All of these blog posts provide some general bankruptcy information and concern the filing for protection under the Bankruptcy Code. They include discussions of such things as the means test, filing for Chapter 7, Chapter 13, and other such bankruptcy issues. Bankruptcy Blog PostsIf you have any questions or want to know more about the bankruptcy process then take a look at the different blogs on here and if you don’t find and answer then give us a call.

We handle bankruptcy cases all across the State of Alabama and we hope these posts can provide some useful bankruptcy information. There is a blog post on bankruptcy exemptions that explains a little about what property you can protect from being liquidated in a Chapter 7 bankruptcy. There is a blog post on the different people involved in the bankruptcy process including the role of the Trustee in handling your case. One of the jobs of the Trustee includes an evaluation of your bankruptcy estate (which is all of the property that you own) to determine if there are any assets they can possible sell and distribute money to your creditors. 

Those are some of the many blog posts about the bankruptcy process. If you have any questions or want to say something about any of our posts then feel free to leave a comment or give us a call at (205) 201-1789.

New Alabama Bankruptcy Exemptions

New Alabama Bankruptcy Exemptions

On June 11, 2015 the State of Alabama increased their bankruptcy exemptions for the first time since 1982. Bankruptcy exemptions are used to protect a debtor’s property during a Chapter 7 bankruptcy. When a Chapter 7 bankruptcy is filed, it is possible that your unprotected property could be liquidated and the money received from the sale used to pay your unsecured creditors. However, you can usually protect all of your assets through these bankruptcy exemptions. For example, there are bankruptcy exemptions for your retirement accounts, wages, social security, and other property that have specific exemptions that can be used to protect all of these types of assets. However, concerning items of personal property (vehicles) or your home, there is only so much value that you can protect in Alabama. In the past, you could protect up to $5,000 of equity in your home ($10,000 if you filed jointly with your spouse) and $3,000 of equity in your personal property such as vehicles or boats ($6,000 if you filed jointly with your spouse). However, the new exemptions have raised these amounts to $15,000 of equity in your home ($30,000 if you filed jointly with your spouse) and $7500 of equity in personal property ($15,000 if you filed jointly with your spouse).Alabama Homestead Exemptions

There are both federal and state bankruptcy exemption laws. Depending on the state you are filing in, you may be able to use the federal exemptions or a state’s exemptions. Sometimes the federal exemptions can be higher than the state you reside in. However, if you reside in Alabama, you generally cannot take the federal exemptions and must take the state exemptions in most cases.

A typical scenario will show how this increase in bankruptcy exemptions can help a potential debtor. Let’s say that you have a vehicle with no lien against it (you owe no money on it and own it free and clear) that is valued at $8000. In the past, you could only protect $3000 of the value of this vehicle. If you had filed a Chapter 7 bankruptcy, and exempted $3000 of equity in the automobile, then the Trustee would likely have taken the vehicle and sold it for $7500, paid you $3000, and paid the creditors in your case the remaining $4500. Therefore, if you had consulted with a bankruptcy attorney they would likely have warned you of this, and you would not have filed a Chapter 7 bankruptcy if you wanted to keep your vehicle. Now, with the new $7500 personal property exemptions, you could file and protect all of the equity in your vehicle and have no fear of losing it in the Chapter 7 bankruptcy.

The homestead exemption in Alabama was also increased in order to help potential debtors. Let’s say you have a home that appraises for $150,000 and it has a mortgage on it for $105,000. In the past, if you had filed a Chapter 7 bankruptcy with your spouse then you could protect $10,000 of the equity in your home. This means that if the Trustee were to sell your home for $150,000, they would have to pay you the $10,000 that you protected, pay the mortgage company $105,000, and there would be closing costs and costs of sale (usually about 10% or so of the selling price) of about $15,000. This means that if the Trustee were to sell the house they would get $20,000 to distribute to your unsecured creditors after they sold the home, which means that you would not likely have been able to file a Chapter 7 bankruptcy and keep your home. However, now the homestead exemption for a married couple filing together is $30,000. Therefore, if the home in the above scenario was sold in your bankruptcy, then the Trustee would have to pay you $30,000, the cost of sale would be $15,000, the mortgage company would be paid the remaining $105,000, and there would be no money from the sale to pay your unsecured creditors. So you could now file a Chapter 7 bankruptcy in the above scenario without fear of the Trustee in this case selling your home.

