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How do I make sure everything is covered in the BK?


sc1776
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What this attorney did say was that he believed I would qualify for a Chp 7...that the properties would be classified as "business" so I wouldn't have to pass a means test

 

 

 

This would be very true.  If more than 50% of your total debt is related to business/profit/non-consumer obligations you do not have to pass the means test.  Unfortunately, “qualifying” for a Chapter 7 is not the same thing as successfully navigating through one.

 

 

...I live in common law state. My "partner" though we never filed a marriage license I guess are considered married..., the attorney is saying that any money that my partner earned could be considered "community property"...any thoughts on that?

 

 

 

I am not familiar with the implications of a “common law” marriage.  I too am in a community property state but my state does not recognize common law marriages therefore I have no experience with the issues raised by the attny.  Make sure you discuss this concept with any other attny you consult with.

 

It sounds like you are now on the way to understanding that there many twists and turns to this thing call “bankruptcy”.  That means you are one step ahead of many other folks who just think “I’ll file bk, no big deal”.  Continue to investigate and educate yourself before jumping in.

 

Des.

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Des -


 


I know that I have been "drip feeding" info in the thread. Part of that is b/c I'm not always sure what's relevant, I'm learning how to ask the right questions...As I mentioned in the thread I recently learned that the state I'm in has community property law applications...making the protection I thought I was giving my spouse FAR less effective than I hoped. That said my spouse had set up a biz for me in his/her name so that I could possibly generate an income without getting on the creditors radar.  Giving me a chance to generate some revenue for attorney's or whatever.  The biz was formed about 2 years ago...Its taken me time to learn the new skill that would be necessary for the business...I'm mentioning all this b/c in my conversation with the attorney today he said that while there's a good chance I won't need to pass a means test b/c means tests don't apply to "business properties", but for some reason my spouse's income would affect my qualifications for Chap 7 to see what could be afforded or not in terms of paying things back, but b/c I have quite a large bit of debt it sounds like a technicality....My spouses bank accounts / income info will most likely need to be disclosed.  I just don't want my spouse to get in trouble for setting up the biz...The biz has no $$, and has not had a profit...there's no funny business with the biz in terms of $$.  Is it typical for a trustee to 1) interview the spouse 2) probe into the nature of the side business?  Or are they more concerned about dollars and cents??  Just how evil are the Trustees?  


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sc,

 

I will respond more completely either this evening or tomorrow morning as I am now at work. However, unless there is something to the idea of a "common law" marriage (which does exist), if you are not legally married then there is no "community" as in "community property". There is a thing called "palimony" which was made famous by Lee Marvin but I do not see an application here.

 

(For a read on "palimony" see http://www.palimony.com/7.html)

 

What I do see is that if the two of you were commingling your finances a Trustee could look to see if there was an equal exchange. To the extent you gave away more in value than you received, a Trustee could try to recoup the difference. I have had to deal with this on at least one occasion and since trying to account for every dollar is virtually impossible, my client eventually just paid some blackmail (settled) to get past the issue.

 

Again, I will try to be more detailed later but now I must get to work.

 

Des.

 

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my spouse had set up a biz for me in his/her name so that I could possibly generate an income without getting on the creditors radar. . . My spouses bank accounts / income info will most likely need to be disclosed.

 

 

If 1) you are legally married; 2) you live in a community property state; and 3) the business was set up after you got married, the business (LLC, Inc or sole proprietorship -whichever it is) is a community asset and belongs to you and your spouse 50/50.   This is also true of your spouse’s bank accounts and income. With only a few exceptions, every item either of you purchase after the day you married is a community asset. If you file bk without your spouse (done all the time) all community property becomes property of the bk estate therefore all property must be disclosed.

 

The question becomes two fold: 1) what can you exempt (protect) and 2) what can’t you exempt? 

 

For the non-exempt assets the Trustee then has to decide if the asset has value.  Remember, in one of my posts I mentioned that your opinion of value is not relevant.  It is up to the Trustee to decide if the item has value.  If it does, he/she will try to sell it.  He/she does not care who buys it.  If you happen to offer more money than anyone else you can buy the asset back.

 

Before you file you need to discuss with the attny the possibility of losing an asset to the Trustee.  If the risk of loss is too great you may decide that a Chapter 7 is too risky.  Again, the more attnys you talk to, the more information you will get and the clearer any decision to file will become.

 

(The attny said that )for some reason my spouse's income would affect my qualifications for Chap 7 (even if my case is a “non-consumer” case).

