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While Chapter 7 bankruptcy offers individuals a fresh start and discharge from many debts, it doesn't come without a price. Property of the debtor becomes property of the estate and is used to pay creditors.
But not all of it. Section 522 of the Bankruptcy Code lists exemptions that debtors can use to exempt property - up to a certain dollar amount in value - from the estate. The purpose of exemptions is to ensure that the individual debtor is able to maintain a basic standard of living post-bankruptcy. But because there are very few assets available for creditor recovery beyond exempt property in many bankruptcy cases, the propriety of a debtor's claimed exemptions is an issue that is oft-litigated.
Such was the case in an appeal to the U.S. Court of Appeals for the Sixth Circuit (the "Sixth Circuit") arising from a Chapter 7 bankruptcy case that was filed in the U.S. Bankruptcy Court for the Eastern District of Michigan. Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 7

A key to getting good results in a bankruptcy case is to make sure that each and every creditor receives notice of the bankruptcy filing. Failure to notify a creditor may lead to disastrous results, including the debt not being discharged or the bankruptcy case itself being dismissed for intentional withholding of information.
About the first question your bankruptcy attorney will ask this: How much do you owe? It sounds like a simple question, but the common answer is “I don’t know–I don’t even want to know.”  There comes a point in the debt cycle that a person stops opening the mail, answering the phone and no longer bothers to figure out who or how much they owe.
How do you figure out what you owe when all the paperwork–the bills, the collection letters, the court summons–is gone?  How can you even determine if you should file bankruptcy if you don’t have a list of what you owe?

1. Get a Credit Report.  There are lots of commercials advertising free credit reports, but the only really free credit report a person can obtain without having to sign up for some type of credit monitoring service is found at www.AnnualCreditReport.com.  Under federal law, the major credit reporting agencies must provide one free copy of your credit report each year.  Get all three reports offered by TRW, TransUnion and Equifax.
2. Organize your paperwork.  Start opening the piles of mail with all those nasty “Past Due” notices.  Open those letters from collection agencies and match them to each creditor.  Some clients use separate folders for each creditor or debt.
3. Search Court Records Online.  Most court records are now online and can be searched for free or for a minimal charge.  Here is the link to Nebraska’s online court search (which requires a subscription) and the free Iowa online search portal.
4. Tax Debts.  Not sure if you owe taxes or even if you filed all required tax returns?  The most direct way to solve that question is to call the IRS at 1-800-829-1040.  Don’t be afraid to call.  Most people answering the IRS phones are very nice.  If by chance you speak to a rude person just hang up and call again.  If you suffer from Telephobia, then use IRS form 4506-T to request an Account Transcript of each tax debt you owe.  An Account Transcript is basically a time diary of each tax you owe showing when a tax return was filed, who filed the return (the IRS or you), the date the tax was assessed, and the balance presently owed.  Since many income taxes become dischargeable three years after they were due (or two years after they were actually filed, whichever date is later), it is critical for the bankruptcy attorney to know exactly if the tax returns were filed and when they were filed.  Account Transcripts provide that critical information.
5. Write Name & Address of potential creditors.   There is no penalty for listing a debt you are unsure about.  In fact, the bankruptcy creditor list can actually state whether a debt is uncertain.  If you don’t have a bill for a medical service performed a year ago and you are not sure if insurance paid all or some of the debt, list the debt anyway.  All your bankruptcy attorney needs to list a debt is the Name and Address of the creditor–they don’t need the actual bill.  If in doubt, list the debt.

Should you file bankruptcy?  Is the debt total  too small to justify such a drastic action?  If not, what type of bankruptcy should you file?  Chapter 7, 13, 11 or 12?  The qualify of the advice you receive will largely depend on the amount and nature of the debt owed.  Make a good list.
Image courtesy of Flickr and sfgirlbybay.

As many predicted, RadioShack Corp. has filed for bankruptcy protection.
The electronics retailor filed a Chapter 11 bankruptcy petition on Thursday after reaching a deal to sell existing stores to hedge fund Standard General.
In its petition, RadioShack listed $1.2 billion in assets and $1.39 billion in debts. The filing occurred in the U.S. Bankruptcy Court in Delaware.
Standard General will procure up to 2,400 of electronic retailer’s current 4,000 stores. Affiliate company General Wireless plans to partner with wireless operator Sprint to take over as many as 1,750 retail shops, according to the Wall Street Journal.
Sprint would essentially operate a store within a RadioShack store, offering "mobile devices across Sprint`s brand portfolio as well as RadioShack products, services and accessories," according to a statement made by Sprint.
RadioShack asked the U.S. Bankruptcy Court for approval to join with liquidation firm Hilco Merchant Resources to close the remaining retail stores. Domestic and international franchise stores will not be included in the restructuring.
DW Partners LP has agreed to finance RadioShack with roughly $285 million in bankruptcy financing, which will provide the company with an extra $20 million in borrowing ability.
According to the Wall Street Journal, employees at several RadioShack locations have been told by the company ship smartphones to nearby stores that would remain open in an effort to speed up the closing process.
Additionally, workers in some stores have been told to slash prices on smaller-ticket inventory.
Standard General had provided RadioShack with an undisclosed loan last year. However, the financial assistance was not great enough to carry the company while executives failed to persuade lenders and suppliers to renegotiate current agreements.
RadioShack posted losses in past 11 consecutive quarters. The company warned of a potential bankruptcy filing in a December securities filing.
As of late last year, RadioShack employed 24,000 people.

When you file a chapter 7 bankruptcy, you are basically telling creditors that you have no significant assets from which to pay them. To prove this, on your bankruptcy petition you must list all of your property of every nature. You are then allowed to protect or exempt a specific amount of property depending upon+ Read More
The post Income Tax Refund At Risk When Filing Chapter 7 Bankruptcy appeared first on David M. Siegel.