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Will You Lose Your Jewelry if You File Chapter 7?

By Jonathan on August 30, 2011

Usually, when I meet with a prospective bankruptcy client, the first question I get is “how long will it take me to recover after filing bankruptcy” and the second question I get is “will I have to give up my personal items like furniture and jewelry?”

The “recover from bankruptcy” question is the subject of a different blog post, but I can tell you that in my experience of over 23 years, I rarely, if ever, see anybody lose any of their personal property when they file bankruptcy.

Let’s take jewelry, for example. In Georgia, you can protect or “exempt” up to $500 worth of jewelry. This means that you may have $100,000 of credit card debt and you can wipe all of that debt out and still keep your $500 worth of jewelry because under the Georgia exemption statute, this jewelry is exempt.

But wait – there’s more. If you file jointly with your spouse, each of you gets to claim the $500 exemption, making a total of $1,000. Further, the exemption law allows you an extra $600 of “wildcard” exemption that can be applied to jewelry, and you can take up to $5,000 of your real estate exemption and apply it to jewelry as well.

Thus, an individual can exempt $500 + $600 + $5,000 = $6,100 worth of jewelry. A couple filing jointly can protect up to $12,200 worth of jewelry.

What if your jewelry is worth more than $6,100 (individual) or $12,200 (married couple)? I would advise you to get that jewelry valued. As Charleston bankruptcy lawyer Russ DeMott points out on his blog, people buying used jewelry want a deal–a really good deal. That heirloom ring you think is worth $15,000 may fetch only $2,500 from a wholesale jewelry buyer. [Read more…] about Will You Lose Your Jewelry if You File Chapter 7?

I just moved to Georgia. Where do I file and which exemption rules apply?

By Jonathan on August 23, 2011

The amount of property you are allowed to keep depends on where you file and which set of “exemption” rules applies. While the federal bankruptcy law grants certain exemptions, each of the states is allowed to adopt its own set of exemption rules, and they vary considerably.

The first question, “Where do I file?” is easy. If you have lived in Georgia for at least 91 of the last 180 days, you file your bankruptcy petition in Georgia. (Which District Court you file in depends on where in the state you live.)

The harder question is, “Which exemption rules apply?” The rules about which exemptions apply are designed to prevent people from moving to a state just to take advantage of its exemptions. [Read more…] about I just moved to Georgia. Where do I file and which exemption rules apply?

New IRS Ruling on “Innocent Spouses” May Help Bankruptcy Filers

By Jonathan on July 26, 2011

Tax issues are often on the mind of bankruptcy filers. As I discussed on this blog last October, there are certain circumstances when you can discharge tax debts in bankruptcy, but these conditions are somewhat limited and do not apply to many bankruptcy filers.

One scenario that can be very frustrating involves an “innocent spouse.” Imagine a situation where your husband (or wife) manages all of the family’s finances and you have absolutely no knowledge of his failure to report income or his phony deduction claims. If you sign and file a joint return, the IRS will hold you equally responsible with your spouse for any tax liability resulting from the errors on your tax return.

However, if you truly had no knowledge, information or control over your spouse’s tax dealings, you can petition the IRS to declare you as an innocent spouse and reduce or eliminate your personal liability for overdue tax payments, penalties and interest.

Until just a few days ago, a woman or man possibly eligible for innocent spouse relief had to file papers with the IRS to request innocent spouse status within two (2) years from the date of the first delinquent tax collection notice. If you waited more than two years to file your IRS Form 8857, you were out of luck and could not petition the IRS for this type of relief. [Read more…] about New IRS Ruling on “Innocent Spouses” May Help Bankruptcy Filers

Retirement Plans and Bankruptcy

By Jonathan on July 19, 2011

When I am meeting with clients, I get a lot of questions about retirement plans. Often, I see clients who have very little equity in property, and even less cash, but they may have $25,000 or $30,000 in an IRA or a 401(k). How does having several thousand dollars in a retirement plan impact your options regarding a bankruptcy filing?

To answer this question, I am going to point you to a very helpful series of articles written by my colleague Damon Duncan, a bankruptcy lawyer in Charlotte. Although Damon is writing for the benefit of North Carolina bankruptcy filers, the principles he discusses are applicable to Georgia filings as well:

Generally, funds in an ERISA qualified retirement plan are considered “exempt” assets. This means that your retirement plan is protected from the claims of creditors and these funds are protected from the reach of the trustee. To put this another way, in most cases you could file a Chapter 7 and wipe out $100,000 of credit card debt, but you would exit bankruptcy with your $30,000 IRA intact. [Read more…] about Retirement Plans and Bankruptcy

Don’t Mess with Taxes!

By Jonathan on June 23, 2011

Don’t mess with taxes! (with apologies to Texas)

The amount that is withheld from your paycheck depends on the number of exemptions you claim.

Many people deliberately understate the number of exemptions they claim. Maybe they have income outside their employment, and don’t want to get stuck with a big tax bill when it comes time to file. Others may like the idea of getting a big fat tax refund, even though having too much money withheld from your paycheck means that you are lending your money to the government interest-free.

On the other hand, there are some people who overstate their exemptions, figuring that it’s their money, and they’d rather let the extra money earn interest all year instead of lending it to Uncle Sam.

Tax Planning and Bankruptcy

If you are thinking about declaring bankruptcy, proper planning means that your decision about how much to have withheld becomes a little more complicated.

If you are expecting a big tax refund, your bankruptcy attorney will likely advise you to put off filing your bankruptcy petition, if possible, since the refund will be considered part of the bankruptcy estate and therefore available to the Trustee for distribution to your unsecured creditors. [Read more…] about Don’t Mess with Taxes!

Can Facebook Ruin Your Bankruptcy?

By Jonathan on June 8, 2011

Social Media sites, and Facebook in particular, have changed the practice of law. Divorce lawyers regularly review the opposing party’s Facebook profile for evidence of adultery or hidden assets. Prosecutors present online photos to juries as evidence of guilty behavior. Bill collectors troll social media sites looking for assets and debtors.

And don’t think that limiting access to your profile to “friends” only will help. Facebook information can easily be subpoenaed – do not assume any right to privacy for your online materials.

How has Facebook and similar sites impacted the world of consumer bankruptcy. In this guest post, Charlotte bankruptcy lawyer Damon Duncan, identifies three situations where your careless use of Facebook could have serious bankruptcy implications: [Read more…] about Can Facebook Ruin Your Bankruptcy?