A question about my filing process

[IBroke]

Hi,

I'm just figuring out if this would work in theory:

I'm currently planning my timely schedule for my CH7 filing. I'm currently dealing with 2 obstacles:

1. A joint car-loan with my mother which I DON'T want to include in the BK-filing.

2. A notice of deposition where I'm ordered to appear on 09/24/2010.

Initially, I have planned to pay off the car-loan with a settlement-check my mother, the co-signer, received. Unfortunately, the sum is smaller than we expected. It covers the attorney-fees and anything else as planned - but I'm short a few $$ on the car-loan. So I would need a little more time.

So here is what I've been thinking of:

If possible, I would have my attorney file CH7 a few days prior to my scheduled deposition. Since these depositions are considered "an attempt to collect a debt", I wouldn't be required to answer any questions due to the BK-protection. Since I don't have the full amount to pay off the car prior to the filing, I would list the car as debt with the intention to redeem. As soon as we have the funds available to pay off the car, my mother is going to pay off the car and we are going to take her off the title. After that, I'm asking my attorney to "adjust" my filing (prior to the court date, of course) to list the car as my asset instead of liability.

If this would buy us an additional 30 days to gather the funds for the car AND would "protect" me from the deposition AND would keep the "IIB"-notation off the car-loan, I would be SUPER-HAPPY.

So what do you guys think? Does that work?

[backtoschool]

If your name is on the car loan and the title now, then half the equity in the car is part of the bankruptcy estate and needs to be exempted.

You cannot exclude ANY debt from your petition. All debt is included, even if it mostly paid off.

Paying off the car before filing, even if it is with your mother's money will surely be caught by the trustee if your name is on the loan too. They payment will go towards your half of the equity and will become an asset of the estate that will have to either be exempted or will be distributed to creditors.

Payment of the car by your mother after filing, will also make the car an asset of the estate that will either have to be exempted or will be used to pay off creditors.

Transfers of titles within a year of bankruptcy are a huge red flag.

[IBroke]

If your name is on the car loan and the title now, then half the equity in the car is part of the bankruptcy estate and needs to be exempted.

You cannot exclude ANY debt from your petition. All debt is included, even if it mostly paid off.

Paying off the car before filing, even if it is with your mother's money will surely be caught by the trustee if your name is on the loan too. They payment will go towards your half of the equity and will become an asset of the estate that will have to either be exempted or will be distributed to creditors.

Payment of the car by your mother after filing, will also make the car an asset of the estate that will either have to be exempted or will be used to pay off creditors.

Transfers of titles within a year of bankruptcy are a huge red flag.

There is obviously a misunderstanding here. The transfer of the title will actually be a DISadvantage to me. I don't want to transfer my part of the car to my mother - we want to transfer HER part to ME so that the car - an 11 year old 116K mile car with a very low value - becomes MY asset in the BK-process. What "red flag" should that raise? It will be MY car and listed as MY asset and will be covered by MY exemptions due to its low value.

What I wanted to know is if I can change my filing/schedules after I have filed to show this change of posession prior to the court-date (from listing it as liability to listing it as an asset - just as I explained in my previous post).

I don't have anything to cover/hide. I'm unemployed and don't have any assets besides the car. My case will be a CH7 no asset.

[hawk25]

If your name is on the car loan and the title now, then half the equity in the car is part of the bankruptcy estate and needs to be exempted.

You cannot exclude ANY debt from your petition. All debt is included, even if it mostly paid off.

Paying off the car before filing, even if it is with your mother's money will surely be caught by the trustee if your name is on the loan too. They payment will go towards your half of the equity and will become an asset of the estate that will have to either be exempted or will be distributed to creditors.

Payment of the car by your mother after filing, will also make the car an asset of the estate that will either have to be exempted or will be used to pay off creditors.

Transfers of titles within a year of bankruptcy are a huge red flag.

I never took into consideration the half equity concept. Lets say our house has 10k in equity, and I am married but not filing jointly, does that mean that I have 5k of equity to exempt instead? Is this a federal law or does it vary state by state?

[IBroke]

I never took into consideration the half equity concept. Lets say our house has 10k in equity, and I am married but not filing jointly, does that mean that I have 5k of equity to exempt instead? Is this a federal law or does it vary state by state?

I do know from the meeting with my attorney here in Florida that if a car is owned jointly, only have of its value goes towards your exemption. It is important what the title says - "OR" or "AND" between the owner-names.

[backtoschool]

There is obviously a misunderstanding here. The transfer of the title will actually be a DISadvantage to me. I don't want to transfer my part of the car to my mother - we want to transfer HER part to ME so that the car - an 11 year old 116K mile car with a very low value - becomes MY asset in the BK-process. What "red flag" should that raise? It will be MY car and listed as MY asset and will be covered by MY exemptions due to its low value.

What I wanted to know is if I can change my filing/schedules after I have filed to show this change of posession prior to the court-date (from listing it as liability to listing it as an asset - just as I explained in my previous post).

I don't have anything to cover/hide. I'm unemployed and don't have any assets besides the car. My case will be a CH7 no asset.

I am sure you are not trying to cover or hide anything.

But transfers of property and assets between relatives is one of the biggest red flags the trustee looks for, going either to your mom or from your mom.

