Is this a good time to file Chapter 7?

Question

I'm an  unemployed school teacher. I own a home worth 91,000 that I want to keep and I have 6 grand in 401(k) and another six in brokerage account ( some of that amount is from liquidated stock. I also have about 500.00 worth in various stock and owe 35,000 in unsecured credit card debit. I would like to know if now is good time to file chapter 7 or should I wait? Currently, I am being sued by a creditor.

Susan Taylor · Answer

You should contact an attorney immediately & probably file the money in the  brokerage account is at risk of being seized by the judgment creditor.

Marc Stern · Answer

This is something that needs to be carefully discussed with a lawyer.  No one who is competent is going to answer this question in this type of forum without many more facts.

Kelly Nigohosian · Answer

If you are not able to pay your bills as they come do,  then  considering  whether or not to file bankruptcy is a good choice.  Their a  pros and cons,   but my first instinct would be to say you should probably  file a chapter 7  in the near future,  and start to get back on your feet  again with a fresh  start.

Gregory Neuhaus · Answer

While you give substantial information, it is not enough on which to base an answer.  It looks as if this would be a good time to file, but a bit more information is required.

Robert De Groot · Answer

The six grand in the brokerage account and the 500 in various stocks are not exempt from the claims of creditors. One way around this problem may be to put those moneys into the 401K. Until you turn those assets into exempt assets, you should not file because the first thing the trustee is going to do is sieze the non-exempt assets.  It doesn't hurt to plan ahead and I am glad you asked the question. You do need an attorney to do a bankruptcy for you. A petition preparer could not give you legal advice like this.

Burton J. Green · Answer

Based on what you wrote, your 401 is exempt.  If your brokerage account is not part of a qualified IRA or other retirement account, then if you file it will not be exempt and will be available to your trustee who will take it.  The fact that you are unemployed suggests that the means test will not   prevent you from filing chapter 7. My advise would be to see an attorney   before doing anything and discuss your situation. You will probably need  to  take steps to dispose of the brokerage account prior to filing  bankruptcy.

Michael Jay Berger · Answer

It sounds like a good Chapter 7 to me.

David Benson · Answer

Now is a good time to do some bankruptcy planning with a qualified bankruptcy attorney. The brokerage account causes me some concern since it is unclear that the money would be exempt under Ohio law. An initial consultation may not cost you a dime and the insight you get should be worth a lot.

Russell Knight · Answer

It depends if your home is underwater or not (financially speaking). You can keep almost $ 5000 worth of non 401k stock and all of your 401k account.   If you have $ 91k equity in your house, your home will likely be seized by the trustee and sold.

William Rubendall · Answer

You should consult with a bankruptcy attorney as to the advisability of filing chapter 7. Ask whether your assets are exempt, that is, protected from creditors. You are allowed a specified amount of value of your home as a homestead, depending on your age and number of dependents. It appears from your information that you have exempt 401(k) and non-exempt stock.

Jeffrey Solomon · Answer

The $6,000 in the brokerage account, which I assume is not a retirement account, would be an asset that the trustee would take.  I am assuming your are keeping your home.  You should consult an attorney.

Cary Smalley · Answer

I suggest you talk to a bankruptcy attorney to discuss the details of your situation.  Brokerage account and stock funds that are not a retirement account may be taken by the trustee.

Asaph Abrams · Answer

The material factor is whether or not the home is encumbered or held free and clear.  Qualified bankruptcy counsel in your area may advise accordingly with regard to fully protecting your assets.  This answer (by San Diego bankruptcy attorney, Asaph Abrams) doesn't address all facts & implications of the question; it's general info, not legal advice to be relied upon. It creates no attorney-client relationship; it may be pertinent to CA and/or its Southern District Bankruptcy Court only, and it's independent of other answers. It may be time sensitive, as in past the "Use by" date: laws and case law change.

Dean Stairs · Answer

The best time to file a bankruptcy varies based on your entire situation, so it's best to have a thorough consultation with a  bankruptcy attorney to determine.  The information you provided indicates that bankruptcy may be your best option, but many other factors must be considered before a recommendation could be made.

Sanaz Bereliani · Answer

My first question would be whether the house has $91,000 in equity or that is simply the value and you have a mortgage on it? That would make a huge difference in your case. In bankruptcy you have to "exempt" or "protect" your assets. The job of a Bankruptcy Trustee is to try to liquidate unprotected assets to pay off your creditors. Plus they take commission on what they collect.  In bankruptcy you can either use 704 exemptions which allows you to protect the equity in your residence and limits what other things can be protected (in your case the stocks/investment accounts will most likely not be protected)... OR you can use 703 exemptions which provides you with a $23,000 Wildcard you can use to protect your stocks/investment accounts/etc. but you cannot protect $91,000 in equity.   So it's a give and take. I would highly recommend sitting down with an attorney to go over the facts of your case to let you know if you should file or not. If equity in your home is not a problem I would definitely recommend you filing bankruptcy to stop the lawsuit and get rid of the $35,000 unsecured debt.

Roger Bus · Answer

This could be a very good time to file Chapter 7, usually better to file   while unemployed if possible. Hopefully you do not have too much equity in  your  home.

Pamela Stewart · Answer

Based on the information provided,  I cannot advise you if this is a good time.  Is your home paid for?  If not, how much do you owe on it?  The amount of equity would determine if you can use Texas or federal exemptions. Additionally, if you are in Texas, you may have some non-exempt assets (brokerage account and stock) that the Trustee could ask you to turnover. How much is the debt you owe on the account you are being sued on?  Sounds like you could negotiate a settlement with them.

Phong Thanh Tran · Answer

If you are currently being sued by a creditor, it is a good idea to file for bankruptcy before the creditor wins its lawsuit and files a lien against you.  In Chapter 7, your home and 401k are exempt from the bankruptcy estate.  However, the stocks in your brokerage account may be taken by the trustee to pay your creditors.

James Wingfield · Answer

Now might be a good time for you to file a Chapter 7 bankruptcy.  Some additional questions that I would want to discuss with you are whether you are up to date on our mortgage and car payments, whether you have you have a spouse with significant income, and if you have paid any family members money you owed them in the past 12 months.  Assuming you are up to date on the payments, you are single or your spouse?s income is not so high as to put your household income over the median income threshold in Massachusetts, and you have not made transfers to family members in the past twelve months, then this may be a good time to file.  You should consult with a qualified bankruptcy attorney before taking the next step.  Good luck.

Giovanni Orantes · Answer

Unless there are other facts that you have not disclosed, it does appear that you likely qualify for a Chapter 7 now while protecting all the assets you mention and more. As you seem to realize, you may not qualify later.

Edward Olson · Answer

There is not enough information here to make a recommendation.  Bankruptcy is intended to provide the honest but unlucky debtor a "fresh start", financially speaking.  You need to speak with a bankruptcy attorney and go over ALL of your finances before you decide to file or wait.  Most will provide a half hour free consultation to see if Bankruptcy is appropriate for your situation.

Charles Schneider · Answer

Sounds like a good time to file.

Christiaan Mauritz Van Niekerk · Answer

Yes you can keep everything and still get rid of your debt but do it through an attorney.

Gregory Wald · Answer

Your eligibility for Chapter 7 is based in large part on your average income for the past six months.  If you have been unemployed for at least a month or two, then this probably is a good time to file Chapter 7.  However, an attorney would need more information to give you good advice on whether to file now.

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