Mr. Goldman has over 20 years of business experience. He has been involved in starting and managing technology related companies involved in distribution, manufacturing, marketing, retail, direct marketing and ecommerce. With his broad business background, Mr. Goldman concentrates in the areas of business formations, business transactions, elder law, and estate planning, and asset protection
One of the best bankruptcy exemptions offered to those filing bankruptcy is the retirement account exemption. As long as your 401K or IRA is ERISA (Employee Retirement Income Security Act of 1974) qualified, then your 401k or IRA will be protected if you file bankruptcy. Amazingly, there are not a lot of limitations to this rule. This is a wonderful law as it is very common for a person’s biggest asset to be their retirement account. Some of the qualified ERISA retirement accounts include 401(k)s, 402(b)s, IRAs (Roth, SEP, and SIMPLE), Keoghs, profit-sharing plans, money purchase plans, and defined-benefit plans. It is important to note that most employer-sponsored retirements plans are ERISA safe in bankruptcy.
Many who file bankruptcy may have also taken out a 401k loan in an effort to avoid having to file bankruptcy. It is important to understand how your 401k loan will be treated in your bankruptcy. First of all, a 401k loan is not considered a regular debt and will not be treated as any other creditor. In other words, a 401k is not dischargeable through bankruptcy and you will still have to repay it after your bankruptcy is completed. Additionally, in a Chapter 7 in which assets are available to be liquidated, your 401k loan would not receive any portion of the liquidated funds as a normal creditor would. In a Chapter 13, your 401k loan would not be part of your chapter 13 plan. However, you most likely will be allowed to still make payments towards the loan through automatic deductions on your paystubs.
Can you take out a 401(k) loan before filing bankruptcy?
Yes. You can take out a 401(k) loan before filing bankruptcy. However, there are several considerations you should first think about because you will be stuck repaying that loan after bankruptcy. You do not want to use a 401k loan to pay off any debts unless it is going to completely solve your debt issues. This is because, again, you will still have to repay the 401k loan after bankruptcy. Also, as long as the funds remain in your 401k, they will be protected. As soon as the funds are released from your 401k, they lose that protection. Finally, funds received from a 401k loan can be treated as income on your MEANS test. This could cause you to no longer qualify for a Chapter 7 because your income is too high.
Can you take out a 401k loan during or after bankruptcy?
Yes. But it is still never advised. If you are in a Chapter 13, you will have to get the court’s approval first.
Paying off your 401k loan before filing bankruptcy.
Since a 401k loan is not treated as a normal debt in bankruptcy, if you payoff the loan before filing bankruptcy, your Trustee could potentially undue the transfer and redistribute the funds used to payoff your 401k loan to your other creditors. But, this is very jurisdiction dependent. In some jurisdictions, there is rarely any objection over the repayment of a 401k loan.
Regardless of whether you have a 401k loan, it is always important to talk about your 401k and how it will be affected by bankruptcy with an experienced bankruptcy attorney. Please call the Law Office of David M. Goldman, PLLC today.
I remember turning 18 and being so excited to get my first credit card. I was still a senior in high school, so I went to my favorite department store and applied for my very first credit card. To my surprise, I was approved right away! It seemed all too easy. Shouldn’t getting a credit card be a little more difficult to get?
When I got that credit card, I was so excited to purchase a Coach wallet (my first very own big purchase) and vowed to not use the card again until it was paid off. Of course, I fell into the same trap as many other 18-year-olds and did not stop there. I wanted another credit card and went to my second favorite store and filled out another credit card application.
When I arrived at college that fall, I was shocked to see credit card company after credit company with booths set up on campus. They offered ridiculous free items to get students to sign up, and, guess what, it worked! The booths were always busy with students filling out credit card applications. I don’t know what kept me from filling out one of those applications (maybe it was that I already had one or that it had been drilled into me by my family never to purchase what you cannot afford) I never did and am so thankful today I did not.
