Author: Team Flexsin

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Filing for Chapter 7 bankruptcy can be a distressing process. While losing one’s home, huge tax bills or pestering debt collectors are more crucial concerns, the prospect of losing one’s wedding ring, heirloom jewelry or just a necklace, a pair of earrings or a special wristwatch can be an additional stress.

When you file for Chapter 7 bankruptcy, you are expected to surrender certain assets (not all), which are then sold by the trustee, to repay your creditors with the proceeds. The items that you have to surrender depend on the state in which you live. Each state, including the District of Columbia, has laws, called Exemptions. These laws are passed with the idea, that a person gone bankrupt, should not be deprived of basic necessities for living – clothing, shelter, car, furniture, etc. Under these laws, some items of property are exempted regardless of their value, while others are exempted only up to a certain dollar amount. The freedom to choose between state exemptions or federal bankruptcy exemptions depends on the state in which you live. You can know more about state and federal exemptions by visiting Recovery Law Group or calling 888-297-6203.

Common Exemptions to Protect Your Jewellery

Let’s discuss some common exemptions that can help you to save your jewelry. The availability of these exemptions varies from state to state.

• Exemption of Wedding or Anniversary Ring – While some states don’t ask their debtors to give up the wedding or anniversary ring, regardless of its value, others allow it to be retained only up to a certain dollar amount. Some states don’t have this exemption at all.
• Exemption of Jewellery – Many states allow this exemption only up to a certain dollar amount. Others can be quite liberal.
• Exemption of Heirloom – Some states have this exemption to let you safeguard your ancestral jewelry that has been passed down in your family for generations. Whether you can keep the jewelry of unlimited value, or only of a certain dollar amount, depends on your state.
• Exemption of Wearing Apparel – There is a specific mention about keeping the wearing apparels, often to an unlimited value, in many state bankruptcy courts. Some states also allow the debtors to keep cufflinks, mid-priced watch, and other small jewelry items, under this exemption.
• Wildcard Exemption – This exemption lets you apply a certain dollar amount (as low as $200 to as high as $25,000) to any kind of property. So, in case your state has this exemption, you can use some or the complete value to protect your jewelry.

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Yes, it is mandatory to list all your debts while filing for bankruptcy. When you ‘borrow’ money from your mother, it’s considered a debt, which you’re expected to repay. While filing for bankruptcy, you are supposed to fill the bankruptcy papers, known as petition or schedules. These papers are a financial statement, so, the information filled in them needs to be accurate. If your schedules are found to be inaccurate by the court, it can deny your case. Thus, you must list all your debts, including the one you owe to your mother, on your bankruptcy papers.

Listing the debt you owe to your mother can prove to be beneficial for her. According to IRS Publication Topic 453 – Bad Debt Deduction, if your debt gets discharged in your bankruptcy, your mother can say that you won’t ever be able to repay her the debt. The ‘uncollectable’ status of the debt will give her the ‘absolute proof of loss’, and she’ll become eligible for tax relief. Under normal circumstances, before deducting a debt as a ‘bad debt’, the lender would sue the debtor and would make reasonable efforts to get the repayment. But in this case, the discharged debt in bankruptcy will eliminate the need to follow those steps, for your mother. It is advisable to consult a tax advisor to determine her eligibility for the tax deduction. Further intimation regarding the necessity to list all the debts in the bankruptcy papers and the benefits of it for the creditors, can be known by consulting the best attorneys in Los Angeles and Dallas, TX, at Recovery Law Group. They can also be reached at 888-297-6203.

Now, if you’re worried that listing your mom as your creditor in bankruptcy papers might make her think that you don’t trust her and hurt her feelings, you must follow some of these practical strategies to avoid the embarrassment.

She’s your mom and thus, is completely aware of your struggles with money. So, your decision to file bankruptcy won’t be a surprise for her. Explain to her that you’re legally bound to list all your debts in the bankruptcy papers. Failure to do so can pose serious repercussions for you. Also, tell her that you’ll be legally allowed to repay the debts after bankruptcy. There are strong chances that your mother won’t ask you to repay the debt and will be happy to let you discharge your debts in bankruptcy.

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Dependency on asset-protection trusts and offshore accounts to safeguard one’s assets has been in vogue for the past several years, and a large number of people have put their faith in these trusts to protect their assets. In the beginning, it might seem like a sensible idea. However, hoodwinking a bankruptcy trustee can put you on a razor edge.

