Chapter 1: About Your Assets

Why you will keep your assets

YOUR MAIN RESIDENCE

For people that own their own home, the first question usually asked is whether they will be able to keep their home if they file bankruptcy. The answer in almost every case is “Yes.” The exemption laws in New York State are very generous. You are entitled to protect $75,000.00 in equity in your home over and above any mortgage liens and home equity loans. For a married couple filing jointly, the exemption is doubled.

If you file a Chapter 7 bankruptcy, you can keep your home so long as you are current on the mortgage and continue to make the monthly payments. You must also continue to pay any home equity loans. If you are behind on your mortgage when you consult with us, we will discuss options (including Chapter 13) for you to deal with the mortgage arrears.

During the interview process, we are going to go over details regarding your property. The following issues will be reviewed:

1. How the property is titled – In most cases, the property will be owned individually or jointly by the client and their spouse. However, there are many other possible scenarios. For example, the property may be owned jointly by the client and another family member, or it maybe owned jointly by the client and a business partner. It is important that we review the form of ownership, and we will ask you to provide a copy of the deed so that we can verify it.

2. When you purchased the property and how much you paid for it If the property was purchased recently, the purchase price is often a good indicator of its present value. In fact, the purchase price for a recently acquired home tends to be more accurate than the tax assessment. Our goal in reviewing this information is to try to place an accurate value on the property. In cases where the value of the property is not clear, we will ask you to obtain an appraisal or a realtor’s “market analysis” of the property. We can generally put you in touch with a local realtor who can perform a market analysis for you at a very reasonable rate. In most cases, an appraisal is not necessary, so it is certainly not something that you have to obtain prior to meeting with us.

3. Mortgages, home equity loans and home improvement loans Most people have a mortgage against their property. We will ask you to provide us with proof of the mortgage balance, so that we can determine the amount of equity that you have in the property. Remember that most equity is exempt, so the main purpose is simply to provide accurate information to the Court regarding the mortgage. If you have a home equity loan or a second mortgage, we will require proof of the balances on these debts as well. In some cases, people have home improvement loans backed by some type of lien or mortgage. If you bring in your original loan documentation, we can generally tell if there is a lien or not.

4. Monthly mortgage payments, taxes and insurance We review this information because we must prepare a budget that discloses all home-related costs. If the mortgage payment does not contain an escrow component, we will ask you to provide copies of current tax bills, and we will divide the annual tax figure by 12. The same holds true for insurance premiums.

5. Whether you are current on the mortgage and taxes Hopefully, all of your payments against the home will be current when you come in to our office. However, if you have fallen behind, relax. In most cases, we can help you deal with the arrears. It is important that you give us accurate information regarding any delinquent mortgage payments or tax payments. We have found that people are sometimes embarrassed to tell us how far behind they really are on their payments. We certainly understand this embarrassment, but we would actually prefer that you overestimate the arrears rather than underestimate. If you need to file a Chapter 13 bankruptcy due to mortgage arrears, the process is similar whether you are one month behind or three years behind. The same is true for delinquent taxes.

6. Whether you have any judgments against you If you have judgments against you, it is very likely that there are judgment liens against your home. This type of lien is similar to a mortgage because, without a bankruptcy filing, you cannot sell or refinance the property without paying it. However, whether you file Chapter 7 or Chapter 13, it is very likely that we can remove the judgment liens against your property. We do check certain online databases that provide us with judgment information. However, these data sources are not always completely up to date. Therefore, if you even suspect that any of your creditors have obtained a judgment against you, we would like you to bring that to our attention during the meeting.

REAL ESTATE OTHER THAN YOUR HOME

In a significant number of cases, clients own property other than their home. Most commonly, clients own multi-family rental property. However, it is not unusual to meet with clients that own recreational land (such as a hunting camp), unimproved vacant land, or even commercial property. Sometimes, your name may have been placed upon property owned by somebody else for estate planning purposes. For example, we very often meet clients who have been added to the deed by a parent (sometimes without their knowledge). Even though you may not consider this to be “your property,” if the deed is in your name, you definitely have an interest in the real estate that must be reviewed.

There is no specific exemption for real estate other than your home. However, the recent changes to the exemption laws in New York State do leave open the possibility of protecting approximately $10,000.00 in equity in any type of real estate. If the value of the real estate exceeds this, it does not mean that you will lose it. However, you may have to file a Chapter 13 plan to protect the non-exempt equity. This is something that will be reviewed with you in detail.

