Property transfers before filing Bankruptcy

Transferring non-exempt property to exempt property is one way to protect value in your estate prior to filing for bankruptcy. There are rules in regarding whether you did so with the intent to hinder, delay or commit fraud on creditors, but these can be overcome. There must be some evidence in the facts or circumstances which are extrinsic to the mere facts of conversion of non-exempt assets into exempt and which are indicative of such fraudulent purpose. It is permissible under the threat of being sued to convert non-exempt assets into exempt assets. Typically this involves paying your mortgage down, but it can also be selling a cheap car and buying a car closer to the exemption value in order to protect cash in the bank. Things you want to stay away from are taking large sums of cash and putting them into IRA accounts on the eve of bankruptcy if you don’t have a history of putting too much money on a regular basis into that protected account. If you put money into another IRA on the eve of bankruptcy the court will most likely find you did so with the intent to hinder, delay or defraud. Things like Section 529 accounts unfortunately are considered to be part of bankruptcy estates even though they are for the benefit of your children.

Frequently Asked Questions: Debt Consolidation in California
How does debt consolidation affect credit scores?

Initially, it might cause a slight dip due to credit inquiries. However, consistent payments can improve your credit score over time.

What is the difference between debt consolidation and debt settlement?

Debt consolidation involves taking a new loan to pay off debts, while debt settlement is negotiating to pay less than you owe. Settlement can negatively impact your credit score.

What are secured vs. unsecured debt consolidation loans?

Secured loans require collateral (like a house or car), usually with lower interest rates. Unsecured loans don't require collateral but typically have higher rates.

Is debt consolidation right for me?

It depends on your total debt, interest rates, credit score, and payment capability. It's suitable if you can pay off your debt within five years and secure a lower interest rate than your current debts.

Should I consider long-term financial planning?

Yes, debt consolidation should be part of a broader financial strategy including budgeting, cutting expenses, and building an emergency fund.

How do Chapter 7 and Chapter 13 bankruptcies in California differ?

Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 allows debt restructuring over a set period, usually three to five years.

Can my spouse's bank account be garnished for my debt?

Bankruptcy laws offer protections against such actions, but specifics depend on individual cases and state laws.

How can I learn more about my options?

Consulting a California bankruptcy attorney can provide clarity. Firms like The Law Offices of Christopher Hewitt offer free consultations to explore debt relief paths.

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