What if you have assets during a Chapter 7 Bankruptcy in Manhattan: Dont be Greedy!
by: Daniel Gershburg, Esq.
Lets be real. No one necessarily wants to file for Chapter 7 Bankruptcy in Manhattan as a first step. Its obviously a last resort. You’ve gotten yourself into a ton of debt and there doesnt seem to be a way out. But you have to take practical steps if you want to move forward during the process if you don’t want any issues.
What am I babbling about? Well, under the Bankruptcy Code, you have certain exemptions, meaning you can keep a certain percentage of your stuff when you file for Bankruptcy and the creditor and Trustee cannot get their hands on it. Some examples include $50,000 in home equity in your home, $2400 from a Bank Account, all of your IRA’s, 401k’s etc. However, lets say you have some cash in the bank above that $2400 and you really need to get this Bankruptcy filed. Dont hide it or move the money. Don’t try and be crafty and put it into someone elses account. Just let it go. You heard me. Let it go.
Lets say you had $100,000 in debt. Not a crazy figure and I see it everyday in my Brooklyn office. If I told you I could get rid of $100,000 in debt for $5,000, chances are, you’d kiss me (ethically inappropriate under most circumstances.) However, the problem is many clients will try and save their very last dime from the Trustee, and thats just not a great way to go about doing things. If you have $7000 in your bank account because you saved a couple of bucks, protect the $2400 and give the rest to the Trustee during the Bankruptcy filing. The Trustee will be happy, which means less problems, if any, for the Bankruptcy, and for that amount of money you’ve known gotten rid of about $100,000 in debt.
It seems counterintuitive to us. Why give up money when we can “protect” it. I get that. The problem is the amount your protecting as a percentage of the debt you’re being forgiven is minimal. The trade off is absolutely amazing. So my advice is not to mess up this amazing tradeoff but trying to keep every last dollar. It will only cause problems for you and your attorney in the actual case. Of course, like anything Bankruptcy related, there are many caveats to discuss, but in general I think you get the idea.