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An Introduction to Nevada Bankruptcy Exemptions

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A major concern for many Nevada residents in debt is that filing for bankruptcy will cause them to lose what little property they have left. In fact, bankruptcy is about protecting debtors so they can make a “fresh start” free of crippling debt. It would make little sense to strip debtors of everything they have and expect them to rebuild from nothing.

Federal or State Rules?

For that reason, when an individual files for bankruptcy under Chapter 7 or Chapter 13, he or she can exempt many assets from the bankruptcy process. An exempt asset does not need to be turned over to the court-appointed bankruptcy trustee. Nor can a creditor seize or demand possession of any exempt asset.

Since bankruptcy is governed by federal law, Congress has established a default set of exemptions. But individual states are free to make their own lists of exemptions. States can also decide whether to let their residents choose between the federal and state lists. Nevada, however, requires its residents to use only the state exemptions.

Protecting Your Home and Car

So, what are the Nevada exemptions? For many people, the most important asset they have to protect is their home. Nevada permits a $550,000 “homestead” exemption. This means you can protect up to $550,000 in equity that you hold in the real property or mobile that you use as a primary residence. You cannot use the homestead exemption to protect a second home or a residential property that you rent out to other people. You must also file a Declaration of Homestead with Clark County prior to seeking bankruptcy protection.

Please note the homestead exemption protects you against unsecured creditors in bankruptcy. It does not undo a mortgage or tax lien against your home. And if your property is worth more than the exemption amount, you may be forced to sell, although you are entitled to keep up to $550,000 from the sale proceeds.

Nevada also exempts up to $15,000 of equity in your car. As with the homestead exemption, this does not protect you against a secured claim (i.e. your car loan), and it is possible you will have to pay your creditors or the bankruptcy trustee for any equity above the exemption amount.

Personal Property Exemptions

The homestead exemption applies only to the property and buildings, not the contents. Nevada separately exempts up to $12,000 in “household goods.” This includes furniture, electronics, clothing used for everyday wear, yard equipment, and other “personal effects.” This exemption covers your personal property and anything owned by one of your children or other dependents. If the value of all household goods exceeds $12,000, you may decide which property to exempt and which to surrender.

Separately, there is a $5,000 exemption for private libraries, art works, musical instruments, and jewelry. As with household furnishings, you can choose which items to keep if the total amount exceeds $5,000. You are also permitted to keep “all family pictures and keepsakes” regardless of value.

Income, Retirement, and Wild-Card Exemptions

Nevada bankruptcy exemptions also protect your wages from garnishment. The minimum exempt amount is the greater of 75 percent of your disposable weekly earnings or 50 times the federal minimum wage, which is currently $7.25 per hour for a 40-hour workweek. Practically speaking, this means you must be allowed to keep at least $362.50 per week in earnings, although most debtors will be allowed to exempt more. The bankruptcy court also may permit a low-income debtor to keep a higher amount of wages depending on the circumstances of the case.

As for other sources of income, most types of public benefits – including workers’ compensation and unemployment insurance – are exempt from bankruptcy. Any court-ordered spousal or child support is also exempt. Most insurance benefits, such as the payout of a life insurance policy, are exempt. Federal law further exempts many types of retirement accounts, including 401(k) plans, traditional IRAs, and Roth IRAs.

Finally, Nevada allows a $1,000 “wild-card” exemption to be used towards any kind of property, including cash or equity in property.

Do You Need Help from a Clark County Bankruptcy Lawyer?

In many cases, Nevada’s bankruptcy exemptions protect just about all of a debtor’s assets. This means that a debtor can exit bankruptcy free of debt with his or her property intact. It is also important to get legal advice from a Las Vegas bankruptcy attorney who can help you keep as much of your property as possible.

Call the Law Office of Erik Severino today at 702-997-4149 to schedule a free consultation with an experienced bankruptcy lawyer who will give you the personal attention your case deserves.

Are There Debts I Cannot Get Rid of Through Bankruptcy?