Today, as a bankruptcy attorney, I now see many of those “students” needing to file bankruptcy, because they racked very high credit card bills on those credit cards before they had the experience or knowledge to understand the repercussions of using a credit card. They were young, excited to be away from home, and just wanted to have a good time.
Well that all changed with the Credit Card Accountability Responsibility and Disclosure Act of 2009, better known as the Credit CARD Act of 2009. The Credit CARD Act put restrictions on how credit card companies can advertise to consumers who are under 21 years of age. Specifically, credit card companies cannot mail advertisements to persons under 21 unless they “opt in” for such mailings. Credit card companies also can no longer use free gifts to get college students to apply for a credit card. Finally, if you are under 21, you will need to have a co-signer or prove you have your own independent source of income.
For some, this is a very good thing. For others, it could be a burden. It can be burdensome on those 18-year-olds who are ready to have a credit card and understand the significance of having one. It is also burdensome for parents who choose to become a co-signer for their child. If their child abuses the credit card, they run the risk of the child ruining their credit along with their own. Regardless, the Credit Card Act of 2009 is doing a lot of good in preventing many young people from ruining their credit before they even get the chance to build good credit.
If you have found yourself in this sort of situation, it is never too late to do something about it. By filing bankruptcy, you can discharge all of your credit card debt and get a fresh start at building a strong credit report. Contact the Law Office of David M. Goldman, PLLC for more information.
One thing people do not talk about when contemplating whether they should file a Chapter 13 Bankruptcy, is just how difficult being in a Chapter 13 Bankruptcy is going to be and how it is going to affect your day-to-day life. It is not only difficult because it requires a payment plan which will last three to five years, but it is going to be difficult to find extra money for unexpected expenses.
A Chapter 13 Plan requires you to pay all of your disposable income into your plan. What this translates to could be the following:
Based on the median income and median expense numbers for your state, the average household of 4 spends an average of $2,000.00 per month on rent/mortgage payments, food, gas, electricity, and all other necessary monthly expenses. Your monthly gross income is $4,000.00 per month when you file a Chapter 13 Bankruptcy. Luckily, you have a car payment of $400 per month, which you can use as a deduction on your MEANs test. In this scenario, you could potentially be paying well over $1,000 per month to your Trustee. This leaves barely any extra funds for any other expenses other than necessities. Not to mention anything that unexpectedly pops up such as a necessary home repair, or the need for new tires for your car. (It is important to note that your necessary monthly expenses are not based on what your family actually spends. It is based on what the average family of your size spends in your state.)
Another thing that makes being in a Chapter 13 Bankruptcy so difficult is that even funds received through an insurance payout might be subject to your bankruptcy estate. For example, if you get into a car accident and total your vehicle, the proceeds you receive from your insurance company or the party-at-fault’s insurance company might have to be turned over to your Trustee. Another example would be if you file a claim against your homeowner’s insurance policy. Those proceeds would be treated in the same way.
What, if anything, can be done?
You can ask the Trustee and the Court if you can keep the funds by filing a Motion to Retain Proceeds. However, you will only be able to keep the funds if you are able to prove that the funds are absolutely necessary. You will also be able to keep the funds if your Chapter 13 Plan is a 100% plan. A 100% plan is where you are paying back 100% of your creditors who filed a claim in your bankruptcy.
Bottom-line, being in a Chapter 13 bankruptcy is going to be stressful at times. Issues and questions are bound to arise over the course of your three to five year plan. Having an attorney who can prepare you for possible issues that might arise is very important. However, it is going to impossible to foresee all issues that might arise. By retaining the Law Office of David M Goldman, PLLC to file your bankruptcy, you will have the piece of mind of knowing you have an attorney who will be there when unexpected questions arise. Call today to speak with an attorney.
Filing bankruptcy with assets can be very stressful. You want to know how filing for bankruptcy will affect those assets before you file so that there are no surprises. One type of asset that you might be concerned about is an investment property. Can you keep it if you file bankruptcy? Possibly, but most likely not without some consequences.
