to paying existing credit card balances? What expenses for health care, repair, or just household maintenance are you putting off? What big dollar items are ahead? What have you saved for retirement? Consider whether a fresh financial start makes sense. Just getting by A life of minimum payments, minuscule bank accounts, and no retirement savings is a life fraught with finan ..read more