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The idea behind Chapter 7 bankruptcy is that a person can discharge – or cancel – certain types of debts, relieving them of any future legal obligation to pay. Typically, individuals file for Chapter 7 because of mounting unsecured debts, such as credit cards or medical bills. After going through the bankruptcy process – in Chapter 7, this means liquidating the debtor’s nonexempt assets and repaying the creditors as much as possible – a court will issue a discharge for any remaining unpaid debts.

While many debts can be discharged in bankruptcy, not all can be. Congress establishes the rules for what kinds of debts can and cannot be discharged. Here are some of the more common types of “non-dischargeable” debts.

Unscheduled Debts

When you file a petition for Chapter 7 bankruptcy, you must include a schedule with the names and mailing addresses of all of your known creditors. This ensures the creditor is notified of the bankruptcy case and has ample opportunity to file a claim against your bankruptcy estate. If you omit a creditor from your schedule, the bankruptcy court may refuse to discharge the debt you owe, unless the creditor otherwise had “notice or actual knowledge” of your case.

Family Support Obligations

You cannot discharge a “domestic support obligation,” including alimony or child support payments ordered by a court in connection with a divorce or separation agreement. These types of support obligations are considered priority debts by the bankruptcy court. Not only can they not be discharged, but the debtor also must continue to make required payments while the bankruptcy case is pending.

Tax Debts

Most recent tax debts cannot be discharged. However, you may be able to discharge older income tax debts under certain circumstances: The due date of the tax return must have been at least three years prior to the date of the bankruptcy petition; the return itself was filed at least two years prior; the assessment is at least 240 days (about eight months) old; and the taxpayer cannot be guilty of fraudulent conduct or tax evasion.

Student Loans

This is a major problem for many debtors. Student loans are difficult, though not impossible, to discharge in bankruptcy. Unless you can prove “undue hardship” – basically, forcing you to repay the loan would keep you trapped in poverty indefinitely – a judge cannot legally cancel a student loan debt.

Personal Injury Judgments and Government Fines

While bankruptcy can wipe out many types of civil judgments, you cannot discharge any fine, penalty, or payment ordered as part of a court or administrative proceeding. Federal law also expressly forbids discharge of a judgment arising from a personal injury or wrongful death claim where the debtor was held liable based on driving under the influence of alcohol or drugs. In other words, if you are driving drunk and injure someone, any judgment that person later obtains against you in court is non-dischargeable in bankruptcy.

Recent Purchases of Luxury Items

While credit card debt is generally dischargeable, a bankruptcy judge may refuse to discharge certain credit card purchases made within the 90-day period leading up to the debtor’s bankruptcy petition. Specifically, a creditor may object to the discharge of debts incurred for “luxury” purchases totaling more than $675 during the pre-bankruptcy period. What constitutes a “luxury” purchase depends on the circumstances, but it generally refers to any item that is not “reasonably necessary” for the support of the debtor or a dependent.

Fraudulent Debts

Bankruptcy is intended to discharge only honest debts incurred in good faith. If a creditor can prove a debt was obtained through “false pretenses, a false representation, or actual fraud,” the bankruptcy court may refuse to discharge the debt. This can include, for instance, lying on an application to obtain a line of credit.

Get Help From a Las Vegas Bankruptcy Lawyer Today

This is only a brief overview of some of the kinds of debts that are legally non-dischargeable. Many other debts, however, are dischargeable. An experienced Las Vegas bankruptcy attorney can sit down with you and look at your specific debts to help identify any potential problems. One important thing a bankruptcy attorney will do is make sure your petition is complete and accurate. The last thing you want to happen is for a dischargeable debt to be rendered non-dischargeable because it was not properly listed.

The Law Office of Erik Severino has been focused exclusively on consumer bankruptcy law since 2009. If you need help with a Chapter 7 or Chapter 13 bankruptcy filing, call us today at 702-997-4149 to schedule a free consultation.

