Conserving Assets In Ch. 7

How Do I Protect My Assets and Tax Refund?
How Does Early Planning Maximize My “Fresh Start”?

Contact a bankruptcy attorney about filing for chapter 7 bankruptcy.

Protecting Your Property in a Wyoming Bankruptcy

Unplanned events can lead a family or business to the brink of financial disaster. The event might be a loss of employment, major medical expenses, a divorce or a business collapsing under the weight of an oilfield bust. When an unplanned event rudely camps in your living room, a Wyoming bankruptcy may be your best option to protect assets, especially if you start with early planning.

Manage Debt and Protect Assets Before Filing Ch. 7. Without a plan for managing your debt and assets, a lack of information often leads to poor decisions that work to your detriment, reduce your exemption allowances and waste precious family resources, such as a tax refund, on debt that could have been included in the Chapter 7 bankruptcy. Examples include:

1.  Borrowing against a 401(k) retirement account that would have passed through a Ch. 7 bankruptcy as exempt.
2.  Borrowing against equity in the family residence when the equity would have passed through a Ch. 7 bankruptcy as exempt.
3.  Using a large tax refund to buy time with creditors when the tax refund could have been spent on the needs of the family, and then a few months later having creditors return for more money after the tax refund is depleted and there are no monies left to pay for bankruptcy.
4.  Selling exempt household furnishings at a sharply reduced value.
5.  Using the family’s exempt motor vehicle to secure a payday loan.
6.  Paying down credit card or medical debt that would have been discharged in bankruptcy, while failing to apply those same monies to debt that is not discharged in bankruptcy, such as unpaid taxes, child support or student loans.

To avoid these common mistakes, it is critical to consult with a knowledgeable Wyoming bankruptcy attorney well before having your wages garnished or being served with a collection lawsuit.

Maximizing Exemption Allowances. In preparing for bankruptcy, a competent Wyoming bankruptcy attorney can advise you how to: i) lawfully maximize the assets that are exempt and protected from liquidation in Ch. 7 and ii) avoid squandering exempt assets paying down debt that will be discharged in bankruptcy. Maximizing the exemption allowances ensures that a debtor retains the assets necessary for a fresh start following the Ch. 7 bankruptcy. Arnold Law Offices would prefer not to tell you that precious exempt assets were squandered prior to filing a Chapter 7, because, for instance, an IRA retirement account was liquidated or a second home mortgage was taken out.

The major asset classes protected by Wyoming exemption laws include:

1.  $40,000 of equity in the residence for a married couple or $20,000 of equity in the residence of a single person. The residence may be a stick built home, a mobile home with lot, a trailer or a farm. W.S. § 1-20-101, 102, 104.
2.  An unlimited amount for retirement, pension, 401(k) and IRA accounts. W.S. § 1-20-110(a)(ii), W.S. § 9-3-426(a)(ii).
3.  $10,000 of equity in two motor vehicles if a married couple files together or $5,000 of equity in one motor vehicle for a single person. W.S. § 1-20-106(a)(iv).
4.  $4,000 in value for furniture, bedding, provisions and other household articles of any kind or character as the debtor may select. When spouses occupy the same residence, each is entitled to a separate exemption or $8,000.00 in total for both spouses. W.S. § 1-20-106(a)(iii).
5.  $4,000 in value for tools of the trade. W.S. § 1-20-106(b).
6.  $2,000 in value for clothing and wedding rings. W.S. § 1-20-105.
7.  75% of net wages due on the bankruptcy filing date.
8.  100% of social security income or disability income.
9.  100% of Worker’s Compensation benefits.
10. Life insurance or disability insurance monthly benefit payments.
11. Cash surrender value of most life insurance policies.

In addition to the Wyoming state exemptions, several federal exemptions also apply, including protections for benefits received as a veteran and federal retirement accounts. If properly used in consultation with a Wyoming bankruptcy attorney, you can lawfully leverage the exemption allowances and obtain the best possible “fresh start” under Chapter 7.

Manage Your Tax Refund. It is common to see tax refunds of $8,000.00 or more. When grappling with past due debt, the temptation is to use the tax refund to partially catch up on bills and buy some time. The problem with this approach is two-fold. First, using the tax refund to pay overdue bills does not address the core problem of having more debt than the household income can support. As a result, you begin falling further behind with your bills soon after exhausting your tax refund. Then, the phone calls and harassment begin anew, but then at that point, there may well be no monies available to pay for a bankruptcy filing. Second, the tax refund is not spent down strategically so as to ensure maximum the benefit to you and your family.

If you are beyond the tipping point where household income is not sufficient to service your debt or if a wage garnishment is likely to occur, then you are better served by spending your tax refund on family necessities, such as clothing, household furniture and appliances, and tires for the vehicles. The assets purchased with these expenditures are exempt. In addition, you can use the tax refund to pay non-dischargeable debt such as past due child support or delinquent taxes. You can use the tax refund to catch up utility bills. Furthermore, you can pay future expenditures now, such as paying your rent, mortgage or vehicle payment a month ahead, stocking up on groceries to fill the pantry and freezer or paying your insurance premiums in full rather than paying monthly or quarterly.

You should not use any part of your tax refund to repay loans extended by family members, since the Bankruptcy Code defines such a repayment as being a preference if made within 12 months of your bankruptcy filing. If there is a preference, you or your family member must pay over the amount of the preference payment to the Ch. 7 trustee. Nevertheless, you may make as many payments as you wish to family members after your Ch. 7 bankruptcy has been filed. Those post-petition payments are not preferences.

Smart Decisions Based on Early Planning. With early planning, you can emerge from bankruptcy with more property than if you use every available resource to feed the wolves at the door, and as a result, spend down exempt assets that would have passed through bankruptcy or fail to use your tax refund to serve the needs of you and your family. Similarly, tax refunds should be managed thoughtfully and with a plan in mind.

Once exempt property is disposed of prior to a bankruptcy filing, it cannot be recovered. To emerge from bankruptcy with possession of your basic assets needed to build a secure financial future, you should consult with a knowledgeable bankruptcy attorney at Arnold Law Offices as early as possible.

Wyoming’s Arnold Law Offices Assists Individuals and Families in Preparing for Bankruptcy.

 If you are considering a bankruptcy action, contact the Wyoming Bankruptcy attorneys to set up an initial consultation. Arnold Law Offices serves all of Wyoming, including Uinta, Sweetwater, Lincoln, Carbon, Teton, Fremont, Natrona and Laramie Counties. Call (888) 760-4357 or (307) 789-7887 to make an appointment.