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San Antonio Bankruptcy Protection LawyerFor those who have significant debts or who have experienced financial hardship, bankruptcy may provide them with the ability to regain financial stability. After a person files for bankruptcy, the court will place an automatic stay on all collection actions by creditors. This will prevent creditors from contacting a debtor, seeking repayment of debts that are owed, pursuing judgments against a person, taking actions to enforce judgments (such as wage garnishment), repossessing property, or proceeding with a home foreclosure. The automatic stay will provide a person with protection during the bankruptcy process, allowing them to determine the best ways to address their debts. However, there are some situations where creditors or other parties may request to have the automatic stay lifted so they can proceed with collections or other actions against a debtor. By understanding when relief from the automatic stay may be available, a person can determine the best ways to respond to these requests.

Motions for Relief From the Automatic Stay

Most of the time, a creditor will only be able to lift the automatic stay if they can show that there is good cause to do so. Creditors or other parties may file a motion for relief from the automatic stay in cases involving:

  • Secured debts - The most common reasons why creditors seek relief from the automatic stay often involve a desire to protect their interest in property or assets that are in the possession of the debtor. For secured debts, creditors will have a financial interest in the collateral used to secure the debts, and in some cases, creditors may believe that they will be unable to fully recover the amount owed to them. For example, if a debtor has defaulted on an auto loan, the creditor may be concerned that if they are unable to repossess the vehicle, the debtor may take actions that decrease the value of the vehicle, preventing the creditor from being able to recover what is owed. A creditor may be able to lift the automatic stay and proceed with a repossession if they can show that they do not have adequate protection against financial losses and that the debtor does not own any equity in the collateral.

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Schertz Debt Relief AttorneyWhen a person or family has large debts that they are struggling to repay, there are multiple options for relief. In many cases, bankruptcy can provide the best way to eliminate crushing debts. Depending on the type of bankruptcy pursued, a debtor may be required to turn over certain assets, which will be liquidated in order to repay some of the debts owed to different creditors. If a person has a retirement savings account or other types of assets that they expect to use to provide for their needs after they retire, they may be concerned about whether they will be able to maintain ownership of what they have saved or whether their accounts will be seized during the bankruptcy process.

Addressing ERISA Plans and Other Retirement Assets in Bankruptcy Cases

In a Chapter 7 bankruptcy, which is also known as a “liquidation bankruptcy,“ certain assets owned by a debtor may be seized by the bankruptcy trustee. In a Chapter 13 bankruptcy, a debtor usually will not be required to turn over their assets, but they will be required to make payments to creditors over a period of three to five years, and the amount creditors receive through this repayment plan must be at least as much as what they would have received if a person’s assets were liquidated in a Chapter 7 case.

The assets that will be considered during bankruptcy are known as the bankruptcy estate. The U.S.Bankruptcy Code states that employee benefit plans that are covered by the Employee Retirement Income Security Act (ERISA) may not be included in the bankruptcy estate. These include employer-sponsored retirement savings accounts such as 401Ks. Deferred compensation plans such as pensions and tax-deferred annuities will also not be considered when determining the value of a debtor’s assets that may be liquidated during bankruptcy.

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Kerrville Debt Relief LawyerIn cases where a person has extensive debts that they may be unable to repay, bankruptcy can be a good option that will provide financial relief, allowing them to receive a fresh start. However, filing for bankruptcy will require a person to take a complete inventory of the assets they own, and they will need to report a variety of financial details. By understanding what is considered “property of the estate,” a person can determine their best options for receiving relief from their debts while maintaining ownership of as much of their assets as possible.

Assets Included in the Bankruptcy Estate

The filing of a bankruptcy petition will create a bankruptcy estate that includes all money or property that will be considered during the bankruptcy process. Depending on the type of bankruptcy a person pursues, non-exempt assets in the bankruptcy estate may be seized by the bankruptcy trustee in their case. In a Chapter 7 bankruptcy, assets may be liquidated, and the proceeds will be used to repay their creditors. While a Chapter 13 bankruptcy usually will not require a person to turn over their assets, they will need to repay creditors an amount equal to the value of the non-exempt assets in the bankruptcy estate.

The U.S. Bankruptcy Code details the types of assets that are considered to be property of the bankruptcy estate. These include all of the physical property a person owns, as well as their financial assets or interests. If a person is married, the community property they own together with their spouse will be considered property of the estate, even if a person is filing for bankruptcy separately from their spouse. Property of the estate also includes:

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Schertz Bankruptcy LawyerIf you are experiencing financial difficulties, you may be struggling to make payments toward multiple different types of debts and expenses. In these situations, it can be understandable to prioritize expenses that are absolutely necessary, such as rent, utilities, gasoline, and groceries, and you may have been unable to make other types of payments. In addition to getting behind on credit cards or other debts, you may have been unable to make payments toward domestic support obligations, such as child support or spousal support that you are required to pay following a divorce. While bankruptcy may provide you with some financial relief and allow you to regain financial stability, you will need to be sure to understand how it will affect the support payments that you owe.

Bankruptcy and Domestic Support Obligations

When you owe child support or spousal support, the recipient of these payments is considered to be one of your creditors. You are legally obligated to make all required payments, and if you get behind on payments, you must pay the full amount owed, and you may also be charged interest. 

While bankruptcy will allow you to eliminate some debts, different creditors are treated differently during the bankruptcy process. Domestic support obligations are considered priority debts, and unlike some other debts, they cannot be discharged through bankruptcy. However, you may be able to discharge some other debts and create a plan that will allow you to repay the amount you owe to your ex-spouse or your child’s other parent. 

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Kerrville Bankruptcy LawyerIf you are struggling with debts, you will want to determine the options for debt relief that may be available, including bankruptcy. However, as you prepare to file for bankruptcy, you will need to be aware of certain issues that could affect you. One factor that may be considered involves any payments that you made prior to filing for bankruptcy. In some cases, these may be considered “preferential payments” that could complicate the bankruptcy process and affect your ability to discharge your debts.

What Are Preferential Payments?

When preparing for bankruptcy, it may seem to make sense to make payments toward some of your debts and pay off some of what is owed to different creditors. However, the bankruptcy laws prohibit preferential treatment of creditors. Payments made to one creditor may affect other creditors’ ability to recover what is owed to them, and in some cases, some or all of these payments may need to be returned.

Generally, a payment to a creditor may be considered a preferential payment if it was made toward a pre-existing debt, the debtor was insolvent when the payment was made, and the creditor received more than they would have received through the liquidation of the debtor’s non-exempt assets in a Chapter 7 bankruptcy

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