As with your home, you will have to continue to make mortgage payments and tax payments if you wish to keep the property. If you are behind on these bills, the arrears can be handled in a Chapter 13 plan in essentially the same manner as they would be handled for your home.

CARS, TRUCKS, AND OTHER VEHICLES

A client’s car is often their second most valuable asset. If your bankruptcy is handled correctly, there is absolutely no reason that you will have to give up your car or any other vehicle. During the consultation, we are going to discuss each vehicle that you own and obtain the following information:

1. The year, make and model of the vehicle You will be asked to bring a copy of the vehicle title. The title contains the vehicle identification number, and this helps us identify the exact model and trim for the vehicle. Many vehicles (especially pick-up trucks) have many different trim levels and the values can vary significantly. By looking at the “call number” in the vehicle identification number, we can place a fairly accurate value on the vehicle.

2. Automobile loans We will ask you to provide us with proof of the current payoff balance on the vehicle. Most people do not have much equity in their vehicles. In fact, more often than not, they owe more on the vehicle than it is worth. We also need to verify that the creditor has placed a valid lien on the vehicle. If the lien was properly “perfected,” it will show up on the title.

3. Age of the car loan If your vehicle loan was taken out more than two and a half years ago and the loan balance exceeds the value of the vehicle, it is very possible that we can restructure the vehicle loan in the context of the Chapter 13 plan. Essentially, in a Chapter 13 plan, we can “strip off” the portion of the vehicle loan that exceeds the value. The amount that has to be paid back will often carry a much lower interest rate. The payments can probably be lowered as well.

If you claim the New York exemptions, you can protect up to $4,000.00 in equity in a vehicle. Married couples filing jointly can protect up to $8,000.00 in exempt equity in a vehicle, or if they have two vehicles that are separately titled, they can protect up to $4,000.00 each. Under the Federal exemptions, the exemption is $3,450. However, there is a wild card exemption that may be able to protect the remaining equity in the vehicle.

The vehicle exemption under Federal or State law can also be applied against an operable motorcycle and most other non-tow motor vehicles.

If you file a Chapter 7 bankruptcy and wish to keep a financed vehicle, you will be able to do so, as long as you continue to make the payments and maintain insurance on it.

4. Leases In most lease situations, the vehicle title remains in the name of the financing bank or lender. Regardless of the type of bankruptcy that you file, you will almost certainly be able to keep your leased vehicle so long as you “assume” the lease (which simply means agreeing to abide by the original terms) and so long as you keep up the monthly payments and insure it. If you have a vehicle lease, we will review it during your initial consultation. We will ask you for the details of the lease, including the name of the lender, the term of the lease, and the monthly payment.

BANK ACCOUNTS

In most cases, there is an exemption available to protect your bank accounts. Even if no exemption is available, we can typically give you guidance on how to utilize any non-exempt funds in a way that does not jeopardize your bankruptcy case. It is, therefore, extremely important that we have details regarding all bank accounts that you own. It is helpful if you bring in copies of actual bank account statements for the past 30 to 60 days for each bank account that you own. If you have multiple accounts at a bank, we will need to review each account individually. Accounts at credit unions are also considered bank accounts. In general, if a client has a relationship with a credit union, they have at least two accounts: a “share” account (basically a savings account) and a “draft” account (basically a checking account). There may be other accounts as well, such as vacation or Christmas club accounts.

You should also let us know if your name appears on a bank account with anybody else. You may have an account that you own with a child or an elderly parent. Perhaps your name was placed on an account for power of attorney or estate planning purposes. We have even seen clients whose names remained on accounts with ex-spouses, and this has needlessly caused the ex-spouse to become involved in the bankruptcy case.

STOCKS, BONDS AND INVESTMENT ACCOUNTS

There is no automatic exemption for stocks, bonds or non-retirement investments. However, the Federal “wild card” exemption may be available. Alternatively, it may be advisable for you to liquidate certain types of financial accounts in order to prevent having to turn over the account proceeds to your creditors.

We will review whether you own any stocks. Although this is not common for people filing bankruptcy, there are situations where people own stock in the company for which they work or have simply purchased a few shares in a publicly traded stock. You may also own “stock options” provided by your employer. The options by themselves could have value if the option price is lower than the current trading price. Even if the options are currently worthless, the bankruptcy trustee may continue to monitor the options until they expire.

