Wednesday, March 19, 2008

Bankruptcy Joint Debts and Property

If I am discharged for a joint debt, what happens to the cosigner?

Your cosigner's liability for the debt is not effected by your discharge.
Cosigners are almost always joint and severally liable. This means the creditor can collect the entire debt from any person who has signed for the debt. If one of the signers receives a discharge, the creditor will still be able to collect the entire debt (plus interest, attorneys fees and collection charges, if the contract provides) from the other signers.

There has been a firm of collection attorneys aggressively pursuing me for a debt that was given to my ex-husband according to the terms of our divorce. Why are they coming after me when they know it's his debt?

The division of debt in the divorce decree affects only you and your husband. If your husband does not pay the bill, the creditor may come after you for the entire debt. You may have an action against your husband for his violation of the court order, but you may be no more successful in collecting from him may be no better than the creditor who has apparently decided that you are a better target.

Can I protect a cosigner?

If you file Chapter 13, a co-debtor stay automatically goes into effect prohibiting creditors from collecting consumer debt from co-debtors. In order to maintain this protection, your Chapter 13 plan must provide for payment of the entire debt and interest.

My husband and I divorced nearly a year ago and he was supposed to take over the credit cards part of the divorce agreement but he later found out that the bills were too much. I am unable to pay back the loans and credit cards. I have tried several times during the year to get him to go for bankruptcy but he will not do it. Can I do it and settle the debts for the final time?

Yes, you can file and discharge (or cancel) your debt under either Chapter 7 or Chapter 13 bankruptcy. However, if you and your husband are divorced, you cannot file bankruptcy together--each of you would have to file separately. If you ex-husband files, his debt would be eliminated, but creditors would still be able to pursue collection against you. You, of course, could file and seek to discharge your liability for those debts.

My wife and I are getting divorced but we have not gone through the process yet and I was wondering if I file for bankruptcy for myself will it affect her if our divorce has not been finalized yet?

Bankruptcy filed by one spouse can affect the other spouse if there are community debts or community assets. In Arizona, assets earned by either party during marriage are property of the marital community.

Will my filing Chapter 7 personal bankruptcy effect my spouse's or my own I.R.A. accounts, cash value life insurance accounts, or jointly owned land?

In general, your filing bankruptcy will not effect your spouse's property. In Chapter 7, the Trustee will be able to take property which you own if it is not exempt. The Trustee cannot take property of your spouse even if it is not exempt.

Unfortunately, the answer is not so easy if you own propety with someone else, including your spouse. Whether the property may take only your interest in the property, or all of the peroperty depends on the nature of your ownership in it.

Jointly owned property. If you own property jointly with anyone, including your spouse, the Trustee may take your share of the property. The Trustee cannot take the joint owner's share. However, dividing the property between the joint owner and the Trustee may require that the property be sold.

Community property. Community property is property which is acquired through the earnings of you or your spouse during marriage. It can be taken by the Trustee and used to pay debts for which the community is liable. Whether the community is liable depends upon state law.

The most common property owned jointly or as community property is a home. Since Arizona has a relatively generous homestead exemption of $150,000 , we do not often have to deal with the problem of the Trustee seeking to take a home.

You should be able to keep your SEP-IRA & 401K plans. In Arizona, IRAs are exempt--except for deposits made within 6 months before filing--and ERISA plans (which 401k and other retirement plans would ordinarily be) are also protected--if the documents that created them contain properly drafted spendthrift protection.

In Arizona, the cash value in your life insurance is exempt up to $20,000, if you name the proper beneficiaries and meet the other requirements to claim the exemption.

Monday, March 10, 2008

What Counts as Income for Calculating Child Support?

By James Jennings

What counts as income for calculating child support?

Usually gross income from the following† :

Severance Pay
Worker’s Compensation Benefits
Unemployment Insurance Benefits
Income from a Business
Disability Insurance (including Social Security disability)
Rental Income
Social Security Benefits
Trust Income
Capital Gains
Recurring Gifts
Spousal Maintenance (alimony)

Gross Income does NOT include benefits from public assistance programs such as Temporary Assistance for Needy Families (TANF), Supplemental Social Security Income (SSI), Food Stamps, and General Assistance (GA); and, it does not include child support payments received.


Sunday, March 2, 2008

Your Finances & Divorce

By James Jennings

Common financial mistakes of a divorce.

Financial victim:
If you suspect that your spouse is planning to divorce you. You should make copies of all important financial records. Making copies of bank statements, charge account statements, titles and deeds should be a top priority, if you think that your spouse may sell off a re-title marital assets. You should notify the holder in writing and acquire restraining order from the court. You should also watch out for cash in joint checking and savings accounts. I've seen many cases where these accounts have evaporated, and people have been left with no way to pay their bills. If these assets are taken, legal or forensic accounting fees could become very expensive.

Emotional attachments:

Try not to get emotionally attached to assets. This is a very common mistake that I have seen cost people more money than it should. Assets like your home or your pension make for emotionally charged debates during divorce negotiations. The fact of the matter is most people can't afford a house, and usually give a low priority to their retirement planning. A house is an asset that has a very low return on investment in most cases. You need to consider that in most cases, homes are a major cash expense because of the mortgage payments. Also don't forget the taxes, maintenance, upkeep, and electricity on a house.

Impact of taxes on your assets:
Consider the value of your assets, as it relates to your spouse on an after-tax basis. Don't make the mistake of not recognizing what Uncle Sam will take. Sometimes, when going through divorce, a financial planner or tax accountant can help you minimize the total tax you will pay. Don't forget you and your spouse are both liable for taxes due on joint tax returns.

Most people while they're going through a divorce or even after the divorce complain about not being able to pay their bills. It is important that you seek the help of a financial adviser to help you produce an accurate and complete budget that will help you after the divorce.

If you have a lawyer don't use them as a therapist, financial planner, or messenger:
Most divorce lawyers charge between $150 and $300 per hour. Lawyers are great for giving you legal advice. However, you should not use them to be your financial planners, emotional support, or career counselor. Most lawyers are not skilled in these areas. If you try to use them for these services you would end up more than likely paying them a lot more for these services, then you would if you hired people that were professionals in these fields.

Failing to develop and after divorce financial plan:
One thing, I think most people fail to realize is that it costs more money to operate two households than it does to operate one. Financial planning can help you transition from a married to a single lifestyle by prioritizing your financial goals. You should develop a realistic expectation and produce a good plan for the allocation of your financial resources.