1 bankruptcyattorney-lasvegas.com/personal-bankruptcy/chapter-7-bankruptcy/

How the Statute of Limitations Can Affect Your Bankruptcy Case

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When a creditor presents a claim against a Chapter 7 bankruptcy estate, it must be legally valid. In other words, if the creditor could not normally sue to enforce the debt outside of bankruptcy, it cannot seek to collect the debt from the bankruptcy trustee. After all, bankruptcy is about giving a second chance to the debtor, not the creditor.

Time Limits on Creditor Claims

To put this in context, consider the fact that Nevada has a four-year statute of limitations on open credit accounts with a revolving balance. Let’s say you have a bank credit card with an outstanding balance of $1,000. You made your last payment in March 2013. You have made no effort to pay the balance since then and simply ignored any collection notices sent by the bank.

In April 2017, you file for Chapter 7 bankruptcy petition. The bank files a claim for the $1,000 against your bankruptcy estate. At this point, the claim is invalid because more than four years has elapsed. Even if you never filed for bankruptcy, the bank could not legally sue to collect the judgment in Nevada state court.

What Happens When State Laws Conflict in Bankruptcy?

Statutes of limitations differ between states. This can pose an issue in bankruptcy cases, which are governed by a combination of federal and state laws. The U.S. Ninth Circuit Court of Appeals, which has jurisdiction over bankruptcy cases from Nevada and other western states, recently confronted the question of how to deal with such a conflict in practice.

In this case, the debtors are a married couple living in California. In 2007, they purchased a condominium in California. There were two outstanding loans against the property. Unfortunately, the debtors defaulted on the loans, and the lender with the priority claim foreclosed.

This left the second lender with an outstanding debt of $42,000. Apparently, no action was taken to collect on this debt. The debtors filed for Chapter 7 bankruptcy protection in California in 2013, nearly six years after taking out the original loan. The lender then filed a claim against the bankruptcy estate.

Here was the problem: California has a four-year statute of limitations on the enforcement of written promissory notes like the one securing the bank’s loan. But the lender was a bank based in Ohio, which has a six-year statute of limitations. Furthermore, the note itself said it was governed under the terms of Ohio law.

If the bankruptcy court enforced the California time limit, the bank’s note was invalid and the trustee of the debtors’ bankruptcy estate had no obligation to pay off the loan. But if Ohio law applied, the note and the creditors’ claim were still valid. The debtors obviously encouraged the bankruptcy judge to apply California law since it was to their benefit. But the judge decided Ohio law should apply and overruled the debtors’ objection.

The Ninth Circuit agreed that this was the right decision. Normally, when parties sign a written contract specifying a “choice of law,” that decision is binding in any subsequent litigation. So, in the normal course of events, Ohio’s six-year limit would apply to the note.

But this was not a normal situation. The Ninth Circuit said the note did not specifically state it applied to the statute of limitations. It was therefore deemed “silent on the issue.” (One of the Ninth Circuit judges disagreed on this point and felt the note’s choice of Ohio law was binding on the bankruptcy court.)

That said, there were “exceptional circumstances” that still justified applying Ohio’s longer time limit. Basically, the Ninth Circuit said that applying California’s shorter statute of limitations would unfairly prejudice the creditor’s rights. After all, if the debtors had not filed for bankruptcy, the lender could have moved to enforce its note under Ohio law. But once the debtors sought Chapter 7 protection, the creditors had “no forum for its claim” other than the bankruptcy court in California. Therefore, it would be “unfair” to dismiss the creditor’s claim based on California’s stricter time limit.

Get Help from a Nevada Bankruptcy Lawyer

This is just one example of the highly technical legal issues that can arise in a Chapter 7 bankruptcy case. While most bankruptcies are resolved in a few months without any notable creditor objections, when something does go wrong, it can lead to more extended litigation. It is important to work with an experienced Las Vegas bankruptcy attorney who understands the legal system and how to help you avoid potential traps. Contact the Law Office of Erik Severino today at 702-997-4149 to schedule a free consultation.

 

1 bankruptcyattorney-lasvegas.com/personal-bankruptcy/chapter-7-bankruptcy/

2 https://scholar.google.com/scholar_case?case=14959371693978667337&hl=en&as_sdt=6,47