A Chapter 7 Bankruptcy is a liquidation of your assets. If your investment property has any equity in it all, meaning it’s worth more than what you owe on it, then your Chapter 7 Trustee will most likely want to take possession of the property. The Trustee will sell it, and then distribute the proceeds of the sale to your creditors after first paying off all mortgages and liens.
If your property is upside down, meaning you owe more on it that it is worth, then your Trustee MIGHT not go after it because they would get little if anything from selling it. HOWEVER, since all of your assets are liquidated in a Chapter 7 Bankruptcy, your Trustee can still choose to take possession of the property and short sale it. This applies even if you elected to keep the property and reaffirm the mortgage on your bankruptcy schedules.
If your Trustee chooses to take possession of your investment property in either of the situations above, you still might be able to keep your property. It is possible to reach an agreement with the Trustee in which you buy back the property. This generally includes paying the Trustee the amount of equity of the property or whatever proceeds the Trustee would receive from selling it. Usually, you can make payments towards the buy back amount over 12 months.
A Chapter 13 Bankruptcy is a reorganization of your debt and almost always allows you to keep all of your assets. If you have an investment property and want to keep it, filing a Chapter 13 Bankruptcy is probably your safest option.
If you are receiving rent and that rent covers 100% of the mortgage payment, then your Chapter 13 Plan will most likely not be affected by the investment property. But if you are not receiving rent or the rent does not cover 100% of the mortgage, then you will have to pay the portion of the mortgage payment that is not covered by your rental income to your unsecured creditors. For example:
You have a homestead and an investment property that is currently rented out. Your mortgage payments on your investment property are $1,500.00 per month. However, you are only receiving a rent of $1,000.00 per month. To keep the investment property, you will have to continue making the regular mortgage payment and then pay an additional $500.00 in your Chapter 13 Plan to keep it.
If you have assets and are thinking about filing bankruptcy, please speak with an attorney first. A knowledgeable bankruptcy attorney can help walk you through each possible scenario so that you know what will happen to your assets before you file your bankruptcy. Contact the Law Office of David M. Goldman, PLLC today for a free 30-minute consultation.
When Texas and Florida, along with several other states along the eastern seaboard of the United States, were hit by Hurricane Harvey and Hurricane Irma, many mortgage companies offered their borrowers who had been affected by these storms participation in a forbearance program. A forbearance program is where your mortgage company agrees to suspend your mortgage payments for a set period of time. Forbearance programs are usually good for borrowers who are going through a short-term financial situation. The forbearance of mortgage payments is meant to allow the borrower the time they need to get back on their feet and then recommence their regular mortgage payments. The idea behind the forbearance programs after the hurricanes was to allow homeowners time to repair or rebuild their homes that had been damaged by the storms.
Unfortunately, not all forbearance programs have reached their goal. What I have come to learn through the last several months as forbearance programs are coming to an end, is that some of these programs require the borrower to bring their mortgages current at the end of their forbearance period. This means that borrowers must make all missed mortgage payments at one time when their program ends. The issue that many borrowers who have chosen to take advantage of one of these programs is that they were not aware that they would have to make all of the payments at the end of the designated time period. By the time they learned they would be expected to pay their mortgage company all of the payments that were deferred through the forbearance program, it is far too late for them to prepare for such a large payment at one time. This has put many borrowers between a rock and hard place, because they are unable to bring their mortgages current.
The worst part is that many of their homes are still not completely repaired, or even repaired at all. Many borrowers did not have enough insurance to cover all necessary repairs and have been unable to get financial assistance to make up the difference. Many homeowners are now facing the very difficult decision of what they can do in order to keep their homes. Many fear that new foreclosures are on our horizon as homeowners have no choice but to walk away from their beloved homes, because they are unable to make their mortgage payments and/or make the repairs they need in the aftermath of Hurricane Harvey and Hurricane Irma.
Luckily, there still may by a few options available that will at least assist you in making your mortgage payments. One option is a loan modification. If you are approved for a loan modification, all the forbearance payments would be rolled into the new principle balance. Another option may be a Chapter 13 Bankruptcy. A Chapter 13 Bankruptcy would allow you to start making your regular monthly mortgage payments and then spread the forbearance payments out over 5 years, which might help make the payments a much more affordable option. Additionally, a Chapter 13 Bankruptcy might also assist you with other debts you may have.
