Exempt Debts and Debtor Assets in Chapter 7 Bankruptcy

David Gomez provides coordinated estate planning services with the Platinum Law Group in Baltimore, Maryland. Experienced in bankruptcy law, David Gomez and the Platinum Law Group have extensive knowledge of Chapter 7 bankruptcy. 

For those who are considering bankruptcy, one aspect to factor into their decision is whether they qualify for liquidation bankruptcy, which allows the elimination or discharge of their full range of eligible debts. Types of debts that often cannot be fully discharged include taxes owed, student loans, child support, and those related to criminal convictions and DUI-caused injuries. 

In rare situations, debtor assets may be employed by the trustee in satisfying debts. Vehicles that are exempt include the full range of retirement accounts, from deferred compensation 401k to stock bonus and profit sharing plans. In addition, the primary vehicle and house claimed as the primary residence are exempt up to specified equity limits, as are single household items such as antiques valued at less than $675.

Tax Changes Mean Bankruptcy Changes

Platinum Law Group and David Gomez have helped many people with estate planning and bankruptcy law issues. From their offices in Baltimore, David Gomez and Platinum Law Group enable people to erase their debt and get their financial lives back on track.

Changes in the tax code in 2018 affect the way individuals file bankruptcy, especially those with high incomes. High earners stand to receive a significant tax cut, which can affect their deduction on the bankruptcy “means test” and free more income to pay creditors.

The bankruptcy means test tells the government the amount of disposable income a filer can pay to creditors. People with little or no disposable income can often file Chapter 7 bankruptcy, which is more forgiving than Chapter 13 bankruptcy. 

In Chapter 13 bankruptcy, disposable income is put toward a payment plan but can be reduced further by certain deductions. These deductions will also be reduced by the new tax plan.

As a result, high earners filing for bankruptcy are more likely to need to file Chapter 13 instead of Chapter 7. Chapter 13 filers will also likely end up paying more on their bankruptcy payment plans. People below the median income, however, should experience little change in the way they file bankruptcy.

Selecting the Right Type of Bankruptcy

David Gomez and the professionals at Platinum Law Group help their clients with bankruptcy issues and estate planning. Platinum Law Group and David Gomez have advised many clients on bankruptcy issues.

Debtors who initiate the filing for bankruptcy can choose to file in multiple ways, with the most common for individuals being Chapter 7 and Chapter 13. In Chapter 7 bankruptcy, all assets are liquidated and as much debt is paid off as possible. The proceeds from these sales are given to creditors such as banks and credit card companies. Within four months of liquidation, the filer receives a notice of discharge. 

Chapter 7 bankruptcy does not protect any assets, so people who want to keep a family home or a company should think carefully before they file Chapter 7. People with few assets should consider Chapter 7 as the preferred type of bankruptcy.

In Chapter 13 bankruptcy, filers who have a consistent annual income can retain some assets and pay off as much debt as possible within a period of three to five years. After completing this repayment period, any remaining debts are discharged. 

A Chapter 13 bankruptcy provides some protection from creditors during the repayment period. Debtors should choose this form of bankruptcy if they have assets they need to protect, such as a house.

How the Estate Tax Works

Platinum Law Group and David Gomez handle estate planning and bankruptcy cases in Baltimore, Maryland, and the surrounding area. David Gomez and Platinum Law Group work to minimize the impact of the federal estate tax for their clients.

An estate tax accounts for all things a party owns at the time of death as well as certain other financial interests. These items are given their current fair market value and totaled to become the gross estate. 

Insurance, trusts, business interests, real estate, cash on hand, and other assets are subject to the federal estate tax. Most taxable estates are small enough that no estate tax return needs to be filed. As of 2018, an estate tax return should be filed only if the estate has combined gross assets and taxable gifts worth more than $11,180,000.

Strategies When Filing for Bankruptcy

David Gomez serves the Platinum Law Group and provides dedicated bankruptcy and estate law services to clients in Maryland. Forward focused, David Gomez and the Platinum Law Group have a strong knowledge of bankruptcy as a strategic way of dealing with persistent and insurmountable debt. 

Filing bankruptcy offers a lifeline of easing immediate debt and allowing people to look ahead toward sustainable retirement planning once again. The arithmetic is simple: interest on debt principal that has grown to a point where it can never realistically be paid back takes away from money that could be saved and invested productively. 

Before filing for bankruptcy, make sure not to engage in unusual or large repayments of debt, particularly to single creditors, friends, or family members. In certain cases, these can be considered “preferential transfers,” in which one creditor has received an unfair benefit over others, with the creditor sued in court and forced to transfer the money to others. 