 

 

I do not see this as an issue.   In a non-consumer Chapter 7, the debtor does not need to do the “means test”.  The debtor’s Schedule I and J (real time budget that would include a non-filing spouse’s income in a community property state) is very rarely a problem. 

 

I have filed many non-consumer cases that show a substantial positive cash flow based on the real time budget.  To date I have not had a problem because the provisions of 11 USC 707[b} do not apply in a non-consumer case.  The positive cash flow in those cases ran from a couple of hundred a month all the way to over $4k/month.  The one with $4k had over $100 million in corporate personal guarantees so, while $4k sounds like a lot, paying that amount for 60 months would not even put a dent in the debt owed - so it is all relative.

 

What may apply is 11 USC 707(a).  The Court would have to determine that the Chapter 7 was filed in “bad faith” meaning, the debtor is a very bad person and not deserving of the benefits of a Chapter 7.  This is a very difficult thing to prove so unless you are making gobs of $$ and refuse to give up the 3 luxury homes you own in the Virgin Islands,that Bentley you drive and the Ferrari you gave to your daughter, I doubt you would be filing in “bad faith”.

 

Not knowing if this is proper (moderators, feel free to remove this if it is not proper), I would like to refer you to a forum that is specific to bk issues.  Please try

 

www.bkforum.com.

 

 

Des.

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Des -

 

So are you saying that in my situation a bank account that a spouse had with any money in that account before we were married is fair game?  I spoke to a new attorney today and he said if the account was in the spouses name and the spouse had the account before marriage and it was money that the spouse had before marriage and any money deposited after marriage was from their job that they earned (which is all true) that those accounts would be safe...He essentially said that the spouses money is the spouses money...could that be because of the community property rules of the particular state I'm in?  How can I trust any attorney to know?  The attorney has been doing BK for 15 yrs and it makes up 60% of his practice.  How does one know that the attorney you are about to work with is any good or even knows what they heck they are talking about??

 

So much to learn lol

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So are you saying that in my situation a bank account that a spouse had with any money in that account before we were married is fair game?

 

 

Yes, but once community (post marital) funds were added the ability to trace what was sitting in the account ended, especially if there has been various withdrawals from the account.  Under general accounting principals, “first in - first out”.

 

 

I spoke to a new attorney today and he said if the account was in the spouses name. . . before marriage. . .  deposited after marriage was from their job that they earned . . . that those accounts would be safe...

 

 

 

Don’t see how that is possible unless the two of you had a pre/post nuptial agreement disavowing community property and keeping your finances totally separate.  Unless you did something like that all earnings, for either one of you, post marriage, would be community property regardless of where the funds are deposited.  Ask that attny to explain how a community asset becomes a non-community asset just because it is deposited in an account only titled to your spouse.  Ask him for supporting case or statutory law.  For all I know, in your State (I don’t think you have mentioned what State you are in), there is some quirk in the law that changes things.  This is always possible.  What State are you in???

 

 

The attorney has been doing BK for 15 yrs and it makes up 60% of his practice. How does one know that the attorney you are about to work with is any good or even knows what they heck they are talking about??

 

 

 

This is a great question.  Sometimes you have to go with your gut and take a leap of faith.  You check with the state bar association to see if the attny has a disciplinary record and/or mal practice insurance.  You Google him/her to see if there is anything on the Net about him/her that was not created by him/her.  But, most of all, you interview as many attnys as you can and you utilize the one that gives you the most confidence and comfort.

 

 

Des

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Des- 

 

I mean this with the utmost respect and LOVE but I hope you are wrong LOL...Please understand that I am not trying to argue with you, so I hope that my comments back and forth don't come across that way.  I'm just trying to add in things I think of to hold out some hope, to try to figure out how to salvage what my spouse worked so hard to build up before we were married.   None of this was their responsibility, I NEVER would have gotten married if I had known there was even the slightest chance of ANY of this coming back on my spouse...I wouldn't be surprised if my spouse divorces me for all this crap...

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This is not "coming back to your spouse".  Your spouse is not filing bk with you.  The only reason his/her post marital assets are in issue is that you live in a community property state.  This really is not a big deal but just needs to be addressed before filing bk.  My office just settled an issue with a Trustee that came up because the pro-se debtor failed to disclose his/her spouse's assets, including a personal injury claim.  In a community property state that PI claim belonged to the bk estate and should have been disclosed.  The non filing spouse settled the claim and "pocketed" the $$ after the bk was filed.  The debtor decided he/she knew what he/she was doing and filed the 7 without the assistance of counsel.  When the Trustee discovered the asset and what had happened we came in to do "damage control".  Worked out in the end but, had the debtor sought advice of an attny before filing, this problem would not have materialized.  Such is the nature of community property.