Any changes in assets especially between family members will cause the trustee to look more closely at your petition. Adding an asset that you have exemptions for should be fine, as long as your mother did not pay for the car with money that you cannot exempt as well. The problem is that you are paying off the car with your mother's settlement money, not your money, and so if your mother transfers the title to you, you will have to account in detail for the transfer of money, the payment of the car, and the transfer of the title to you. All of this will be looked at closely by the trustee, although you will most likely not have a problem in the end.

[LadyInTheRed]

So, the settlement check is only to your mom, right? Not to you? Is it big enough to pay of the car loan? If you are unemployed, why are you so worried about a deposition? (I'm assuming it's a debtor's exam by a creditor who already has a judgement) Why not let her pay off the car loan and wait to file until you can save enough for your attorney fees? You may even be able to get the deposition delayed.

[LadyInTheRed]

The problem is that you are paying off the car with your mother's settlement money, not your money, and so if your mother transfers the title to you, you will have to account in detail for the transfer of money, the payment of the car, and the transfer of the title to you. All of this will be looked at closely by the trustee, although you will most likely not have a problem in the end.

But, without a title change, if mom pays the debt with her own money, I don't think there's a problem. She is a co-signor, so it's her debt too. Maybe I'm missing something, but that seems like the simplest solution.

[backtoschool]

I never took into consideration the half equity concept. Lets say our house has 10k in equity, and I am married but not filing jointly, does that mean that I have 5k of equity to exempt instead? Is this a federal law or does it vary state by state?

If your spouse is on the mortgage and the title/deed etc, then your spouse owns half the house. You will only be able to claim your half of the equity, in most cases unless your district and state allows a tenancy by entirety to be filed and that is filed before you file for bankruptcy.

If your district is allowing tenancy by entirety and you have filed the proper papers before you file bankruptcy, then you can claim the entire 10k in equity. If your district does not allow tenancy by entirety, then you can only claim 5k.

[backtoschool]

But, without a title change, if mom pays the debt with her own money, I don't think there's a problem. She is a co-signor, so it's her debt too.

Yes, but the OP wants to do a title change while the bankruptcy case is still open.

[LadyInTheRed]

Yes, but the OP wants to do a title change while the bankruptcy case is still open.

But he hasn't filed yet. As I understand it, the goal is to protect mom from the BK. I didn't understood the point of the title transfer in the first place. I agree that part is not a good idea, but I don't think it's necessary to accomplish the goal.

[IBroke]

So, the settlement check is only to your mom, right? Not to you? Is it big enough to pay of the car loan? If you are unemployed, why are you so worried about a deposition? (I'm assuming it's a debtor's exam by a creditor who already has a judgement) Why not let her pay off the car loan and wait to file until you can save enough for your attorney fees? You may even be able to get the deposition delayed.

The settlement was only to my mom. Unfortunately, I'm a couple of hundred $$ short to pay off the car. I can pay my lawyer so I could at least get the process rolling. I'm not too worried about the deposition itself but the fact that the earlier I file, the earlier I would get my possible discharge comes into play as well. You are right, it is from a CC judgement and it is already the second deposition I have to show up for this particular creditor. They do that every year and ask questions about my relatives and their financial circumstances, too. I'm just tired of telling them how much pension my grandmother in Germany gets (yes, that was one of their questions) and providing them with a full year of cell-phone bills with the numbers of my family and private contacts). I already had the deposition rescheduled and they were so kind to schedule the upcoming deposition on my birthday..

So I thought it would be nice if I could provide THEM with a nice birthday-present - my CH7 filing.

I often read on the forum that members should contact their lawyer to have him/her make some changes to the petition so I thought I could do that as well.

The value of the car is $3000 at best and according to my attorney, I can exempt assets in the amount of $6000. I have a few DVDs and CDs and a TV. I'm still living at home so the furniture doesn't even belong to me.

I really don't want to hide anything. I simply want to avoid a "IIB"-notation on that car-loan and want to have it fully protected under my BK-filing as my asset. The problem is that if I leave the car in a joint-ownership, it becomes a "lien-potential" for my mother's judgement-holders as well. They might be tempted to file a lien as soon as it is paid off. That's why I'm willing to perform a transactions that is actually a disadvantage for me when filing - turning my joint-ownership into a full ownership.

[IBroke]

Yes, but the OP wants to do a title change while the bankruptcy case is still open.

True - but I don't want to transfer the title TO somebody else - the title would be transferred to me. Actually, I'm already on the title so my mother would only be taken off. Therefore, I would change the petition to reflect me as being the SOLE owner of the car instead of being a co-signer on the loan. I can't follow your assumption that this would raise a red flag. I'm actually INCREASING my assets by doing so and not the opposite.

[backtoschool]

True - but I don't want to transfer the title TO somebody else - the title would be transferred to me. Actually, I'm already on the title so my mother would only be taken off. Therefore, I would change the petition to reflect me as being the SOLE owner of the car instead of being a co-signer on the loan. I can't follow your assumption that this would raise a red flag. I'm actually INCREASING my assets by doing so and not the opposite.

As long as you have the exemptions to cover the full value of the car, you should be fine.

[IBroke]

As long as you have the exemptions to cover the full value of the car, you should be fine.

Thanks!

The trustee can examine that transaction if he wants to. Since my mother is the co-signer and if I would elect to dump the car in the BK, she would be liable for the loan amount as well. Since it is her liability and debt just as it is for me, I don't think the trustee can object. She is not filing for BK and paying her debt with her own money. After the payment, we receive the title and my mother elects to "opt-out" of the car. I become sole owner and have my attorney adjust the petition accordingly.