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According to news reports
coming from literally hundreds of outlets, comedian Sinbad has filed a Chapter 13 bankruptcy. The source of this report is the web site TMZ.com – and news outlets from major news networks to gossip web sites are re-writing and re-reporting the TMZ story.There’s only one problem with the TMZ story – it is not factually correct. There is no way that Sinbad could qualify for Chapter 13 given the type of debts he owes.If, as has been reported, Sinbad owes American Express $374,979 and Bank of America, $32,199, his unsecured debt exceeds the jurisdictional limits for Chapter 13. If you consider IRS debt of more than $8 million, Sinbad far exceeds the jurisdictional limits for Chapter 13.1I am guessing that Sinbad actually filed Chapter 7, which means that any hard assets or intellectual property he owns could be at risk. This element of the story could be an interesting read but we may never know.While the type of bankruptcy that Sinbad has filed may not make much difference to most readers, the inaccuracy of the news reports does underscore an important point. First, you should not accept at face value anything you read in the newspapers or online about bankruptcy. Despite this glaring inaccuracy, it appears that dozens of news outlets simply accepted what they read on an entertainment web site (TMZ).And TMZ is not alone. Inaccurate information about bankruptcy exists all over the Internet. For example, Nolo.com which is a widely used and respected web site about legal topics, currently has posted on its web site the following paragraph:Under the Georgia exemption system, homeowners may exempt up to $10,000 of their home or other property covered by the homestead exemption. You can also apply $5,000 of any unused portion of the homestead exemption towards any property you own. This is commonly referred to as a wildcard exemption.For example, let’s say your house is worth $100,000. If you have a $90,000 mortgage on the property, then you have $10,000 of home equity. If you file bankruptcy, your equity will be fully exempt under the Georgia homestead exemption. This means that your creditors can’t touch your equity and you can keep your home.Unfortunately, this information is completely inaccurate – Georgia changed its exemption limits in 2012 – now an individual can exempt $21,500 of equity in real estate. 2 If you were relying on the Nolo.com site or another site that gets its information from Nolo, you would be relying on bad information to make your decision about filing bankruptcy.3Secondly, just because a news report is repeated over and over as fact does not make it so. Law school teaches aspiring lawyers to critially read and consider every word of a document. This is why contracts and other legal documents are so long and complex. The news media deals with sound bites. The TMZ staffer who put out the Sinbad story threw in “Chapter 13″ without knowing any better and now this misstatement has been spread all over the world.So, whether you are considering bankruptcy or any other legal matter, do your research and ask questions. Talk to a lawyer and do not rely on what you read on any web site because that information could be wrong.
- Section 109(e) of the Bankruptcy Code provides that Chapter 13 debtors may have no more than $383,175 of unsecured debts. Sinbad’s credit card debt alone totals more than $407,000. ↩
- Click here to read the Georgia exemption statute. ↩
- Nolo.com offers a lot of useful information about the law to consumers but a site this massive can be hard to keep updated. ↩
The post Sinbad Bankruptcy? News Reports Get it Wrong appeared first on theBKBlog.
Divorce is one of the leading causes of bankruptcy. The question is always whether it is better to file bankruptcy before a divorce or after a divorce. There is no right answer, because it depends on your individual situation. I have previously written about the benefits of bankruptcy before divorce. However it might not be possible for you to file bankruptcy before your divorce or you might not need bankruptcy until after your divorce. Additionally, there may be issues of legal strategy where it makes more sense for you to wait until the divorce is complete to file bankruptcy.
A few reasons to wait to file bankruptcy until after the divorce is if you have an ex-spouse who will not cooperate with you, if the divorce is contentious, or if you need the divorce to be completed quickly. Bankruptcy before divorce usually works best during an amicable or agreed divorce process where you still have enough of a relationship to work with your spouse.
The biggest reason to wait until after a divorce is complete to file bankruptcy is when you do not know how much the divorce will cost. During a contentious divorce, you may have large legal expenses that are difficult to predict with any certainty. This means that while you are paying your legal fees, you are getting behind on other bills. There are limits to the number of times that you can file a bankruptcy, so filing bankruptcy too early can really hurt you.
If you file bankruptcy after your divorce, you need to make sure that you understand a few key concepts and that you make sure your divorce is properly structured:
- Certain Debts Cannot Be Discharged: A domestic support obligation such as alimony, maintenance, or child support cannot be discharged in bankruptcy. You cannot avoid child support, because it is awarded based on a statutory formula and the best interests of the child standard. However, you can control the amount of alimony and maintenance that you pay. In particular, watch out for the other side’s attorneys’ fees. If you have to pay the other sides’ attorneys’ fees try to avoid having those attorneys’ fees classified as alimony or maintenance obligations.
- Certain Debts Can Only Be Discharged In Chapter 13: A non-support obligation that arises out of a divorce decree can only be discharged in a chapter 13. Examples of non-support obligations are an agreement to pay certain debts and attorneys’ fees that are not classified as alimony or maintenance obligations. If you have to agree to make payments to your ex-spouse, you want them to be classified as non-support obligations. Even though a chapter 13 costs more than a chapter 7, it is still preferable to spending the next several years paying off debts from your divorce.
