Protecting Assets

May 23, 2016




You are struggling to pay your debts, and you are afraid of being sued.  You own assets and you don’t want to lose them to creditors.  What do you do to shelter your assets from your creditors?  Many people assume that they can transfer the assets to a friend or family member, since the creditor can’t take someone else’s property.  Or they get more creative, and grant a lien or a mortgage to someone close to them to make it appear that there is no equity for the creditors to pursue.  While these may seem like good solutions, and many people see posts online about these methods of protecting assets, these actions can be reversed, and can have terrible consequences.

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The Homestead Exemption Exception


The homestead exemption is designed to protect the equity in a debtor’s principal residence. When a debtor files for bankruptcy and has an interest in a principal residence, a portion or all of the equity interest in the homestead is protected. The level of protection the homestead exemption offers varies state by state.


While the homestead exemption allows a debtor to protect a portion of his principal residence from bankruptcy creditors, the protection is not absolute. 11 USC 522(o) allows a trustee or creditor to challenge a debtor’s homestead exemption and provides a look back period of 10 years. Stated differently, the Court may look back 10 years to discover how a debtor obtained the money to purchase his or her home. A Section 522(o) action is fact intensive and is decided on a case-by-case approach.

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Refinancing Before Bankruptcy – Timing is Everything


You have worked hard, made a down payment, and for many years you have been paying on your home. However, due to certain events, you have racked up medical bills, credit card debt, or owe friends and family money. While you continue to make payments on your home, you fall behind in your other obligations. The debt begins to pile up and the interest rates make it impossible for a home owner, like yourself, to get out from the heaping amount of debt. You start to examine your options – refinancing your home or file for bankruptcy. You decide to refinance your home and hopefully obtain a lower interest rate, which in turn frees up money to pay the other unsecured debt. Even after obtaining refinancing, you are still unable to meet your obligation. Can you file for bankruptcy now and keep your home?



Many homeowners face this very issue and they turn to their bankruptcy attorney for assistance. The bankruptcy attorney is going to need some good information from the homeowner to determine whether he or she qualifies for bankruptcy relief, and whether he or she will be able to keep their home after bankruptcy.

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Exempt Property in Bankruptcy


Many people fear that they will lose everything if they file a bankruptcy.  This is not the reality.  Certain property is considered exempt under the Bankruptcy Code, meaning it cannot be liquidated by the trustee.  The type of property and the limits for the value that can be exempted depends on a variety of factors, including whether you are taking the state exemptions or the federal exemptions.  An experienced bankruptcy attorney can assist you in determining what exemptions to use, and how it will impact the property you will have when you get your fresh-start.


Some states do not permit you to choose; you simply have to use the state exemptions.  Michigan allows debtors to choose between the state exemptions and the federal exemptions, which allows flexibility and permits some amount of exemption planning prior to bankruptcy.  There are some benefits to each exemption structure, but they cannot be combined.  Michigan exemptions may allow you to protect the entire value of your home if it is jointly owned with your spouse.  If you need that protection, you cannot then choose to take the higher federal exemption for household goods and furnishings.  You can use one set of exemptions or the other.

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Bankruptcy & Your Education: Not All School Debt Is Created Equal

March 29, 2016

In a recent decision from the Second Circuit, the Bankruptcy Court for the Eastern District of New York ruled that law school grads can discharge debt incurred while preparing for the bar exam.

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The case of in re Lesley Campbell involves a Pace University School of Law graduate, Lesley Campbell, who sought to discharge the unpaid portion of a $15,000 loan she took out from Citibank to study for the bar in 2009. After borrowing the money, Ms. Campbell failed the bar exam. This forced Ms. Campbell to take a secretarial job at a hotel-management company with an annual salary of $49,000. She made several payments under the terms of the loan, but was unable to fully satisfy the underlying debt. She filed for bankruptcy in 2014.

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IRS Debt Collection

March 8, 2016

A recently signed infrastructure spending Bill contains some drastic changes to how the IRS collects past due tax debts.  The Bill is known as the “FAST Act.” In certain circumstances, this new law actually requires the IRS to hire private collection companies to collect taxes in difficult cases.  This means that the law now requires, rather than permits, the IRS to use private collectors to collect these debts.  It is also important to know the differences between legitimate collection efforts on behalf of the IRS, and the various fraudulent scam phone calls made by parties pretending to be the IRS.


The following is some helpful information regarding this new tax collection law:

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IRS Phone Scam

March 1, 2016

The IRS continues to warn people to guard against scam phone calls from thieves attempting to steal your money or identity.  You should be aware that there is are criminals who will make phone calls in order to pose as the IRS to trick victims out of their money or personal information.

Phone, Dial, Old, Arrangement, Nostalgic

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

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Chapter 13 Plan Payments

February 18, 2016

Chapter 13 bankruptcy can be a useful tool to prevent foreclosure, prevent repossession, terminate garnishments, eliminate tax debts, catch up late payments in a mortgage, or to simply regain control of your personal financial situation.  It may make it possible to reduce the interest you are paying on your vehicle, reduce your monthly car payment, or even to reduce the total amount of your loan.  In certain circumstances, the ability to stop penalties, fees, and high interest charges may be enough reason to consider a Chapter 13 bankruptcy.

Chapter 13 Plan Payments

In a Chapter 13 case, we assist you in developing a household budget, and after subtracting the monthly budgeted expenses from the total household income, the remainder is considered disposable monthly income.  All disposable monthly income must be paid to the Trustee.  The Trustee will use this money to pay debts in order of the priority by the bankruptcy code and the Chapter 13 Plan.  These payments will last somewhere between 36 and 60 months, and once the Plan is successfully completed most remaining debts are discharged.

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Protecting Your Life Insurance Through Bankruptcy

February 15, 2016

When filing a bankruptcy proceeding you are allowed to protect a certain amount of personal property. Bankruptcy attorneys refer to protected personal property as “allowed exemptions.”  One of the categories of personal property is life insurance.  Life insurance comes in many forms.  However, for purposes of bankruptcy we typically categorize life insurance into term life insurance or whole life insurance.

Key to protecting life insurance


Term life insurance has no cash value.  It simply provides cash payment upon death. What this means is the policy or the insurance contract has no cash value while you are living. The term life insurance policy should be disclosed on your bankruptcy schedules, however, to the extent that it has no cash value a trustee has no ability to liquidate the asset.  In other words, you may continue to pay the term life insurance policy and the beneficiaries are allowed to keep any of the proceeds despite your bankruptcy.

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