Many a time, the distribution of funds may not take place, as it can transpire only at an independent trustee’s liking and even a foreign bank may claim the same thing. Although a bankruptcy court can’t compel a bank or a legal entity to present the money, it can hold the debtor in contempt of court until the loan is paid. Under such circumstances, if a bank or a trustee decides to withhold the distribution, the debtor can find himself behind bars.

More often, bankruptcy courts have been facing an additional similar kind of issue. In re Caterers Ltd. of 1990, a debtor first agreed to have received the money from the auction of a property, which was indebted to the bankruptcy estate, and later refused to repay, since it was all spent. This had put the court in a tight spot, as it had to face the dilemma of whether it should relieve the debtor from civil contempt and imprisonment, on account of his incapability to repay the spent money, or not.

At last, the court decided not to relieve him off the civil contempt. The court adjudged that a debtor, who is already guilty of incapability to comply, cannot defend himself in a court by propounding an impossibility of compliance. Moreover, the debtor cannot make groundless claims about his or her inability to act in accordance with the court’s orders and must provide substantially detailed evidence to support the same.

The debtor often shows his inability to comply with the bankruptcy court, when his assets are safeguarded by the asset-protection trusts or other offshore accounts. As discussed above, if the court finds any of these asset-transfers to be deceptive, then it may nullify the transfer and solicit the hand-over of the assets to the bankruptcy estate, and the debtor is held in contempt.

The court does not have any authority over the trustees or managers of the third-party trusts, but it is required to have the legal hold over the assets in question. Since a bankruptcy court is federal, a jurisdictional defense is normally unavailable there. This means that federal law empowers a bankruptcy court to have countrywide legal authority over the assets. In order to know more about the ill-effects of trusts or third-part managers on bankruptcy, visit the website https://www.staging.recoverylawgroup.com/ or contact 888-297-6203.

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In most cases of bankruptcy, the debtor is not expected to part with the assets that he bought with the credit card. However, there are a few exceptional scenarios, in which parting with the charged assets is inevitable.

Security Agreement in Credit Card Contracts

Your ownership of the item, bought with a credit card, depends on the ‘clause of security’ in your credit card agreement. You get the same security agreement while getting a car loan. The bought stuff acts as collateral for your debt, and you cannot be its legal owner unless you clear your complete debt. The stuff in question is forfeited and is repossessed by the creditor, in case of the debtor’s inability to pay the said amount.

Typically, the inclusion of a security agreement in a credit card contract depends on the type of credit card lent by the creditor. Normally, there is no security agreement for debtors with major credit cards, like MasterCard, Visa or American Express. On the other hand, jewelry stores or departmental stores like Best Buy or Macy’s, provide security agreement to their debtors.

What Happens to Items Subject to a Security Agreement?

In case of bankruptcy, the security agreement requires the debtor to either pay the money for the bought stuff or to return the stuff to the creditor. However, there are a few circumstances, under which you can still keep the property in question.

• Personal property items can be retained by working out a good deal, in case you want to keep any of them.
• Old and obsolete items are usually undesirable by the creditors.
• Department store creditors usually claim the repossession of major purchases, called ‘white goods’, like television or washing machines. They don’t take back the ‘soft goods’, like clothes, video games, mattresses or DVDs.

Owning the Charged Items

When you pay a certain amount of money to the department store creditor, it discharges the oldest unpaid balance. As soon as you make the payment for the oldest bought item, it legally becomes yours. Your next payment gets credited against the next oldest balance, and so it goes on.

When you purchase things using major credit cards, the bank pays the store for them, and thus they automatically become yours. The store doesn’t hold any claim over them. Moreover, all the major credit card debts get discharged in bankruptcy, and all the bought things like furniture, normal appliances and clothes become your “exempt” property.

What Happens to the ‘Non-exempt’ Assets bought using Major Credit Cards?

In case of a Chapter 7 bankruptcy, the bankruptcy trustee is allowed to sell your ‘non-exempt’ assets, in order to pay the debts to your creditor. Inexpensive and daily-use items like clothes, furniture, etc. are exempted, but you may have to part with your expensive jewelry and other assets which don’t come under the ‘exempt’ category by the state law. For more information, visit the website https://www.staging.recoverylawgroup.com/ or contact 888-297-6203.