Many clients own mutual funds or other types of investment accounts that are not retirement based. These are not considered bank accounts and, therefore, the “cash exemption” under New York State law is not available. It is rare that we encounter a client with significant portfolios, but if your name is on any type of mutual fund or investment account, it is definitely something that you should bring to our attention.

United States Treasury Savings Bonds are essentially considered cash and there is an exemption available to protect them in most cases. If you have any savings bonds in your name, even if they do not mature for many years, please discuss this with the attorney.

It is much less common in today’s economy to see clients participating in profit sharing programs. In most cases, these profit sharing plans are exempt, but this depends on whether the profit sharing plan is based upon your age or length of service or, instead, whether it is dependent upon the annual profitability of the company. If it is possible that you will be receiving any type of profit sharing income within the next 12 months, we will discuss this at the first consultation.

RETIREMENT ACCOUNTS

There are many different types of retirement accounts. These accounts are almost universally exempt from creditors, even without the filing of a bankruptcy case. The only creditor that typically has the right to take action against your retirement account is the Internal Revenue Service or (maybe) the New York State Department of Taxation and Finance. Even though your retirement assets are almost certainly exempt, we still need to take care in listing all accounts that you own. The most common pension assets are as follows:

1. 401(k) pension plan. These are plans set up by private employers and contain fund deposited by the employee. Sometimes the employer makes “matching contributions.”

2. 403(b) pension plans. These are plans set up by a public or non-profit employer

3. Tier 1, 2, 3 or 4 pension plans. These are retirement plans established by the New York State Retirement System. Almost every employee of a local, county, or state agency has rights under one of these plans.

4. Deferred compensation plans. Most public employees have the option of setting up a Section 457 deferred compensation plan. This allows them to place significant sums of money in tax deferred investments. Even though these are not traditional pensions, they are exempt under both State and Federal law.

5. Defined Benefit Plans. In these plans, the employer sets aside money on your behalf. The amount that you receive is based upon your years of employment and your salary during those years. Once you are eligible to receive retirement benefits, the amount is fixed each month for the rest of your life.

6. Individual Retirement Accounts. These are accounts that are generally set up by the client directly. Although they are not true “pensions,” they are entitled to the same protection in an amount up to $1,000,000.00 under Federal law.

7. Retirement Annuities These are most commonly seen by employees in the State Teachers Retirement System, but they may also be privately purchased. If you own any annuities, it is important that you provide paperwork to establish whether it is a true retirement annuity or one that is not subject to any special tax treatment.

8. Union sponsored pension plans Many construction and trade workers have pension plans set up on their behalf by their union. In many cases, the employer is required to make significant contributions towards union benefits, including pensions. These contributions may or may not appear on your pay stubs each week. If you are participating in a union, it is a good idea to check with your union to determine whether there is a pension plan in place to protect you.

LIFE INSURANCE POLICIES

For several years there was uncertainty in the local courts regarding a client’s ability to exempt certain types of life insurance. However, it is now fairly well settled that even whole life policies with significant cash value are exempt from creditors. Nevertheless, even though the policies are protected, it is important to disclose the existence and ownership of all life insurance policies. We will need to know whether you own the policy, whether it insures your life or someone else’s (for example, you own a policy that insures the life of your spouse or child), the name of the beneficiary, the amount of the death benefit, the cash value of the policy and the whether there are any loans against it. The most common types of life insurance are as follows:

a) Term insurance. These policies do not have any cash value. They simply pay a benefit to your named beneficiary upon your death. Many people have term policies that are provided at no cost by their employer. If you are not sure, you should check with your employer. If you do not have any term policy and are married or have children, we strongly advise you to obtain coverage. Unfortunately, over the years we have learned that most clients are significantly under-insured or have no insurance whatsoever. Remember, that the older you get, the harder it is to obtain insurance. Also, it is always best to obtain life insurance coverage when you are in good health because the rates are lower. If you wait until you become sick or even begin to show symptoms of illness, it may be difficult or impossible to obtain any coverage.

b) Whole life insurance. These policies generally offer better long term protection than term policies because they do not expire at a certain age. They protect you for your entire life, no matter what your age at death. The premiums are significantly higher than term insurance premiums, but your policy does build up cash value.

c) Universal and variable life insurance These policies are similar to
whole life policies but are sometimes set up more for retirement or estate planning purposes. They do contain a death benefit but also, in many cases, give you the option of borrowing against the policy rather than taking income distributions. Upon your death, the beneficiary obtains the policy without any tax consequences to him or her.