An attorney experienced in bankruptcy, loan modification, and foreclosure can help you determine which is the best course of action for you. Contact the Law Office of David M. Goldman, PLLC today (904) 685-1200 to speak with an experienced attorney.
Employee Stock Ownership Plan, better known as an “ESOP,” is a way for employees to have ownership in the company they work for. They are used by several large successful companies because of the various tax benefits they can offer to the company as well as to the employee. Most commonly, employees obtain ownership of the company’s stocks as an award to help motivate and reward the employee. They are also a great way for employees to plan for retirement.
Because of how an ESOP works as a trust fund, employees generally do not have much control or access to their shares until they reach retirement age, or when their shares vest. Because of this lack of access, most ESOPs are treated just like a 401K, or any other retirement plan that is qualified under ERISA, when they file bankruptcy; therefore, ESOPs are treated as an exempt asset.
How does an ESOP work?
Just like a trust fund or spendthrift trust, all shares are retained in an ESOP trust until retirement age or termination of employment. Basically, when a company decides to set up an ESOP, they create a trust that the company makes yearly contributions to. The company then creates a formula that controls how employees receive stock in the company. Before an employee can have access to their stocks, their stocks must first vest.
My ESOP and bankruptcy.
As mentioned above, ESOPs are generally treated just like any other retirement plan in bankruptcy and are therefore an exempt asset, but your ESOP must first pass a two-step test.
First, you must figure out whether or not the ESOP is actually even a part of your bankruptcy estate. As long as there is an anti-alienation clause written in your ESOP documents that restricts your ability to access or transfer your stock, then it should be excluded from your bankruptcy estate. This anti-alienation clause also qualifies the ESOP under ERISA.
In Florida, courts have compared ESOPs to spendthrift trusts. One of the most important things about a spendthrift trust that makes it safe in bankruptcy is that they are set up by someone other than the beneficiary for the beneficiary’s benefit. Therefore, whether your ESOP is safe in bankruptcy really boils down to your access to the stock.
Florida courts have determined that ESOPs are safe where the debtor is unable to reach the stock after leaving employment until they reach retirement age and where they are unable to borrow money from the plan.
On the other hand, if a debtor’s interest in the stock vests and they can reach the stock upon termination or withdrawal proceeds prior to retirement age, then the debtor’s access or control over the stocks disqualifies the ESOP from the exemption and the ESOP will be subject to your bankruptcy estate.
Making sure that your ESOP is safe when you file bankruptcy is very important as they are most often an individual’s biggest asset. This is why it is so paramount to consult with an experienced bankruptcy attorney before filing bankruptcy. Contact the Law Office of David M. Goldman, PLLC.
Having been unemployed for some time, you have accumulated a lot of debt and are now behind on paying those debts. You are considering filing bankruptcy, but happen to have two vehicles that are paid off and want to sell one of them. Can you sell one of those vehicles and then file a Chapter 7 Bankruptcy? The short answer is it depends, and this is why.
Selling one of the vehicles would be considered a pre-bankruptcy transfer of property, and there are several factors that determine whether a person can complete a pre-bankruptcy transfer. Your bankruptcy trustee will look at whether the property in question would have been exempt when you filed your bankruptcy, the price you received for the property, how those proceeds were spent, and the reason for the transfer.
If the property would have been exempt when you filed bankruptcy, then transferring the property prior to filing bankruptcy should not be an issue. However, it could cause a delay in the bankruptcy process as your trustee makes this determination. Your trustee will want to make certain that you received the fair market value of the property and that it was in fact exempt. In Florida, a debtor is allowed $4,000 in personal property and $1,000 in a motor vehicle if they do not claim the homestead exemption. If a debtor claims the homestead exemption, then they are only allowed $1,000 in personal property and $1,000.00 in a motor vehicle.