 

Des.

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Des-

 

You couldn't be more correct.  I have not interest in trying to navigate this by myself.  WAY to much at stake...I have spoken to 2 attorneys to date (stupid weekend)...one said that $$ after marriage might be at risk, and only half of it at that....so for example if my spouse had 20K before marriage and there was 10K acquired after marriage, then only 5K of that 10K would be at risk, my "half"...the other was not concerned at all about the $$ and felt that it would not be in jeopardy.  

 

When you say "we came in to do damage control" what does that mean?  Are you an attorney?  You said things worked out in the end, can you elaborate?  

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Cannot elaborate on specifics but, yes, I am an attny.  A portion of the practice deals with working out settlements of one sort or an other with the various trustees either in the context of remaining in the Chapter 7 or attempting to convert the case to a 13 or 11.  This typically happens when an unsuspecting debtor files without an attny and gets in over their head.  It also happens when attnys screw up and the case is referred to us to try to fix it.  Sometimes we can, sometimes we can't.

 

Des.

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Des- 

 
 
Are there different kinds of "judgements" for the same case?  I met with my first attorney today and he said the only kind of judgement that can not be discharged is one that alleges fraud...I know there was no fraud for any of my cases, but he has put a bit of fear in me b/c he said that sometimes lenders will alledge this even when there is no fraud just to avoid discharge...So now i'm freaked out....i found a copy of the foreclosure judgment where they came up with the final "number" that is owed...but this was pre-sale of the property i think...but it still says "final judgement" can there be another judgement after that for the same property?  or if there was an allegation of fraud would it be in that first final summary judgement?  Because right at the top of the document it says "Summary Final Judgement"...
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If fraud was found as part of the transaction, it would have been noted in the judgement. When it comes to creditors that will lose quite a bit in BK, they will file an adverse hearing and claim anything they can in hopes that something sticks to the wall. You (and/or your attorney) get a chance to fight the charges in front of the BK judge and usually at that point, the creditor either backs out of the adverse hearing or is shown that they have no proof to make anything stick.

 

As far as the foreclosure judgement, the final amount minus the proceeds obtained from the sale of the property is what you would owe in a deficiency. Even if that did not alleged fraud, they could try to claim that they found fraud at a later date.

Now, if you did commit fraud, make sure you are upfront about it with your attorney. Your case sounds big enough and has enough issues that it sounds like the Trustee and the opposing attorneys will be looking for anything to hang you on so make sure you case is air tight. Research Denny Hecker to find out what happens when you try to skirt the rules in BK.

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SC,

 

The attny was giving you the streamlined response.  A judgment is a judgment is a judgment.  If the judgment contains findings of fact and conclusions of law that the defendant committed some kind of fraud, those findings of fact and conclusions of law may be binding upon the bk court.  If binding and the creditor (plaintiff) files a timely complaint under 11 USC 523, the Plaintiff will win on summary judgment (no trial) based upon the state court’s findings.  If those findings are incorporated into a “default judgment” (meaning the Defendant did not try to defend) then, depending upon what state you are in, the default judgment may also be binding upon the bk court.

 

 

As to what a creditor will do in a bk. . .  There is really no way to guess.  My experience has been that if my client did not go hog wild and run up a ton of debt within the 6 months prior to filing, institutional creditors (visa, MasterCard, department store charge cards, banks etc,) tend not to raise a stink.

 

 

As it relates to the foreclosure of the property, stop worrying.  The judgment tells me you are in a judicial foreclosure state and the number on the judgment is either the lender’s deficiency claim or the bid amount for the sale.  It is highly unlikely that a mortgage lender is going to sue you for anything once the bk is filed.  The documents are most likely just standard stuff.

 

 

Des.

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Yeah there is NOTHING in the judgement that I saw or that the attorney I met with yesterday saw that alledges fraud.  I absolutely did not commit fraud.  The deal just went bad...the price the units were set to sell on was just too much for the declining market...and as everyone knows the market just kept getting worse...well no sales means no loan support and then that's all she wrote...

 

Thank you both for responding...I've said this a thousand times before but this has to be the scariest thing I have ever been through / faced...but just starting this process I'm starting to see that there's hope...its going to be a long road but the thought of starting over and having a life is beyond belief...

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