Exemptions In Bankruptcy

18 Dec What Do Chapter 7 Trustees Dream About? CASH!

iStock_000003896159XSmall Chapter 7 trustees are paid the small sum of $60 for administering each case. The real money a trustee makes is from finding and selling assets, and no asset is more favored than cash. According to the statutory formula, in addition to the paltry fee of $60 per case, Chapter 7 trustees are paid a commission from distributions to creditors of liquidated assets recovered in cases: 25% of the first $5,000; 10% of the next $45,000; 5% of the next $950,000; and 3% of the balance. Trustees love cash because cash is, by its very definition, already liquidated. There's no realtor needed, no insurance to purchase, no storage to worry about, and no fees to be paid to sell cash. It's already cash, and cash is king. Why does this matter to you? If you're filing bankruptcy, you get to claim exemptions in property of various types. Exemptions allow you to keep certain property. For example,
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23 Nov Missouri Unemployment Benefits Protected After Receipt

Unemployment benefits are protected from creditors and bankruptcy trustees in virtually all states. In 2009, the Missouri state courts emphasized a little-known protection of those assets, even after receipt. In some cases, a payment to a debtor is protected more broadly prior to payment than after. For example, Missouri protects at least 75% of a person's wages from garnishment by a creditor -- at the source, the employer's payroll office. But once the money is received by the debtor, the protection is much more limited, sometimes to only $600 in total cash or cash equivalents. In the case of unemployment benefits, the right to those benefits are fully protected prior to payment. But in Capital One Bank v. Edison Credit Union the Court of Appeals for the Western District pointed out that this exemption also applies to the proceeds of unemployment benefits so long as they are in a segregated account used just for unemployment.
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14 Nov Who Decides About Reaffirming a Mortgage?

Reaffirmation agreementMuch has been written on this blog about "reaffirmation" - the process by which a Chapter 7 debtor formally and in writing agrees to opt out of the protections inherent to a bankruptcy discharge and assume again contractual liability for secured (or unsecured) debts like mortgages and vehicle loans. You should always speak to your lawyer about the wisdom of reaffirmation agreements. In general, to qualify for a reaffirmation you need:
  1. a lender who is willing to enter into a reaffirmation
  2. you need to be current (or close to being current) on your loan
  3. any equity that exists in the collateral should be exempt per the applicable exemption laws
What happens, however, if you and your lawyer disagree about the wisdom of reaffirmation, as evidenced by this email I recently received:
Hi Jonathan- I have enjoyed your writings. We are currently in a chapter 7- 341 set for 12/3. My attorney is very firm that we should not reaffirm 1st mortgage. We are current up to date, etc..is this my decision or hers? If I decide to reaffirm, will she have to sign the reaff as well? Will our difference of opinion on Mortgage Reaffs effect my case?
Here are my thoughts: First, I think that you should sit down with your lawyer to discuss why she is so adamant about not reaffirming. She may have a very good and appropriate reason for her hesitation. I do know some lawyers who discourage reaffirmation - especially if there is negative equity in the collateral - because the bankruptcy discharge serves to eliminate personal liability.
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