Kentucky Bankruptcy Law

Counsel with Care

Who wants to file bankruptcy right before Christmas!?!

Well, no one does. That is a given. However, there are a few things to remain aware of if bankruptcy is something you have been contemplating here recently:

1) Any gifts you receive of substantial value at Christmas are going to have to be listed in your bankruptcy on Schedule B and exempted on Schedule C. You will need to individually identify any particular item you received that is worth hundreds of dollars.

2) Any expensive item you purchase, whether keeping it in house or giving it away to someone else, will have to be reported as well. If it is a luxury item, that is something costing more than $650.00, you will be raising red flags and risk losing the discharge of that debt.

3) Your right to receive a tax refund arises on December 31st of each year if you overpaid your income taxes. This is true whether you file a tax return right away or wait until the last minute. That tax refund is an asset of the bankruptcy estate upon filing your petition and must be listed on Schedule B and exempted on Schedule C even if you do not know the exact amount you will be receiving.

If you own a home and have a large amount of equity in that property (equity meaning value minus secured debt), you may have a very limited amount of exemption to put towards these assets mentioned above. Consulting with a bankruptcy attorney prior to Christmas may be a wise gift to yourself.

December 2, 2014 Posted by | Alternate Debt Relief, Bankruptcy, Chapter 13, Chapter 7, Consumer Protection | , , , , , , , , , , | Leave a comment

Avoiding pre-bankruptcy temptation and “luxury” goods

It does not matter why. It does not really matter “what” very much. Section 523(a)(2)(C) precludes the discharge of debt associated with the purchase of any luxury item, items or luxury services purchased from a single creditor that aggregates $500.00 or more within 90 days of filing a bankruptcy. The way the statute reads, it is the debt that must combine to more that $500.00 so it would arguably not apply to a purchase of something where $400.00 was on credit and a a hundred or more was in cash or check. The problem is that the code does not define the term “luxury”. So, for my client who was recently separated from their spouse and needed a new bed to sleep it, it is a toss up as to whether the item was a luxury or not. If they purchased a bottom line bed, they probably have nothing to worry about. If they purchase one of these fancy top of the line beds we see on T.V. all the time, then there is a good chance it will be deemed a luxury item.

The consequences for buying a luxury item within 90 days of a bankruptcy are not so harsh for someone like this client that needed a bed. Basically, there is a presumption under the code that they will still have to pay that particular debt. Well, if the Debtor acted in good faith in making the purchase, this will not be a surprise and hopefully they will be able to afford that debt once others are gone. However, for the person who thought, “I’m gonna file bankruptcy soon anyway, what the heck – I’ll buy stuff and get the best!” Well, for them it will be downright disappointing. Furthermore, if they cannot afford even that one debt, the bankruptcy discharge will not prevent judgments and garnishments down the road.

The bigger concern is that such a purchse raises the specter of fraud in the minds of creditors and the trustee. That could move the Debtor from the relatively mild sanction of Section 523 over to the harsher consequences of Section 727. This section of the bankruptcy code operates the prevent a discharge or ALL debts. So, if you suspect that bankruptcy is looming for you, avoid making credit based purchases from a single creditor of $500.00 or more. If you cannot avoid it, then it is likely not a luxury item, but you still need to be aware, just like with my client and the bed, that buying the best may move you from the necessity arena over into the luxury arena in a hurry. Also, this applies to services so, I recommend not getting a lot of massages or pedicures on credit on the eve of filing a Chapter 7 bankrutpcy.

June 19, 2010 Posted by | Bankruptcy, Pre-filing planning | , , , , , , | 2 Comments

Post-holidays bankruptcy filing blues

The commercial pull of Christmas can be irresistible. Everyone else seems to be buying nice and pricey gifts for their loved ones. All the pre-teen and teen kids are craving an iPod Touch or some other even more expensive i-Item. The younger kids are inundated with supremely cool and fantastically expensive toys that walk, talk, and otherwise seem to mimic some surreal lifeform. You feel guilty if you do not buy your most significant other something from Jared or perhaps you are fearful that person would feel slighted if they are not receiving something from this fella’s jewelry store. So, you justify just a little more than you had budgeted to buy gifts. We all have done it. But, now that the festivities have ended and the euphoria of gift giving subsided, the financial cost hits. All those little somethings and not so little somethings add up quick.

Because our society has become oriented around the use of credit, most likely you bought many Christmas gifts with VISA, MasterCard, Discover or American Express. You may have known it was inevitable, but you held off taking that dreadful plunge of actually filing bankruptcy. You wanted to make it through Christmas before facing up to the less than jolly music of debt. This is all entirely normal and understandable, though unlikely to be counted as wise. That is because you now have to deal with 11 U.S.C. Section 523(C)(i)(I). Any debt to a single creditor incurred prior ninety (90) days of filing the peition for “luxury goods” cannot be discharged. So, if you wracked up $500.01 dollars in Christmas gifts on your credit card, you may be stuck with that debt whether or not you can make the payments.

This can happen to the most well-meaning folks who just wanted to make sure their loved ones experienced a good Christmas, but intentions do not matter to the creditors; just the money. If you find yourself in this situation, along with countless others, there is no need to despair. It is important to discuss this with your bankruptcy attorney and determine the best course of action. Depending upon your particular situation, it may be wise to hold off filing bankruptcy for a time. Alternatively, you may need to go ahead and file right away if garnishments or foreclosures are looming. Finally, you may be able to pay back that particular debt if you are relieved of others that are to high to ever pay off. At the very least, though, you need to be aware of the potential impact of Christmas gift buying.

December 30, 2009 Posted by | Bankruptcy, Uncategorized | , , , , , , | 2 Comments