Daily Archives: March 29, 2016

Bankruptcy Planning – Continued

I started talking about Bankruptcy Planning

detroit bankruptcy court
bankruptcy court in downtown Detroit

last week.

More reasons why bankruptcy planning is something you might need to consider.

We Owe More Than We Think We Owe

Eric McWhinnie writes for Cheat Sheet:

The average credit card debt per household is $7,493. However, this includes all households, such as those who diligently pay off their plastic each month or avoid credit cards like the plague. The average amount owed for households with at least some credit card debt is $15,355. Overall, Americans owe more than $700 billion in credit card debt.

I say it all the time, because I first heard it from a VISA executive, the number of bankruptcy filings correlates with the amount of consumer debt.  The higher the amount of consumer debt, the more bankruptcies there are.

But the article goes on:

Lender-reported credit card debt was 155% greater than borrower-reported balances in 2013, resulting in a difference of more than $415 billion. Perhaps Americans are too embarrassed to admit their charging habits.

So, don’t be the person who thinks she does not need bankruptcy planning because she does not know how much she actually owes.

Do NOT Repay Relatives

Another thing that seems to make sense, I like, or at least, do not want to anger my relatives, so let me pay them before I file bankruptcy.

This gets into fancy bankruptcy law terms like preference and insolvency.

Basically, and check with an expert bankruptcy lawyer, repayments of debt within one year of bankruptcy filing is a preferential transfer that can be set aside by your bankruptcy trustee.

Transfer just means the money went from you to the relative.

Preferential is, the relative got paid, and the rest of your creditors did not, so, the bankruptcy trustee can recover the payment, that is, sue your relative for whatever you paid them in the last year.  The trustee then distributes that payment to creditors according to bankruptcy law.bkPLANNING2

The bankruptcy law presumes that you are insolvent, that is, do not have enough non-exempt assets to pay your debts, for one  year before filing, in the case of repayments to relatives.

So, you think you are doing Uncle Joe a favor by repaying him that $1,000 he lent you, and his reward is getting sued by your bankruptcy trustee for $1,000.

Bankruptcy Planning requires consultation with a bankruptcy expert.

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