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Archive for May, 2010
Educational Savings Account § 529
One pitfall for debtors contemplating bankruptcy is contributing to an Educational Savings Account one year before filing for bankruptcy. Generally, contributions to an education IRA under section 529 of the Internal Revenue Code (IRS) are excluded from the bankruptcy estate. However, there are exceptions. Under the bankruptcy code, 11 U.S.C. 541(b)(6), contributions made within one year before the petition is filed are not excluded. Contributions greater than $5,850 per beneficiary made between two and three years before the petition is filed are not excluded either.
All is not lost if you fall into one of these exceptions. You can still exempt these contributions under the wildcard exemption if sufficient amount is available. Lesson learned – when contemplating bankruptcy contact a bankruptcy attorney before making any financial decisions.
Steven Striffler
Attorney At Law
21 McGrath Hwy, Suite 301
Quincy, MA 02169
617-290-1573
www.strifflerlaw.com
Practice is Focused on Bankruptcy & Construction Law
Chapter 7 bankruptcy involves liquidating assets to pay back creditors in exchange for a complete forgiveness or discharge of most debts. Among other duties, bankruptcy trustees are charged with the responsibility of evaluating a debtor’s assets to see whether there is anything of significant value that can be sold to pass on to creditors. Absolutely everything you own must be disclosed, however, only non-exempt property is subject to sale. It is important to understand that a bankruptcy trustee will primarily be interested in property that has equity. What is equity? Equity is the value of property after any debt that encumbers it has been subtracted from the overall value. For example, a car that has a blue book value of $20,000 with an outstanding loan balance of $15,000 has roughly $5,000 of equity.
If John W files bankruptcy owning a car with no equity (meaning he owes more than the car is worth) the bankruptcy trustee has nothing to distribute to creditors and will not come after the property. Any money gained from a potential sale of the car would be owed to the car lender. If y
Underwater On A Second Mortgage? Consider Modifying It In Bankruptcy To Lower Payments
The housing crisis is in full swing with unfortunately no end in sight. Your nationally chartered bank has recently notified you that you don’t qualify for their new “when pigs sprout wings” mortgage modification program. You have a second and third mortgage, not to mention a first mortgage that alone exceeds the value of your home. Stress is mounting and fast. You are as they say “underwater.” Your kids are in the school district of your choice, neighbors are great and your spouse loves the house. In other words, you do not want to surrender the home. If I’m wrong in this assessment and you’d like to walk away from an underwater home, click here. If your preference is to stay in the home continue reading.
Few people are aware that second and third mortgages can be stripped or modified by filing chapter 13 bankruptcy. If you are underwater on your first mortgage, your second and third lien can be removed through the bankruptcy process often reducing your monthly mortgage payments significantly. In addition,