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If you are reading this page because debt payments are making your financial life impossible, now would be a good time to pause and think about a long-term plan for life after bankruptcy. The debtor side of bankruptcy law practice is one of the few places where I measure my success in NOT having repeat customers!

The first step in planning for life after bankruptcy is to examine what choices led to the financial disasters which brought you to this law firm. Sometimes there is little or no personal fault of the financial sort before a bankruptcy case is filed. The rather common “medical bankruptcy” is one example: no one I have ever known planned to have an illness or accident which left them with bills too enormous to pay. Even when all earlier choices have been reasonable and prudent, such as keeping medical insurance premiums paid and keeping a healthy lifestyle, unexpected circumstances can still lead to insolvency.

On the other hand, even seemingly small risk-taking behaviors, such as not paying off a credit card balance in full every month, may have caused or at least contributed to a person’s financial difficulties. Whatever your particular and individual circumstances, writing out a two-column page of causes and cures – which come from your own frank self-assessment AND your own firm commitment to financially prudent living – can identify for you ways to NOT become one of the thousands of our fellow Americans who make walking away from their debts an infrequent habit. I have encountered few people more despised than “repeat” bankruptcy debtors.

Sometimes, undertaking this "causes and cures" exercise could even change a person’s financial life enough to make a bankruptcy case completely unnecessary.

Now, on to those pesky details and questions which brought you here.

  1. Does filing a Chapter 7 (liquidation) bankruptcy mean that a court or a bankruptcy trustee can take away everything I own?

No. Federal bankruptcy law includes a sometimes-generous listing of specific asset types and dollar values which a debtor can always keep, regardless of the debts being discharged. Please understand, however, that if any of these things is not yet fully paid for, keeping the asset comes at the price of not having the corresponding debt wiped out. By the same token, eliminating the debt associated with anything not fully paid for comes at the price of almost always needing to surrender that property to the creditor holding the debt.

Please choose the state whose bankruptcy exemptions you wish to review:

Nevada:

 A.  A list of various types of personal property in NRS 21.090: http://www.leg.state.nv.us/NRS/NRS-021.html#NRS021Sec090

This includes an appropriately generous exemption of up to $500,000.00 in an Individual Retirement Account or other tax-qualified retirement plan, one car up to $15,000.00 value (minus any outstanding loan secured by the vehicle, but NO limit if specially-equipped to accommodate the debtor's physical disability), and a number of other mostly-reasonable dollar values.

B.  Up to $350.00 per month of annuity contract payments, and other insurance policy assets per NRS 687A, NRS 687B, and one paragraph in the above-mentioned NRS 21.090 (paragraph (1) (k)): http://www.leg.state.nv.us/NRS/NRS-687A.html and

http://www.leg.state.nv.us/NRS/NRS-687B.html

Look specifically at NRS 695A.220, 687B.260, 687B.270, 687B.280, and 687B.290.

C.  Miscellaneous exemptions such as public employee retirement benefits in NRS 286.670, and other nuggets in NRS 422.291, 452.550, 612.710, 615.270, 616.550, and 689.700.

Utah:   

A.  A list of various types of personal property in Utah Code Section 78B-5-503. http://www.le.state.ut.us/~code/TITLE78B/TITLE78B.htm

This includes a miserly exemption of up to $20,000.00 for a homestead, what appears to be an unlimited exemption for Individual Retirement Account, 401(k) account, or similar retirement fund (but NOT including any dollars contributed during the full year before filing the bankruptcy case).

B. For members of the National Guard, any military property in their possession: Utah Code Section 39-1-47. 

2.   I have heard that the 2005 changes to bankruptcy law mean that I make too much money to file a case.

Maybe, maybe not, and it depends on what type of bankruptcy case is being filed.

For a Chapter 7, or “liquidation” case, the new law presumes that a debtor is abusing the Bankruptcy Code if he or she (or a married couple) is in a defined high-income level–which is not even at a truly “rich” figure. Here are the details of the annual household income figures this year:

Nevada: Single: $42,346.00 Debtor with one dependent: $56,612.00

Utah: Single: $49,818.00 Debtor with one dependent: $55,220.00

The income level is calculated from the average of the six months immediately before filing the case. So, the total dollars from those six months previous to filing should add up to half, or less, than the annual figures above.

Legally, an ordinary “presumption” can be overcome or “rebutted”. A person or couple earning “too much” money to file a presumptively non-abusive Chapter 7 case must file a motion asking the assigned Bankruptcy judge to rule on whether that presumption is overcome. A job loss caused by a horrible non-fault accident, which leaves the debtor with no reasonable hope of ever working again, is one of the few examples of how this harsh presumption can be overcome.