California Bankruptcy Law » Common Mistakes

Be careful! Don't have money where you owe money.

Malcolm Ruthven — Sat, 24 Jul 2010 14:13:16 +0000

If you have money deposited where you also owe money, you might find that your deposited money is gone. I wrote over a year ago about how if you file bankruptcy, a place where you owe money might take the money you also have deposited there (article), but it doesn't necessarily take filing bankruptcy to trigger that result. If you're delinquent on a credit card debt, that credit-card bank may take the money owed from any deposits you also have with that bank without waiting for you to file bankruptcy. It's called a "right of set-off" and is a complex subject; the simple version is don't let yourself get caught by it.

But, you say, I'm current on my ABC Bank credit card; so what's wrong with also having money deposited with ABC Bank? Do you know that you'll always be current with that credit card? Do you know you won't get delinquent for some reason and, by that time, forget that you also have money deposited there. Do you want to take the risk?

It can get trickier than that. You have a deposit account at a branch of DEF Bank; you don't have any DEF Bank credit cards. Surprise! One day you find that your money is gone from that account. What happened? You have a delinquent credit card account with GHI Bank and some point GHI Bank was bought by or merged with DEF Bank. Bingo, DEF and GHI are the same bank and your money is gone. So be very careful out there.

http://ca-bankruptcylaw.com/2009/05/i-just-filed-bankruptcy-wheres-my-money/

You just negotiated a $10,000 debt down to $2,000!

Malcolm Ruthven — Thu, 13 Aug 2009 00:07:12 +0000

You just negotiated a $10,000 debt down to $2,000. Isn't that great? Well, maybe not. Here's the short version of a possible outcome.

1. That creates an $8,000 taxable event, which means that you have $8,000 additional taxable income.

2. You’ve just spent $2,000, you still have bad credit (actually, worse), and you still owe everything else including the additional income tax.

The moral of this story? Think very carefully before you start to negotiate debts with creditors. It might not be in your best interests to do so.

Can't I just transfer the title of my car to my sister?

Malcolm Ruthven — Sun, 31 May 2009 14:05:04 +0000

I've heard that question, or one like it, many times. A similar version is "What if I just don't list my diamond ring?" The thought to somehow prevent certain assets from being a part of the bankruptcy process seems to be very common. My short and dramatic answer to these questions is "Do you like wearing an orange jump suit?" because bankruptcy fraud is a felony. Even if such actions didn't result in a felony charge in a particular case, they would very likely result in losing any bankruptcy exemptions (amounts not available to creditors) that would have been allowed on those items. Some courts have also held that the debtor can be charged with attorney fees and other costs incurred by the bankruptcy trustee as a result of the debtor’s attempt to conceal assets. If you're considering filing bankruptcy and have any thoughts such as those that started this article, you really need to change your thinking.