- Don’t Plan On Discharging Your Own Family Law Attorney: It is a very bad idea to go into a divorce with the plan that you will run up a large bill with your own attorney and then put them into bankruptcy. You should be honest with your family law attorney about what you can afford. It is important to create a solid groundwork for your relationship with your family law attorney. It is also important that you maintain that relationship so that I can work with them during the bankruptcy process.
- Be Careful With Credit Cards: It is fine to use credit cards to pay your family law attorney; however, you must make a good faith effort to repay those credit cards before you try to file bankruptcy. Credit card companies track usage patterns before bankruptcy filings. If they see you put a huge legal bill on the credit card and then file bankruptcy a month later, that credit card company will cause problems for you. If you have used credit cards to pay your attorneys’ fees or to cover living expenses, then we can work on strategies for timing your bankruptcy to avoid problems with the credit card companies.
- Be Aware Of Your Ex-Spouse – It is always vital that you are completely honest on your bankruptcy petition; but this is twice as true if you file bankruptcy after a divorce. Angry ex-spouses are known for contacting bankruptcy trustees and trying to cause trouble. Fortunately, I have a very solid petition preparation process; and, I know how to deal with angry ex-spouses who are trying to cause trouble for a client.
If you have recently gone through a divorce, bankruptcy may be an important part of your road to financial recovery and getting rid of the baggage from divorce.
Chapter 13 bankruptcy is reorganization through a Chapter 13 trustee. The reason why many people will file Chapter 13 is to save a home that has gone into foreclosure. Now, the reason why the home fell into foreclosure could be several; in many cases, someone has lost their job, fallen behind on their bills and+ Read MoreThe post What are the most common causes of Chapter 13 bankruptcy? appeared first on David M. Siegel.
When you file for bankruptcy protection, the Petition’s got some interesting friends that come along for the ride.
Your bankruptcy petition is three simple pages, calling for some simple bits of information.
It’s the gateway to the bankruptcy case, with every answer spilling into more questions.
Tread lightly or you may spring a trap.
Exhibits To You Bankruptcy Petition
If you’re a publicly-traded company, you’ve got to complete Exhibit A of the bankruptcy petition. But let’s face facts – if you’re filing a case on behalf of a publicly traded company then you likely have a lawyer. Or a team of lawyers. And if you don’t, then you’ve got bigger problems.
Exhibit B, reserved for your bankruptcy lawyer (unless you don’t have one – in which case you don’t need to worry about this piece of information), is a declaration that the lawyer told you about all the different types of bankruptcy protection that’s available to you.
Exhibit C asks about whether you, “own or have possession of any property that poses or is alleged to pose a threat of imminent and identifiable harm to public health or safety.” We’re talking about explosives, dangerous chemicals, and things like that. If you’ve got a garage full of fireworks for July 4, a vat of cleaning solvents, or a lab of chemicals then you’re going to want to take a look at this Exhibit carefully.
Exhibit D is your statement of compliance with the pre-bankruptcy requirement for credit counseling. Failure to file this certification may jeopardize your bankruptcy case entirely.
Without Exhibits, Your Bankruptcy Fails
Though these are called Exhibits, these items are by no means to be seen as afterthoughts to your bankruptcy petition.
They’re not only important, but also required in order for your petition to be seen as complete. Drop the ball by filing a petition without required exhibits and you’ve doomed your case to failure before you’ve gotten past the initial documents.
How to File Bankruptcy: Exhibits To Your Bankruptcy Petition was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
Learning of new attacks being made against debtors who own Individual Retirement Accounts I am reminded of Al Pachino's line in the last Godfather movie: "Just when I thought I was out, they pull me back in!" As reported by Illinois law professor Robert M. Lawless in a recent article posted on CreditSlips.org, some Chapter 7 Trustees are reopening and issue that most of us thought was finally settled in 2005 when Congress passed the latest bankruptcy reform act.
The Bankruptcy Reform Act of 2005 states that retirement funds held in tax exempt accounts would be protected in bankruptcy cases up to one million dollars. Funds held in IRA accounts are exempt from federal taxation, so at last debtors could be sure that the retirement nest egg was safe.
Some Chapter 7 Trustees are now questioning whether certain IRA accounts should be given tax favored treatment since the fine print of the account agreements allow the brokerage firm to use the IRA funds to repay other loans taken out by the debtor from the same brokerage firm. Since the tax code prohibits tax qualified IRA accounts from making loans to the account holder, the Chapter 7 trustees argue that accounts with such loan provisions are not tax exempt and thus not protected under the Bankruptcy Code.
The bankruptcy court for the Eastern District of Tennessee recently ruled that IRA accounts with such loan provisions are not exempt, and that case is currently on appeal in the Sixth Circuit Court of Appeals. In re Daley, 459 BR 270 (Bkcy. EDTenn., 2011).
Nebraska exemption statute 25-1563.01 states that IRA accounts are exempt from the claim of creditors "to the extent reasonably necessary for the support of the debtor and any dependant of the debtor." Prior to the Bankruptcy Reform Act the issue commonly litigated in bankruptcy court was whether the amount held in the IRA account was "reasonably necessary" to support the debtor's family, and if the Trustees succeed in their arguments this issue will come back to life.
