Many people believe that if they declare a Chapter 7 Bankruptcy, they will lose all of their property. This is not a correct assumption. All states have exemption statutes or have incorporated federal exemption laws which allow Debtors to retain some property.
When a Chapter 7 Bankruptcy is filed, the Debtor must list all of his or her personal belongings and other property. The Debtor must determine the value of each item. In most states, the law allows the Debtor to keep, or "exempt", a certain cash value of property. When an exemption is used, the Debtor can retain whatever portion of the value of the property that has been exempted. For example, if a Debtor owns a vehicle worth $8000 and wants to keep the vehicle, the full $8000 value can be exempted (if allowed by the applicable law), and the Debtor can retain the vehicle. The $8000 that was exempted would count toward the total amount of exemptions that are allowed by the law that is applicable to the Debtor's case.
Laws on what can be exempted vary from state to state. In some states, a primary residence can be exempted as a matter of law, with certain requirements including requirements related to the length of residency in the state. In other states, funds in retirement, pension, IRA, or 401k can be exempted without counting toward the total value of a Debtor's general exemptions. It is important to have a good concept of what you can retain if you do file a Chapter 7 Bankruptcy. Failing to exempt your property correctly could result in the loss of belongings that may have been retained if the case were filed properly. A good attorney can tell you more about the property that you could retain if you file for bankruptcy.
Seth W. Diamond is an attorney at Laura Margulies & Associates, LLC. in Rockville, Maryland. His firm represents individuals and companies in bankruptcy and litigation matters in Maryland and the District of Columbia. For more information about bankruptcy and the services offered by his firm, please feel free to visit the firm's website. If you would like to schedule an appointment to discuss bankruptcy with an attorney, call 301-816-1600, or click here.
Tuesday, September 22, 2009
Wednesday, September 9, 2009
Reaffirmation
After a debtor files for bankruptcy, many creditors ask him or her to sign a reaffirmation agreement. A reaffirmation agreement is a written agreement between the debtor and the creditor whereby the debtor agrees to continue making the payments to the creditor even though the debt would ordinarily be discharged. This means that this particular debt is not canceled when the debtor receives the discharge. It becomes a new contract between the debtor and the creditor. If the debtor does not pay the creditor as he or she is required to do under the reaffirmation agreement, then the creditor may pursue all collection efforts against the debtor, including suing the debtor and obtaining a judgment and garnishing wages.
The advantage of reaffirming the debt is that the creditor may allow the debtor to continue using its services. For example, if the debtor had a loan with a credit union, by reaffirming the debt, the debtor may be able to get new loans with the credit union once the reaffirmed debt is paid in full. If the debtor does not reaffirm the debt with the credit union, then the credit union will usually suspend the debtor’s privileges.
Debtors are not obligated to reaffirm any debts and should consider whether they can afford to make the payments called for under the terms of the reaffirmation agreement before they consent to it. If after the agreement is signed and filed with the court the debtor realizes he or she made a mistake, they have 60 days to cancel the reaffirmation agreement. The debtor does not have to state a reason for the cancellation and if canceled timely, the creditor must return all monies sent to it pursuant to the agreement.
It may not be necessary to reaffirm the entire amount requested by the creditor. The debtor’s bankruptcy lawyer may be able to negotiate with the creditor to reduce the interest rate, lower the principle balance due or lower the amount paid each month. The reaffirmation agreement will state the original terms and also the new terms. If the new terms are still beyond the debtor’s budget, I would recommend that the debtor not sign the agreement.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
The advantage of reaffirming the debt is that the creditor may allow the debtor to continue using its services. For example, if the debtor had a loan with a credit union, by reaffirming the debt, the debtor may be able to get new loans with the credit union once the reaffirmed debt is paid in full. If the debtor does not reaffirm the debt with the credit union, then the credit union will usually suspend the debtor’s privileges.
Debtors are not obligated to reaffirm any debts and should consider whether they can afford to make the payments called for under the terms of the reaffirmation agreement before they consent to it. If after the agreement is signed and filed with the court the debtor realizes he or she made a mistake, they have 60 days to cancel the reaffirmation agreement. The debtor does not have to state a reason for the cancellation and if canceled timely, the creditor must return all monies sent to it pursuant to the agreement.
It may not be necessary to reaffirm the entire amount requested by the creditor. The debtor’s bankruptcy lawyer may be able to negotiate with the creditor to reduce the interest rate, lower the principle balance due or lower the amount paid each month. The reaffirmation agreement will state the original terms and also the new terms. If the new terms are still beyond the debtor’s budget, I would recommend that the debtor not sign the agreement.
Laura J. Margulies is a principal in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia.
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