Bankruptcy is a serious matter that is happening today with too often frequency. According to the National Bankruptcy Center, consumer bankruptcy filings ticked up in February of 2011, but so far the rise has slowed from 2010. Personal bankruptcies have fallen 8% compared to the same time a year ago. The data for this first couple months might indicate consumers won’t have a repeat performance of bankruptcy filings in 2010 where more than 1.6 million bankruptcies were reported, the highest level in five years. What is astonishing about these statistics is the fact more middle-class Americans, people with high incomes, and people with higher education levels are still resorting to bankruptcy filings than ever before. In the midst of all these statistics is the fact that many of these filers are not sharing the bad news with their spouse until it is too late, and they are having to face bankruptcy. So, what happens when you fail to tell the spouse?
This personal bankruptcy story was posted on the internet in March of 2011 as comments in a bankruptcy discussion: “Married 8 years, two Kids, wife was home on Maternity leave in 06. I was mortgage broker. Wife does not handle money stress well at all. Money was tight. I used credit cards and a HELOC to meet bill obligations. Have about $55k in debt wife does not know about. She has recently started her own business and I am self employed as well. I really want to keep her from the stress, but it’s starting to ride on my nerves and conscience…to add fuel the the fire, she thinks there is about $25k in the bank. There is about $11k…How do I tell her about this debt? Should I tell her?I don’t even know how she would react. I sometimes think she would want a divorce.”
The debtor in this personal bankruptcy illustration obviously has failed to tell his wife about their impending financial disaster. He fears his wife might divorce him if she finds out. Believe it or not, this is a rather common thing many men, or women for that matter, do when trying to protect their spouse. They might rationalize what there spouse doesn’t know is not going to hurt them, but if they are truly becoming bankrupt, there is nothing further from the truth.
When you are truly going bankrupt, eventually, you will never be able to keep the fact a secret. The reason is because bankruptcy involves many more people than just a spouse or your family. There is usually more than one creditor when you find yourself in the place of being truly bankrupt, and these creditors have a habit of instigating collection activities when you are late or default on payments you no longer can make. Collection activities can incorporate the use of the U.S. Postal Service, telephone companies, collection agencies, legal counselors, and an assortments of other servers who might be used in the collection process. When these things begin to occur, it is practically impossible to keep them a secret because too many in the community you live already know.
Divorce is often mentioned during bankruptcy matters and listed as a reason a person will file for bankruptcy, especially when that person, as the divorced, loses the primary income maker. There are probably not many statistics kept for those who divorce as a result of a spouse filing bankruptcy, and I suspect the numbers are on the low side. What statistics are available on divorce lists the fact one of the leading causes to divorce is for one spouse or the other failing to be trustworthy. When you have been dishonest in matters, whether it is having an extramarital affair or in finances, it builds mistrust, and it is usually the mistrust that lays the ultimate groundwork for divorce. So, in my opinion, when it comes to finances or extramarital affairs, honesty is always the best policy, and I don’t think it is ever too late to be honest.
One thing is certain when it comes to bankruptcy, bankruptcy laws can be complicated, and common sense indicates you will probably need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Seattle, Bellevue, or Everett, Washington, contact us today at www.betterbankruptcy.com. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
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Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, before filing for bankruptcy, many people would move to another state that had a more generous homestead exemption than the one they were living in. The new law has much stricter requirements as to which state’s home exemption you can use. However, if you live in a state that allows the choice of federal exemptions, then you can choose the federal exemptions regardless of how long you were living in the state. With personal bankruptcies still on the rise in 2011and the housing crisis causing thousands of homes to be upside down, understanding homestead exemptions is critical if you plan on filing for bankruptcy any time soon.
This personal bankruptcy story was posted on the internet in February of 2011 as comments in a bankruptcy discussion: “I’m new here so not sure if I’m in the right place but I live in nw Indiana.
We are getting ready to file bk soon. We cannot afford to live in this home any longer. It is mortgaged with no equity and lost 30% of it’s value due to the economy. Our business closed and we tapped all savings and credit cards and have not been able to open a successful business or find gainful employment. We have a previous home that has no mortgage. We used to live there about 4 years ago.
We owe about $15k in property tax there. We plan to move back to our previous home that is being rented now…We’d like to use our previous home for the homestead exemption. Does anyone know how long we have to live there to claim it as our primary residence?”
The debtor in this personal bankruptcy illustration has questions about how long she must live in a residence to claim a homestead exemption. The federal exemption for a homestead is limited to $125,000 if the property was acquired within the previous 1215 day (3.3 years). The cap is not applicable to any interest transferred from a debtor’s previous principal residence. The value of the state homestead exemption is reduced by any addition to the value brought about on account of a disposition of nonexempt property made by the debtor during the 10 years prior to the bankruptcy filing. An absolute $125,000 homestead cap applies if either: the court determines that the debtor has been convicted of a felony demonstrating that the filing of the case was a abuse of the provision of the Bankruptcy Code; or the debtor owes a debt arising from a violation of federal or state securities laws, fiduciary fraud, racketeering, or crimes or intentional torts that caused serious bodily injury or death in the preceding 5 years.
The state you use for your exemptions is: the state you lived in for the 730 days (2 years) before filing; or if you did not live in a single state in the previous 2 years you use the state where you lived the majority of the 180 period preceding the 2 year period; or if the preceding renders you ineligible for any exemptions then the debtor is allowed to choose the federal exemptions.
In the case of the debtors in our illustration, they have lived in Indiana for the previous 4 years. That means most likely they cannot go back to their former out of state residence to claim their exemption. Since they currently live in Indiana, a state that does not allow federal homestead exemptions, their homestead exemption is $17,600 of equity (husband and wife may double exemption). The $35,200 is all the husband and wife can protect concerning the two houses. Since they are upside down on their mortgage in Indiana, that house most likely will not be sold. The out of state house most likely will be sold and after the $15,000 back taxes are paid, what is left will be divided up between the homeowner, who gets the first $35,200 (if joint owned), and unsecured creditors, who will get the remainder of the proceeds of the sell. Of course, closing costs, which will include all the costs to sell the home, will be taken out when the house is sold.
Bankruptcy laws can be complicated, and common sense indicates you will probably need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Indianapolis, Indiana, contact us today. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.
