Usually the answer is YES, but it’s best to call and check with a competent chapter 7 bankruptcy lawyer in Utah before you file. It’s not a good idea to empty out an account for the sole purpose of ensuring that the funds won’t go to creditors. Hiding assets from bankruptcy creditors is a fraudulent act that comes with stiff penalties, and this includes hiding the funds in a savings account. However, under certain circumstances, it might be a good idea to spend or take money out of your savings account before filing your case. When you file for bankruptcy, your creditors are entitled to receive a percentage of funds determined under bankruptcy law. For instance, priority creditors get paid first, while the majority of others take a pro rata share in any remaining amount. If you take money out of your savings account to hide it from your creditors or the bankruptcy trustee the official tasked with administering your case you’ll be committing bankruptcy fraud. Not only will the trustee be able to recover the funds using the clawback provision, but you could lose your discharge the order that erases qualifying debt or face criminal prosecution and up to twenty years in prison, $250,000 in fines, or both. Cashing Out Savings for Exemption PlanningIf you are filing for Chapter 7 bankruptcy, the trustee can take your nonexempt property and use it to pay your creditors. In Chapter 13, you have to pay your creditors an amount equal to your nonexempt property and likely more, depending on your disposable income and whether you have debt you must pay in full in your repayment plan. Bankruptcy exemptions protect your property in bankruptcy. If an asset is exempt, you can keep it. Each state decides the exemptions available for filers. If you don’t want the trustee to take the money in your savings account, check your state’s exemption laws before filing your case to make sure you can exempt the funds. In most cases, you will have to use an exemption specifically designed for bank accounts and not many states allow filers to protect much cash or a wildcard exemption that allows you to keep any property of your choosing to protect your savings account. If you can’t exempt your savings account, you might need to do some exemption planning when preparing to file your bankruptcy case. In general, a certain amount of exemption planning is allowed as long as it is in good faith and not excessive. You can usually spend the money on necessities such as food or rent, or use it to buy a necessary exempt asset. For instance, if you don’t have a car but your state has a motor vehicle exemption, you may be able to use the money to purchase a vehicle. However, keep in mind that excessive exemption planning can be construed as bankruptcy fraud. Each bankruptcy court has its own views regarding how much exemption planning is proper. As a result, consider talking to a knowledgeable bankruptcy attorney in your area prior to converting any nonexempt assets into exempt ones. Filing for bankruptcy doesn’t automatically freeze your bank accounts on its own. However, certain banks and credit unions will freeze accounts if you file for bankruptcy to protect the bankruptcy assets. These banks will typically require proof that the money in the account is exempt (you can keep it) in bankruptcy before allowing access to the funds again. For instance, it’s common for a bank to require the bankruptcy trustee to call and verify that the account shouldn’t be frozen and the trustee will typically do so if you’re entitled to the money. Also, if you owe money to your bank or credit union for example, if you have a balance on its credit card the bank can withdraw the money in your account using a mechanism called a set off. The contract you signed when obtaining credit gives the bank this right. As a result, it might be a good idea to switch banks if you know the bank will freeze your accounts or be a creditor in your case. But be aware that you’ll still have to disclose the money in your bankruptcy even if you keep it as cash, and you’ll have to be able to exempt, as well. When to consider filing Chapter 7If you’ve tried negotiating with your creditors, working with a credit counselor or consolidating your debt, but are still struggling to manage your debt, Chapter 7 bankruptcy might be your last resort. Chapter 7 bankruptcy can help by acting like a pause button for some of your debts. Once you file your petition, some of your creditors could be temporarily stopped from most collection actions against you or your property. But filing Chapter 7 can ultimately mean losing some assets. The law varies from state to state, and each state can classify property as exempt (can’t be taken) or nonexempt (can be taken). So depending on where you live, your home, stocks, other investments as well as other nonexempt assets you have could be at stake. If you’re concerned about what you may have to forfeit, talk to a lawyer. Some assets, including 401(k)s and pensions, may be exempt. The process of filing Chapter 7 bankruptcy generally takes 80 to 100 days from filing to when your debts are discharged. You’re not required to hire an attorney, but it is recommended that you go through this process with professional guidance from an attorney. Here are some of the things you should be prepared to do during a Chapter 7 bankruptcy. qualify for Chapter 7 bankruptcyYou : • Education course: Before your case is discharged, you’ll have to take a financial education course from a qualified nonprofit credit counseling agency. Some debts typically can’t be erased in bankruptcy, including recent taxes, child support and student loans. Bankruptcy still may be an option for you, though, if erasing other kinds of debt would free up enough money to pay the debts that can’t be erased. The other common form of consumer bankruptcy, Chapter 13, may be better if you have more assets or secured debts, and can repay some or all of what you owe. Other debt relief options are available, too, such as a debt management plan through a credit counseling agency. Take advantage of the free initial advice that credit counselors and many bankruptcy attorneys offer before deciding on a path. Filing Prior to RetirementIf you haven’t retired yet, the money in your retirement accounts such as a 401(k), 403(b), 457(b), Keogh, or other profit-sharing or defined benefit plan cannot be touched by creditors if you file for Chapter 7 bankruptcy, regardless of how much money you have saved in them. Chapter 7 is the most common form of bankruptcy and involves a court-appointed trustee liquidating your assets and distributing the money to your creditors. The money in those kinds of accounts also will not affect the amount you would have to pay back after filing for Chapter 13 bankruptcy, which is more complex than Chapter 7 and involves setting up a court-approved repayment plan. If you have funds saved in an IRA, Roth IRA, SEP-IRA, or SIMPLE IRA, the funds are also generally exempt from creditors, but only up to a certain limit. Bankruptcy And Social Security BenefitsUnder federal law, most creditors cannot garnish your Social Security benefits. However, the federal government does allow money to be taken from your Social Security check before it’s sent to you for the payment of federal taxes, federal debts including student loans, child support and alimony, and court-ordered restitution owed to the victim of a crime. Once the money hits your bank account, however, the money can be taken by creditors. The good news is that, under a rule established in 2011, banks must know whether federal benefits are included in an account before they allow money to be seized. If Social Security or similar government benefits are included in an account, the bank must protect two months’ worth of those benefits from creditors. Chapter 7 And Discharging DebtUnder Chapter 7 bankruptcy, your medical bills can be discharged that is, completely wiped away. Credit card debt, personal loans, utility bills, attorney fees, and some court judgments can also be discharged. Mortgages, car loans, liens, and other tax bills, child support, and most student loan debts are generally non-dischargeable in a Chapter 7 bankruptcy. How To Make the Decision To File Bankruptcy?If you feel like you are drowning in unpaid medical bills or credit card interest and late fees, bankruptcy could offer some relief. However, some seniors may be considered judgment proof, which means that they simply do not have anything for creditors to collect if they sue and win. If you’re in that type of situation, a bankruptcy may be unnecessary. Consult an attorney about whether or not filing for bankruptcy makes sense for you. Chapter 7 LawyerWhen you need legal help with filing for chapter 7 bankruptcy, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
Ascent Law LLC
8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506
Ascent Law LLC
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About MeHave a strong interest in donating wieners for farmers. Have some experience investing in cod in Bethesda, MD. Spent the better part of the 90's deploying Roombas in the aftermarket. Spent a weekend creating marketing channels for jungle gyms for no pay. Spent 2002-2009 building robots in the aftermarket. Spent 2001-2005 supervising the production of salsa in Libya. Archives
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