1If I decide to file a bankruptcy, will I still be able to keep my home and my car?
Probably but it depends. In Nevada, you are able to exempt (protect) your primary residence and one vehicle up to $550,000 for your residence and $15,000 in your vehicle. If you own your home and car outright and your house is worth less than $550,000 and your car is worth less then $15,000 yes. You will be able to keep them.
What if you do not own them free and clear? If you want to keep them you will be able to keep to if you are current on the payments. You can keep debts in a bankruptcy. You will need to sign a “reaffirmation agreement” for each debt you keep. A reaffirmation agreement is you agreeing to continue making payments until the debt is paid off. The debt will not be discharged in the bankruptcy and you will still pay the debt after the bankruptcy is concluded. If you don’t make the payments after the bankruptcy you can be foreclosed or repossessed.
2Will I have to pay taxes on debts that are wiped out?
No. Sometimes shady banks or collectors do try to be sneaky and send you a 1099-C after you declare bankruptcy. The C stands for cancellation of debt. If you have debt written off by a company that is not discharged in bankruptcy they can send you a 1099-C and force you to declare the amount they wrote off as income. Leaving you with an unexpected tax burden as a prize for doing business with them.
This is a common creditor threat but one that does not apply in bankruptcy. Even if the creditor cancels the debt or issues a 1099-C, you do not have to declare it as income once it is discharged in bankruptcy. These are easily defended by a good bankruptcy lawyer. Don’t fight them alone. You are only going to declare bankruptcy once. The attorney’s fees are cheap compared to the impact on your life.
3Can my paycheck be garnished?
In Nevada, a creditor can garnish up to 25% of your net income. This includes wages, commissions, salary, bonus, overtime, tips, etc. are subject to being garnished.
Income that cannot be garnished: Social Security benefits, unemployment benefits, child support, alimony support, money received from a pension, annuity payments (up to $350.00/month), and money received from a qualified retirement plan (401(k), IRA, Roth IRA, 403(b), etc.).
A creditor can’t just garnish your wages. They must first file suit against you saying you are responsible for the debt and that you haven’t paid. The court must decide against you. And then the creditor must file a writ of execution and writ of garnishment with your payroll department and with a local sheriff or constable’s office to enforce and administer the writ of garnishment. This process may take up to several months before a garnishment could occur.
Any garnishments will cease upon filing bankruptcy. If you are dealing with a garnishment please contact me so we can protect 100% of your income.
4How much money can I make to qualify for a Chapter 7 bankruptcy?
Chapter 7 or liquidation bankruptcy, has a income limit based on his or her family size. Every state is different. In Nevada you can earn this much:
- 1 person Household: $46,151
- 2 Person Household: $60,234
- 3 person Household: $66,813
- 4 person Household: $70,851
- For each additional person in the household, add $6,900.
If your income is more than these limits you may be forced to file a Chapter 13 Reorganization Bankruptcy.
There are deductions available to reduce your gross income downward in order to still qualify for a Chapter 7 but you will need to discuss these deductions with your bankruptcy attorney. Please call my office today and schedule an appointment so that we can determine your best course of action.
5Do I have to take classes?
Yes, but they are on the internet and there is no test. You must take a credit counseling class before you file to learn about the bankruptcy process and alternatives. You must also take a debtor education class before you are discharged to learn about debt and how to use it wisely. The first class can be completed in about 20 minutes. The second class is a little longer about an hour. The two classes together will cost about $100 and must be completed by every debtor.
6I repaid a loan to my mother right before I filed. Is that ok?
No. Any money you repaid to a family member within a year before filing has to be disclosed and can be undone by the trustee. For example, if you repaid $1000 to your mother right before filing for a loan she made to you, the trustee could seek to get that money back from her.