If You Need Bankruptcy Help Here are the Guidelines You Need to Meet Under BAPCPA

We offer bankruptcy help to families throughout California.  It is common for clients to ask us if they will qualify given that the bankruptcy laws changed a few years ago.  In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed at the federal level and now anyone that wants to file needs to meet those guidelines in order to do so.  There are multiple components to this legislation.   It aims to protect consumers by educating them and better prepare them to manage their finances, take discretion away from judges, and protect creditors by making sure people aren’t constantly filing for bankruptcy.  We have found that most of our clients still qualify under the new guidelines.  

Here is what you need to know:

Time Delays: If you have filed bankruptcy in the past, there are rules for how long you need to wait before you can file again.  This can range from two years to eight years, depending on the type of bankruptcy filing you did before.  We can review your case and let you know if you have waited long enough. 

Credit Counseling: Before you are allowed to file for bankruptcy you now need to take a mandatory credit counseling class.  This can be done online 24/7 or over the phone and only costs around $50.  It takes an hour, so this isn’t much of an inconvenience.  If you can’t afford a class, they have to let you take it for free. If you have more questions about the course, call us for bankruptcy help. 

Means Test: Before, a judge had the discretion to determine if you should qualify for bankruptcy based on your income and expenses.  Now, there is an eight-page document that needs to be filled out that uses the income you earned over the past six months and includes mandatory deductions.  It also has a provision for qualifying under the median household income guidelines.  In Riverside, CA the average household income is $57,096 according to the U.S. Census Bureau.  This means that most families in the area would qualify since a couple with four children only needs to make less than $80,910.  This has made it easier for most families to qualify and for those that make more than the median income; they can still qualify by using the standard deductions. 

Debt Management: If your bankruptcy gets approved, you have to participate in a debt management course. This course teaches how to manage finances and debt payments so that going forward you are less likely to need to file bankruptcy again.  We have found that people, who seek bankruptcy help, generally like this course because it provides tools they can use later on and most of our clients want to use this as a fresh start that doesn’t have to be repeated.

We understand that the bankruptcy laws can be confusing and will help you to successfully navigate through them.  For more information or a consultation, give us a call. 

A Bankruptcy Lawyer Can Help to Protect Your 401k

If you need to eliminate debt, a bankruptcy lawyer can help you to do so while preserving some of your assets.  There are various assets that are protected under bankruptcy laws, as long as a judge approves your filing.  For example, your primary residence can be protected so long as your equity doesn’t exceed the threshold.  You may also be entitled to keep your vehicle.  In both scenarios, you would be responsible for making the monthly payments if you are allowed to keep the property.  In other words you can’t keep an asset and eliminate the debt on it at the same time.

Simultaneously, your 401k and other retirement funds are typically protected assets.  Even if your 401k has enough money in it to pay off your credit card debt, you may be able to wipe away the debt while keeping your retirement account intact.  This is a huge benefit for people that don’t want filing for bankruptcy to negatively impact their financial future as they age. 

In order to make sure that your 401k is protected, you should get legal advice from a bankruptcy lawyer.  While in general your retirement funds are safe, every case is different so you will need specific legal advice.  One important thing to keep in mind is that the funds need to stay within your account in order to be protected.  If you transfer money out of your 401k into your checking account, those funds become fair game because they could be used for daily expenses.  It is extremely important to keep this in mind and leave the funds alone before, during, and after your bankruptcy filing.

The same holds true for any property that you purchased using your retirement funds.  If, for example, you withdrew retirement funds to purchase a second home, it would be up for grabs as the funds used to purchase it would not be protected.  If you are even considering filing for bankruptcy, do not touch your retirement funds.

If you have a different type of retirement account, it may be protected as well as long as it qualifies under the Employee Retirement Income Security Act (ERISA) since the Supreme Court has ruled that funds can't be transferred to pay creditors. IRAs that are non-ERISA accounts are protected under federal law up to $1,245,475.  This is a considerable amount of money and makes it easier for people to file bankruptcy that have a significant amount of funds in their retirement accounts. 

As a bankruptcy lawyer, we understand how the laws can be complicated and it is our job to help you navigate through them successfully.  By understanding the laws and working within them, you can keep many of your assets while eliminating your debt.  This can put you on the path for a successful financial future and we will help you to make this happen by providing excellent legal representation.  To learn more and to find out if you would qualify for bankruptcy, give us a call.