OTHER PERSONAL PROPERTY

The good news is that virtually all household furnishings are exempt from creditors under both State and Federal bankruptcy law. For most people, even those assets that are not technically exempt are not worth enough to justify being sold to pay creditors.

During the initial consultation, we are going to review your personal property with you. There are two reasons that great care must be taken in reviewing these assets. First, it is important that your bankruptcy petition be complete and accurate in detailing all of your assets, even those that are clearly protected from creditors. Second, if there is an asset that may not be exempt from creditors, it is better for us to know beforehand so that we can recommend an exemption strategy. At the end of this chapter, we have attached our standard personal property worksheet. We encourage you to complete it and bring it with you to the consultation.

The rest of this chapter will review the basic types of personal property and provide some guidance regarding available exemptions.

Household Furniture

Under the New York bankruptcy exemptions, an individual debtor can protect up to $10,000.00 in home furnishings, including furniture, some appliances, a television, kitchenware, and other items. Married couples filing jointly can protect up to $20,000.00 in household furnishings. It is rare to meet a client who has furnishings that value even close to the available exemption limits.

Security Deposits

If you rent your apartment or home, it is likely that you posted a security deposit when you signed the lease. You may also have given a security deposit when you started a utility service. These security deposits are technically an “asset.” They must be reported on your bankruptcy petition. They are exempt from creditors.

Televisions, Video Equipment and Computers

Despite the significant changes in the New York bankruptcy laws in 2010, there is still actually very little protection for items such as DVD players, computers, cell phones, video cameras, and other types of electronic devices. However, remember that even if you paid several hundred dollars for one of these items, it is very unlikely that the present fair market value is significant. Also, if you happen to have very valuable video electronic equipment, the Federal wild card exemption can be claimed to protect your assets in almost all cases.

Wedding rings, Engagement Rings and Other Jewelry

This is probably one of the most overlooked areas of personal property. Although wedding rings are exempt in a bankruptcy case, engagement rings are not. It constantly amazes me how few bankruptcy petitions for married couples show ownership of an engagement ring. However, if you own jewelry and do not list it, there is a significant possibility that it will be raised as a question at your first bankruptcy hearing. I have heard many trustees chastise married women for not listing their engagement ring or other jewelry as an asset.

Until recently, there was no exemption that could be claimed for jewelry. However, the wild card exemption can now be applied to protect engagement rings or other jewelry.

It is important that you provide as much detail regarding all types of jewelry, including gold chains, rings, watches. I consider disclosure regarding jewelry as one of the key indicators of the accuracy of a bankruptcy petition prepared by other attorneys. Although it is certainly possible that a client may own no jewelry of any kind, it is not probable. If a bankruptcy petition discloses the ownership of jewelry with significant detail, it is a pretty good bet that all other important areas of the bankruptcy petition have been truthfully and carefully completed. On the other hand, if no jewelry is listed, it raises the possibility that other portions of the bankruptcy petition have not been diligently prepared.

Remember, it is always our goal to present your bankruptcy case in the best possible light. It is rare that we cannot protect your assets, but if you do not disclose an asset and it is discovered later, it is very possible that you will not receive your bankruptcy discharge. The Bankruptcy Court in Rochester has denied a bankruptcy discharge to a bankruptcy debtor solely for failing to disclose the existence of an engagement ring.

Recreational Equipment

Many clients, especially those living in rural areas, own recreational vehicles, such as dirt bikes, all terrain vehicles, snow mobiles, pop-up campers, and jet skis. Until the enactment of the new exemptions in 2010, there was no easy way to protect these assets. However, the Federal wild card exemption can protect any recreational vehicle within certain monetary limits. At the first consultation, we are going to discuss with you the year, make and model of all assets. It is helpful for you to bring registrations, titles, and even the original contracts of sale so that we can properly identify the asset and place an appropriate value on it in your bankruptcy schedules.

Accounts Receivable and Other Debts Owed to You

When we first bring up the topic of receivables with clients, their inclination is to think that we are asking them about business receivables. While certainly you may be owed money by a business customer or client, it is much more common that you are owed money by someone else. For example, you may have had a tenant that owed you rent and had to be evicted. You may have loaned money to a friend or family member. You may be a realtor waiting for a real estate commission check. Essentially, if you are owed money for any reason, this is an asset that has to be disclosed on your bankruptcy schedules.