I hope that this helps to explain why this increase in the Alabama bankruptcy exemptions is so important. It potentially allows more Alabama debtors access to the Chapter 7 bankruptcy courts by removing some of the threats of losing their homes, vehicles, or other items of personal property. If you are considering filing a bankruptcy in Alabama and have questions about these new exemption amounts, then give us a call today and our bankruptcy lawyers will be happy to speak with you.

Statement of Financial Affairs: Part II

Statement of Financial Affairs II

This blog series is devoted to explaining each and every line of the Statement of Financial Affairs (SOFA), which are part of the bankruptcy schedules that are filed in every case.  We will continue where part I left off, explaining what is requested and the information you should generally provide.  The last post went over Section 7, concerning gifts given to others, so we will start with Section 8.  This section ask for all losses from fire, theft, other casualty, or gambling in the last year.  This would include stating the circumstances of the loss, the value of the property, date of loss, and whether insurance covered some or all of this loss.  This would also mean mentioning any pending insurance claims arising from such losses.  Section 9 ask for all payments in the last year related to debt counseling or bankruptcy.  You would list all attorney fees that went toward the filing of the bankruptcy case, any attorney fees paid toward attempts at settlements with creditors, paying for credit counseling and deb management courses, any non-attorneys that helped with debt counseling or prepared the bankruptcy petition for you, and pretty much anyone that you paid to help with your financial management or bankruptcy filing.  You would list the name and address of the entity paid, who paid it, date of payment, and how much was paid or the value of the property given.  SOFA in Bankruptcy

Moving right along, we come to Section 10 of the SOFA which requires the debtor to list all other property, other than property transferred in the ordinary course of the business or financial affairs of the debtor, transferred either absolutely or as security within one year before the commencement of the case.  This means all property and you would need to list the date of transfer, the name and address  of person you transferred property to, their relationship toward you, and a description of property (including the value).  It also asks to list all property transferred in the last ten years to a self-settled trust or similar device of which you are a beneficiary.  If you are a beneficiary of a trust, then you may need to list any such property transfers here.  Section 11 requests that you list all financial accounts and instruments (trusts for example) closed, sold, or transferred in the last year, that were held in your name or for your benefit (such as with you as beneficiary).  This includes checking accounts, savings accounts, other financial accounts, shares or share accounts, certificates of deposit, retirement accounts and IRA’s, mutual funds, savings plans, and annuities.  You should list the name and address of the financial institution, the type of account, account number, amount on the date of sale or closing, and the final balance.  If you are filing without your spouse, and you are not separated, then this would include your non-filing spouse’s accounts as well since any income they received may be considered household income. 

Section 12 requests that you list all safe deposit boxes or other depository boxes in which you have had securities, cash, or other valuables in the last year.  This would include jewelry and all other such valuable personal items.  You must include the name and address of the financial institution holding it, the names and addresses of all persons with access to the depository, the date of any transfers or surrenders, and a description of the contents of the box.  If married and not filing jointly, and not separated, then must list the non-filing spouse’s deposit boxes too. In Section 13 you must list all set-offs made by any creditor, including banks, against you within 90 days before filing.  A set-off is where some of a debt owed to a creditor is cancelled out, either partially or in whole, by debt owed by the creditor to you.  For example, if you have $1,000 in a checking account and you owe the holders of the account $1,000 in debt, then the bank may take the $1,000 they owe to your account and apply that toward the $1,000 you owe.  It is applying one debt owed by one party to another debt owed by the other. Since the bank owes you $1,000 (since you have given them the money by depositing it into your checking account and they promise to give it back to you should you request it) and you owe the bank $1,000, the bank offsets the debts, making it a wash. This is important to know before filing bankruptcy, so that you can properly prepare for this prior to filing.