BUT, if you are planning to file bankruptcy and the property would not be exempt in bankruptcy, then you need to proceed with much caution. It is best to first speak with an attorney before making any pre-bankruptcy transfers. Your trustee most definitely will investigate the transfer and will pay close attention to when the transfer was made and the proceeds received from the transfer. If the fair market value was not received, then the trustee may undo the transfer or make you pay the fair market value of the transfer to your bankruptcy estate. The trustee can also look into certain types of transfers from as far back as ten years ago. However, they most commonly only look back two to five years in Florida.
Another thing your trustee and the court will look into is your intent at the time of the transfer. Your intent can be inferred by looking at who you transferred the property to, did you try to conceal the transfer, what was your financial situation when the transfer occurred, etc.
If you use the proceeds from the transfer of non-exempt property to increase the value of your homestead, such as by paying down the mortgage or making improvements, the court can look back 1,215 days. Without having to look at your intent, the court can then reduce your homestead exemption by that amount. Luckily, however, using such proceeds to make normal mortgage payments or normal maintenance and repairs should not be an issue.
Despite the type of property you are looking to transfer prior to filing bankruptcy, it is best to consult with an experienced attorney. Speak with the Law Office of David M. Goldman, PLLC at 904-685-1200 for a free initial consultation.
If you wish to file a Chapter 7 Bankruptcy, you will have to first pass something called the MEANS Test. The MEANS Test is the determination of whether or not you are eligible to file a Chapter 7 Bankruptcy based upon your household size and income.
For a Chapter 7, your income must be below the median income level for your household size in your state. In order to figure out what your income is, the court looks at an average of your monthly income for the previous six months prior to filing. In Florida, as of April 1, 2017, the median income numbers are around the following and increase as your household size increases:
Household of 1: $44,576.00
Household of 2: $55,344.00
Household of 3: $60,636.00
If your median income is below these numbers for your household size, you only have to complete the “short-form means test.” This is because it is easy to determine that you qualify for a Chapter 7, because your income is clearly under the median.
If your median income is above these numbers, you will have to complete the second part of the MEANS Test. The second part of the MEANS Test, the “long form,” does a further determination/analysis of whether your income and expenses allow you to qualify for a Chapter 7. Things such as a mortgage or car payment can help you to lower your monthly income in hopes that it’s just enough to help you qualify for a Chapter 7 Bankruptcy.
What types of income are included in the MEANS Test?
Now that you know how it is determined if you can file a Chapter 7 Bankruptcy, you probably would like to know what income is included in the MEANS Test. While ALL types of income must be listed on your Schedule I, which lists your monthly income in the future, NOT ALL types of income are included on your MEANS Test, but unfortunately, most are.
Income from regular employment, running a business, pension, retirement, etc. all must be included in your MEANS Test, even child support and alimony payments are included in your MEANS Test. The only income that is not included in your MEANS Test is disability income, such as Veteran Affairs Disability and Social Security Disability.
What this means is that even if your income is too high to qualify for a Chapter 7 Bankruptcy due to your social security or VA benefit, you might not have to include that income in your MEANS Test, because, without it, you might be able to qualify for a Chapter 7 Bankruptcy.
One of the first steps to filing bankruptcy is determining whether or not you pass the MEANS Test and qualify for a Chapter 7 Bankruptcy.
Contact the Law Office of David M. Goldman, PLLC today to evaluate whether or not you will pass the MEANS Test. Other factors such as any assets you might have also need to be taken into account when deciding whether bankruptcy is the best option for you.
When someone thinks of bankruptcy, one of the very first things that come to their mind is that they do not want to lose the property and assets they currently have. If you own property such as a home, vehicle, or any other property of value, you might automatically assume that bankruptcy is not an option for you because you will have to surrender your assets to your bankruptcy estate.
However, you will be happy and surprised to learn that a Chapter 13 Bankruptcy might present some very unique opportunities for you that you were not previously aware of. For those of you facing financial difficulties while owning an investment property you do not want to lose, a Chapter 13 Bankruptcy might be the perfect solution for you.