At the same time, don’t suddenly run up new debt once the decision has been made to file for bankruptcy. Consequences of this include the new creditor claiming fraud, as a bankruptcy filer can run up a balance, take out a new loan, or open a new line of credit, without planning to pay it back. This debt could potentially be considered nondischargeable and owed in full within bankruptcy proceedings.

Chapter 13 Bankruptcy Fundamentals

Since 2010, David Gomez and Platinum Law Group have assisted clients deal with their legal challenges. David Gomez and Platinum Law Group offer a variety of services, including filing for chapter 13 bankruptcy. 

Also known as a wage earner’s plan, a chapter 13 bankruptcy allows an individual with a regular income to create a plan that will enable the partial or full repayment of debts. The repayment plan involves making regular payments over a period of three to five years. It will be a three year payment plan if the current monthly income of the debtor is below the applicable state median, though the court can approve a lengthier period “for cause.”

If the current monthly income of the debtor is above the applicable state median, then typically the plan will be for five years and in no cases will it be longer than five years. During this period, creditors are forbidden by law from initiating or continuing collection activities. Filing for chapter 13 bankruptcy involves knowledge about many fine points in the law, and seeking counsel from a qualified legal expert is advised.

Calculating Federal Estate Tax

David Gomez and the Platinum Law Group provide bankruptcy counsel to clients. Besides bankruptcy, David Gomez and the Platinum Law Group also provide estate planning services to help clients reduce their estate tax burden. 

Estate tax is a form of tax paid by a decedent’s estate. It is often considered a tax on the right to transfer property to descendants or other heirs. It is imposed at the federal level, though some states also levy an estate tax. 

The estate tax due is calculated from the net value of a deceased person’s estate. First, the decedent’s gross estate is calculated by adding probate assets such as individual accounts and shares in property to non-probate assets such as IRAs and life insurance. Afterward, the gross estate figure is reduced by funeral expenses, estate administration expenses, and claims against the estate. Marital deductions and charitable deductions are also made. Afterward, taxable gifts are added and the result is the taxable estate value. It is to this figure that the estate tax rate is applied to calculate the estate tax liability.

MySmartMoney Provides Resources for Financial Planning and Assistance

Located in Baltimore, Maryland, David Gomez and the Platinum Law Group provide bankruptcy and estate planning legal services. Dedicated to supporting its clients and the community, the Platinum Law Group contributes to the nonprofit organization United Way Worldwide. Programs offered by the organization include MySmartMoney.

Maintained online via a partnership with the SunTrust Foundation, MySmartMoney helps people become financially secure and lead lives free of financial burden. The platform offers access to a variety of financial planning and assistance resources designed to encourage financial responsibility and confidence. Educational materials include information on developing financial planning goals at each stage in life, from starting a job and living independently to starting and providing for a family. People in need of immediate financial assistance can learn about resources for paying bills, taking care of emergency expenses, and addressing other sources of financial instability. Resources also help individuals whose identity has been stolen, as well as those who cannot afford health care.

MyFreeTaxes.org Offers Free Tax Filing to Low-Income Households

David Gomez and the Platinum Law Group, LLC, handle personal injury, bankruptcy, and tax estate planning cases. Beyond its daily operations, the Platinum Law Group supports United Way, which partners with H&R Block, Inc., to offer the MyFreeTaxes.org program to low-income households.

While many tax-filing programs and services offer free filing for federal taxes, they charge a fee for state taxes. Anything beyond basic-level filing may result in additional fees. MyFreeTaxes.org offers families and individuals with free filing services if they made less than $66,000 in 2017, regardless of whether they have multi-state filings or earned income on the side or from investments.

The program utilizes H&R Block’s premium software, which scans for entitled tax credits and ensures that users obtain their maximum refund. Designed for security and ease of use, the software also connects users with IRS-certified specialists to address user questions and concerns.

United Way’s Born Learning Initiative Supports Early Learning

David Gomez and the Platinum Law Group provide legal counsel on estate planning and bankruptcy law. To give back to their community in Baltimore, Maryland, David Gomez and the Platinum Law Group support a number of charities. Among these is United Way and its program, Born Learning.

Born Learning, an initiative by United Way and its partner organizations, upholds a mission to help parents and caregivers prepare their children for education. Many parents know the importance of doing so, but few know exactly how to do it. Children without the support of parents or caregivers--especially those in underserved areas--are more likely to experience low achievement and graduation rates.

Born Learning empowers both parents and caregivers with the resources and learning materials they need to understand childhood development. It also educates them on the “everyday moments” concept of learning preparation, in which parent-child interactions are merged with educational concepts to help children learn. For example, a parent can play a numbers game with their child while folding clothes. Born Learning also provides tools to accelerate early learning in various communities.