Section 14 request all property owned by another person that you hold or control.  This would be a vehicle that you operate that someone else owns, any property you hold in capacity as bailee, trustee, or property on consignment.  The name and address of the owner should be listed, as well as the description, location, and value of the property.  In Section 15, it ask for all of the prior addresses of the bankruptcy filer where they have lived and vacated within the last three years prior to commencing the case.  If you have moved around a lot, then there might be several addresses to look up, but it is necessary to list all of these addresses.  Section 16 states that if you reside or formerly resided with a spouse in a community property state in the last six years, then the debtor must list the name of this spouse and the dates residing there.  The community property states, commonwealths, or territories include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, and Wisconsin.  Section 17 requires the listing of certain environmentally hazardous sites or materials which are owned, manufactured, released, or previously owned, manufactured, or released.  These include radioactive, chemical, and biological hazards.  There are definitions as to what hazardous materials, sites, and environmental law mean, and there are three sub-questions asked.   First, to list the name and address of every site for which the debtor has received notice in writing by a governmental unit that it may be liable or potentially liable under or in violation of an Environmental law.  Indicate the governmental unit, date, and law, if known.  Second, it ask for the address and name of every site for which the debtor provided notice to a governmental unit of a release of hazardous material and indicate the governmental unit where the notice was sent and date.  Lastly, it requests a listing of all judicial or administrative proceedings, including settlements or orders, under any Environmental law with respect to which the debtor is or was a party.  This includes listing the name and address of the governmental unit that was, or is, a party to the proceeding and the case number.  Hopefully, not many of you will need to fill out this section.

Section 18 through section 25 concern any business interests or ownership that you may have currently, or have had within six years of the bankruptcy filing.  If the debtor is an individual, they must list the names, addresses, taxpayer-identification numbers, nature of the business, and beginning and ending dates of the business.  This would be any business in which the debtor was an officer, director, partner, or managing executive of a corporation, partner in a partnership, sole proprietor, or was self-employed in a trade, profession, or other activity either full or part-time.  This would include if you “do work on the side”, since such work is typically considered as being self-employed, or a trade or profession.  Therefore, if you haven’t kept good records of your small business or “work on the side” then this section can be especially difficult to fill out properly.  It asks for bookkeepers and accountants who within two years immediately preceding the filing of the bankruptcy kept or supervised the keeping of the books of account and records of the debtor.  The debtor must list all firms or individuals who within two years of the bankruptcy filing have audited the books of account and records, or prepared a financial statement of the debtor.  It further asks for all firms or individuals who were in possession of the books of account and records of the debtor at time of filing and all financial institutions, creditors, and other parties, including mercantile and trade agencies, to whom a financial statement was issued by the debtor within two years of the case being filed.  It ask for all former and current partners, officers, directors, and shareholders.  Also, the debtor must list all withdrawals from a partnership or distributions credited or given to an insider including compensation in any form, bonuses, loans, stock redemption, options exercised and any other perquisite during the last year.  If debtor is a corporation, then they must list the name and federal taxpayer-identification number of the parent, corporation of consolidated group for tax purposes of which the debtor has been a member at any time within the last six years.  It also requires a listing of all pension funds which the debtor, as an employer, has been responsible for contributing to at any time in the last six years.

That last section is not applicable in most cases (since most people do not own businesses or have trades or professions), and with most small businesses the questions are easily answered.  However, as with all of the SOFA much of it may be answered with a simple no, depending on your particular case.  Of course, this is only intended to provide general information concerning these difficult questions and you should always talk to your attorney for answers specific to your financial situation.  I hope that these publications may have helped explain some of the questions posed in the SOFA. Keep watching our site for more informative blog posts in the future.