With the new bankruptcy exemptions, it may be possible to protect some or all of the money that is owed to you for any reason. Under the prior law, it was almost impossible to protect these receivables unless they were directly attributable to earnings prior to the bankruptcy filing.

Receivables are important because, if there are no available exemptions, the Trustee can pursue collection of the amount owed to you. He can even sue your friends or family to collect the money. He is not necessarily bound by any payment terms that you negotiated with your friend or family member. So, even if you never had any intention of collecting the debt, the trustee can still go after it. We know that the last thing that you want is to have a friend or family member caught up in your bankruptcy proceeding. If you tell your bankruptcy attorney about the these types of situations, there is almost certainly a way to handle it to prevent the involvement of the people who owe money to you.

Firearms

This is another area where there is probably a significant amount of non-disclosure. People tend to be very protective of their firearms, and they are always afraid that they will have to give them up as part of the bankruptcy filing. This is almost never the case. Remember, most firearms are simply not worth a lot of money. Also, the trustees are not in the business of selling individual items of personal property. If you have no other assets of significant value, the trustee is not going to care about your shotgun or rifle. It is only when an individual has a significant collection of firearms that the value becomes an issue. Even then, the Federal wild card exemption may allow you to protect the fire arms. If you fail to disclose even a single shotgun or rifle, the Bankruptcy Court may deny your entire bankruptcy discharge. This actually happened a few years ago in a case in Rochester.

Tools and Household Maintenance Items

Many clients have significant collections of tools and equipment that they have collected over the years. Commonly, these are necessary for the client to carry out his trade or profession. For example, you may be an auto mechanic that has purchased tools from Matco or Snap-on. You may be a carpenter who owns lathes, table saws, and woodworking tools. There is fairly decent protection for “tools of the trade,” so it is important that you provide us with details regarding these items. It is fairly easy for a bankruptcy trustee to figure out if you are likely to own significant tools. By looking at your tax returns, the trustee can determine your occupation (especially if you are self-employed and file Schedule C). It is very unlikely that a self-employed contractor earning $40,000.00 or $50,000.00 a year does not have tools and equipment worth several thousand dollars. Remember, it is the goal of the bankruptcy attorney to make sure that all of your assets are protected. It is always better to disclose all of your assets so that an effective strategy can be developed to protect the items that are most important to you. I cannot think of any client that has ever been forced to turn over business assets that were properly disclosed in a bankruptcy petition.

Even regular household tools have to be disclosed. Almost everybody has at least basic hand tools and a tool box. I am probably one of the least handy people around, and even I probably have about $200.00 worth of tools lying around the house.

You will also have to disclose ownership of lawn mowers, snow blowers, compressors, and other equipment used to maintain your household. With the exception of riding lawn mowers, these assets tend to have very little value and are not of much interest to a bankruptcy trustee.

Artwork and Other Collectibles

Almost everybody has some type of artwork, memorabilia, or collectibles. Most often, these collections are of sentimental value and have no real market value. I once had an employee that collected shot glasses from all over the world. She probably had a couple of hundred. They were of significant value to her personally but would probably not fetch more than $50.00 at a garage sale. If you have any collections of these types of items, please let us know. Even if they are valuable, we can figure out a way to protect them for you. Occasionally, people do have collections of significant value. For example, we had a client who owned more than 10,000 records. We also had a client that owned several thousand dollars worth of baseball cards. If you have a collection like this that you would like to protect, we can almost certainly help you find a way to do it.

Even people without large collections probably have some basic artwork in their home. As you prepare for your consultation, please give some thought to items that would fall into this category.
YOUR SMALL BUSINESS

I have often received calls from prospective clients telling us that they want to file bankruptcy “on their business” but not personally. We certainly understand why people would want to distinguish between their business from their personal interests. However, the reality is that, in most cases, a failed business is going to have ramifications on the business owner’s personal finances. For example, there are probably personal guarantees on some of the business debts, and if the business closes, it is very likely that the creditor will pursue the individual on the guarantee. Also, if there are bank loans involved, it is possible that the bank has taken some type of collateral mortgage against your home, which could be subject to enforcement once the business closes.

