Transfer of assets prior to filing.
People will sometimes transfer assets prior to
filing bankruptcy, because they think that this is how to protect it
from being taken away. This is a good example of a costly legal mistake
that people often make, which an expert would easily have avoided. Do
not attempt to omit such assets from the bankruptcy schedules. Do not
hide, conceal, transfer, or falsely encumber non exempt assets.
Doing so carries the risk of being prosecuted for committing bankruptcy
crimes, it is likely to result in the denial of a bankruptcy discharge,
and the trustee can still recover such property, or its value, from
whoever it was given to. If such property is recovered by a trustee, the
debtor can not then claim it as exempt, even if it could have been
properly exempted before such transfer. Surrendering non exempt assets
is a price the debtor pays for the privilege of seeking relief under
Chapter 7. If the price is too steep, (you don’t want to risk losing non
exempt assets), then don’t file or else consider filing under Chapter
13. One of the requirements for gaining confirmation of a Chapter 13
Plan is that the Plan pays creditors the same value that they would
have received from non exempt assets if the case was administered under
Chapter 7.
Caveat: Consult
with a bankruptcy specialist before you file to determine if you have
any assets that are not exempt. Do not engage in schemes to hide,
transfer or conceal assets. Inexperienced people can't help but trip
over the maze of new rules and regulations.
Exemptions are provided under state law.
The Federal bankruptcy laws allow each state
to determine which assets a person is allowed to keep when a bankruptcy
case is filed. California is one of the most generous of all states when
it comes to exemptions. The state exemptions are set forth in two
separate lists, which are found in California Code of Civil Procedure (CCP)
§703 and §704.
California has two different sets of
exemptions. The debtor is allowed to use the
exemptions from only one "list" or
"set" of exemptions. These are either
California Code of Civil Procedure (CCP) §703 or §704. We cannot "mix
and match" from the two. There are some similarities between these
exemption lists, but also some major differences. Therefore, expert
legal guidance is imperative for any person filing bankruptcy. The
failure to correctly plan for the bankruptcy filing and use the correct
exemptions can actually cause some people to lose property that they
could have been protected.
Successful exemption planning.
Proper exemption planning is essential to
successfully accomplishing the Debtor’s goal of protecting assets.
However, great care must be taken. Non-attorneys, such as the so-called
legal document preparers, paralegals, or other non-attorneys, cannot be
relied upon to properly guide a person through the legal maze of
bankruptcy laws.
Risk of losing assets.
If the property has more equity in it than can be covered
by every applicable exemption, (sometimes an asset may be cross-covered
covered by more than one exemption) the bankruptcy trustee may sell the
property. When the trustee sells the asset, the trustee will pay the
amount of the exemption to the debtor, and retain the non exempt amount
of equity for the bankruptcy estate. Money kept by the bankruptcy estate
is used to the expenses of bankruptcy administration, and the remainder
is distributed to creditors.
Priority claims get paid ahead of other
creditors from non exempt property. Money that
is available in an estate to pay creditors is distributed according to a
pro rata method of priority. Certain claims, such as
family support and most types of tax claims enjoy priority, and
are required to be paid ahead of non priority unsecured claims,
such as credit card debts. If there is not enough money to pay all the
allowed claims in full, you would see a situation where priority claims
may receive a distribution and leave no money to pay anything to non
priority unsecured claims.
Where to find the list of exemptions.
Below is a link for the exemptions that are available to debtors who
file a bankruptcy case in California. The California
debtors can choose between the two separate sets of exemptions.
Depending on the kind of assets that the debtor owns, one set of
exemptions may be much more favorable to a particular debtor than what
is available under the other set. Exemption planning is an art, and the
exemption planning is best
performed under the guidance of an
experienced bankruptcy attorney. Caveat:
You can not "mix and match" by combining exemptions
from one list with any of the exemptions on the other list.
Uses this link to view the two actual
sets of California exemptions:
California Exemptions
Caveat:
Always check with an expert before taking any action, as the laws
sometimes change, and court rulings will occasionally affect the manner
in which these laws are applied and interpreted. For example, the
bankruptcy law also places certain exclusions on property that can be
claimed as exempt in situations where the debtor has not been domiciled
in the same state for at least 730 days before the filing of the
bankruptcy case, and if not, then the debtor may be required to use the
exemptions of the state where the debtor used to live, instead of the
state where the debtor now lives. These exception requirements are
extremely complex and require careful analysis by an expert.
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BAYER, WISHMAN & LEOTTA
Attorneys at Law
888 S. Figueroa Street, Suite 1970
Los Angeles, CA 90017
213-629-8801
www.debt-relief-bankruptcy.com
email at:
info@debt-relief-bankruptcy.com
Reprinted with permission.