You will be happy to know that under Title 11 of the United States Bankruptcy Code, Section 1322(b)(1), you can cram down a mortgage on an investment property. Cram down essentially means that if your mortgage is more than the fair market value of your investment property, then you can lower the principle balance of your mortgage to match the fair market value or secured value of the property. Basically, you can modify the mortgage’s contract by changing the principal balance, interest rate, and term. AND… the creditor cannot object to it.
For example, if the principle balance on your investment property mortgage is $200,000, but the fair market value of the property is only $100,000, you can “cram down” the principle balance of the mortgage to $100,000.
BUT…this option is not available for a mortgage on a principle residence or homestead property. Section 1322(b)(1) of the Bankruptcy Code specifically states that “may modify the right of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence…” The apparent reasoning by the legislators is that special protections should be given to Lenders who provide mortgages for a principle residence because they are providing an essential service.
There is nevertheless one other major limitation to being able to cram down a mortgage on an investment property. Many courts require that the mortgage is paid off by the time you complete your Chapter 13 Plan, which is within either three or five years. This translates into very high Chapter 13 Plan payments that can be very difficult to afford and keep up with.
Being able to cram down a mortgage on an investment property is not the only type of cram down offered through a Chapter 13 Bankruptcy. You can cram down most debts that are secured by property such as an auto loan.
If you have an investment property and wondering if a Chapter 13 Bankruptcy might help you save it, or have another secured debt that you would like to cram down through a Chapter 13 Bankruptcy, contact the Law Office of David M. Goldman, PLLC today for more information. Set up a consultation today so that an attorney can help you determine what your best option might be.
The Bankruptcy Abuse Prevention Act of 2005 made student loan debts non-dischargeable through bankruptcy. Why do you ask?
The federal student loan program was initially created with the goal of making a college education affordable for all children. Originally student loans were only meant to help fill the bridge between grant money and the cost of tuition, books, and housing. In other words, student loans were only supposed to supplement education costs. Student loans were never meant to completely cover the full costs of receiving a higher education.
Instead of being based on your creditworthiness like most other types of debts, student loans are only based on your need. Due to this need v. creditworthiness approach, Congress did not feel that student loans should be dischargeable through bankruptcy except under very extreme circumstances that are completely out of your control. Specifically, Congress did not want to put the burden of unpaid student loans onto the taxpayers.
Nonetheless, there were put into place a couple of programs for those facing a partial financial hardship. The first program was the William Ford Foundation, which provided an income contingent repayment plan. This program is available for those who choose to take lower paying jobs such as in public service. There is also the Income Based Repayment Program. With this program, your payments are based on your income. After 20 years, the amount still owed is discharged; however, there are still huge limitations on how you can qualify to remain in this program.
Of course, things did not go the way Congress had intended. Federal government spending on higher education could not and cannot keep up with the ever-increasing costs of earning a college degree. Federal grant programs failed to cover the entire costs and, as a result, students began looking to borrow money from other sources (privately funded student loans) once they had exhausted the federal government-insured student loans. This left college graduates with very high student loans to pay back.
In the Middle District of Florida where I practice, and encompasses the Jacksonville and Orlando divisions, an all or nothing approach has been taken towards the dischargeability of student loans. You either qualify 100% for your student loans to be discharged because of an extreme circumstance, which has a very high level of proof, or you do not. There is no middle ground.
However, Representative John Delaney introduced bipartisan legislation last Friday that would make student loan debt dischargeable through bankruptcy. So everything might be changing in 2017! The bill has been named the Discharge Student Loans in Bankruptcy Act (H.R. 2366).
In 2016, according to the Federal Reserve Bank of New York, the amount of student loan debt reached an all-time high of $1.3 trillion dollars.
At the Law Office of David M. Goldman, PLLC, we are always looking at creative methods to help our clients deal with their overwhelming debt burden. Contact our office today for a free initial consultation at (904) 685-1200. There are a lot of options available. The trick is finding the one that best fits you and your life. We are here to help you put your financial health back on track.
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