Until this new attack of the trustees is finally decided, I would recommend that debtor attorneys claim both the new federal exemption and the older Nebraska exemption to IRA accounts in the bankruptcy proceeding, and that they inform their clients of the possible risk they may face if they hold substantial IRA assets.
For those who missed it, our firm was featured in the Oakland Press last year. You can read the article by following the link here:
http://www.theoaklandpress.com/articles/2012/03/26/news/local_news/doc4f6bc6fed7012515634862.txt
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for May 21, 2013 Sinbad, almost $11M in debt, files for bankruptcy Battery maker B456 Systems’ bankruptcy plan approved GM Bankruptcy Proceedings Delayed by Zombie Whistleblower Case
As many readers of our blog probably know, IRAs (Individual Retirement Accounts) are exempt under New York State Debtor and Creditor Law and the federal Bankruptcy Code. An exempt asset means that an individual can file for Chapter 7 bankruptcy and keep that asset after the bankruptcy filing. The reason for this exemption is twofold: (1) IRAs are deemed "spendthrift trusts" under New York State and federal law; and (2) the purpose of the law is to give debtors a "fresh start" with some assets, and especially to protect retirement monies for debtors.
As with many topics in bankruptcy, sometimes there is not necessarily a clear answer to an issue. While the law is clear with respect to IRAs (New York State law provides that IRAs of any value are exempt assets, with limited exceptions, and the Bankruptcy Code allows exemption of up to $1,245,475 in IRAs or Roth IRAs), what about inherited IRAs? An inherited IRA is an IRA that debtor inherits from a family member, generally a parent, and the distinction from a regular IRA is that the debtor's earnings were not used to fund the IRA, but instead the monies were rolled over from the IRA of a deceased family member, usually after the death of the family member.
Several Bankruptcy Trustees around the country have raised the issue of whether inherited IRAs should be deemed exempt in bankruptcy. In the Southern District of New York, in In re Cutignola, 450 B.R. 445 (Bankr. S.D.N.Y. 2011), the exempt IRA of a debtor who died post–petition passed to her co–debtor husband through her will. The Bankruptcy Trustee moved for turnover of the IRA to the bankruptcy estate, arguing that the IRA lost its exempt status when it was transferred to the husband. In its analysis, the Court looked at the language of Bankruptcy Code § 522 and concluded that if the funds are: (1) retirement funds; (2) in an account exempt from taxation; (3) and arrived in that account through a direct transfer, the funds remain exempt. Accordingly, the Bankruptcy Trustee's turnover motion was denied.
While the issue has not been definitively settled, this author's opinion is that in the Southern and Eastern Districts of New York, inherited IRAs are exempt.
The question of what assets are exempt in bankruptcy is very complex, depending on the asset, the jurisdiction and the type of bankruptcy relief sought. For more information, please contact Jim Shenwick.
There are exemptions available in Chapter 7 bankruptcy that may help protect your cash. Although the cash in question has to qualify as an exempt asset. It’s common for consumers to be afraid of filing in fear of losing cash assets. The good news is you may be able to retain your cash and other assets [...]
The Bankruptcy Code defines a bankruptcy petition preparer as “a person, other than an attorney for the debtor or an employee of such attorney under the direct supervision of such attorney, who prepares for compensation a document for filing.” The Justice Department uses the term “typing service” to describe bankruptcy petition preparers. This is because the limits on what a bankruptcy petition preparer can and cannot do are extreme.
Bankruptcy Petition Preparers are not attorneys and they are not qualified to give legal advice. They cannot advise you as to what chapter of bankruptcy will best serve your purposes. They cannot tell you what property to exempt or how to exempt it. They cannot help you avoid the perils of fraudulent transfers or preference payments. They cannot attend hearings with you or represent you in court. In affect, all that a bankruptcy petition preparer can do is read you the questions on the bankruptcy form and type your answers.
For this reason the Bankruptcy Court for the Eastern District of Michigan has set a firm $100.00 cap on the amount of money that a bankruptcy petition preparer can charge for their services. The Court understands the limited benefit that bankruptcy petition prepares provide and it also understand that a large percentage of cases that are filed through the use of bankruptcy petition preparers fail to successfully obtain a discharge.
The bottom line is that individuals who are seeking bankruptcy protection are vulnerable. Money is tight and they are looking for the most affordable help that they can find. They look to cut corners through the use of bankruptcy petition preparers or on-line form preparation software and manuals. However, the cost of a good bankruptcy attorney is generally far less than the cost of the damage that can be done through inadequate representation.
A bankruptcy attorney can help you avoid losing your home, car or other assets. A bankruptcy attorney can help avoid having the Trustee sue your family and friends for preferential payments or fraudulent transfers. A bankruptcy attorney can help you analyze your situation and determine which type of bankruptcy will best accomplish your goals. An experienced bankruptcy attorney is not only a reasonable expense, an experienced bankruptcy attorney is a necessary expense.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
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