When you consult with your bankruptcy attorney, great care will be taken to review your business situation, including the assets and liabilities. While this guide cannot go over every possible business scenario, the following is a summary of the most common situations we encounter:

1. Sole Proprietorships. The majority of our clients with businesses operate them as sole proprietorships. A sole proprietorship typically involves an assumed name, such as “ABC Home Improvements,” which you have probably registered with the local county clerk’s office. You are probably also filing a Schedule C with your annual tax return, and you are most likely maintaining a separate bank account for the business and maintaining separate business records. However, despite all these distinctions between your business and personal affairs, any of your creditors have the same rights to enforce their claims against your personal assets as they do against your business assets. This does not mean that you made a mistake in setting up your business in this way. In most cases, even if you had chosen to set up a formal corporation, it is unlikely that you would have received any business credit without signing personal guarantees.

When you file a bankruptcy case, all of the assets of your sole proprietorship will have to be disclosed to the bankruptcy trustee assigned to your case. In the vast majority of small business cases, the assets will not have significant value. For example, in the home improvement business example, it is likely that you have some tools and equipment. You may even have paid several thousand dollars for these assets. However, when the trustee considers whether they are worth liquidating, he will have to assign a liquidation value. It is exceedingly rare to see a trustee seriously pursue liquidation of business assets in a small scale business.

In addition, with the new Federal “wild card” exemption, there is now considerably more protection available for your business assets. However, there are situations in which the business may simply have too much value to be protected in a Chapter 7 case. This is commonly seen in businesses that have retail locations. The name and “good will” of the business may be worth tens of thousands of dollars. This does not mean that you will lose the business when you file bankruptcy, but it does mean that you will probably have to file a Chapter 13 case and pay your creditors back at least some percentage in order to protect the assets.

2. “S” Corporations and Limited Liability Companies. Whether your business is set up as a corporation or a limited liability company, it will be treated essentially the same way in either a Chapter 7 or a Chapter 13 filing. A value will have to be placed upon your shares in the corporation or your membership interest in the limited liability company. This is best understood with an example.

Let’s say that you own a small home improvement business, but rather than setting it up as a sole proprietorship, you decided to set it up as an “S” corporation. You own 100% of the shares in the corporation. The business has assets worth about $20,000.00 and liabilities of $100,000.00. When your bankruptcy is filed, we would list the ownership of the shares in the corporation. These shares are considered personal property, and the value that is placed on them will be directly impacted by the assets and liabilities. If the assets are worth less than the liabilities, the business probably has no saleable value. The net result, therefore, would be pretty much the same as a sole proprietorship in which the liabilities exceed the assets.

The major difference between the treatment of sole proprietorships and stock interests is that, at times, outside investors may be interested in purchasing the shares or the membership interest of your business. There are a number of local investors (we like to call them “bottom feeders”) who will invest money to take over your business. In some cases, they will close the business and sell the assets. In other cases, they will try to resell the business interest back to you at a premium. If you have properly valued the assets and liabilities of the business, it is not likely that one of these investors will have much interest in your business. However, if they think that you have undervalued the assets or overstated the liabilities, there is a risk that they will try to bid on the assets. You should not be too alarmed at this possibility. This only happens in the context of a Chapter 7 case, and when it does happen, you will have the absolute right to convert the case from Chapter 7 to Chapter 13 to protect your business assets.

Remember, when you consult with our bankruptcy attorneys, we will definitely review the value of your business. There is always an option that will guarantee your protection of the business. So do not let your fear of losing your business be a reason to keep you from talking to a bankruptcy attorney.

PERSONAL INJURY, WORKERS’ COMPENSATION,
AND SOCIAL SECURITY CLAIMS

Many bankruptcy filings are directly or indirectly caused by a significant injury or disability. If you were hurt while on the job, you may have a pending workers’ compensation claim. Even if you are collecting benefits, it is unlikely that these benefits are even close to the earnings that you had prior to the injury.

You may also have experienced an accident that is not work related. For example, you may be collecting no-fault benefits as a result of an automobile accident, and you may have a pending personal injury claim. If the injury is substantial, it may be preventing you from returning to work in your regular occupation.

If you are unable to work due to an illness or disability, you may be applying for social security benefits. As with workers’ compensation benefits, these benefits will probably not be enough for you to pay your day-to-day living expenses.

Fortunately, most claims of the type described above are fully exempt from creditors. Without question, ongoing worker’s compensation and social security benefits are exempt. Although there is still some uncertainty, it is most likely that even back-pay awards for social security or workers’ compensation benefits are exempt as well.

Personal injury claims are treated differently. Under New York Law, there is an exemption of $15,000.00, net of any legal fees that you pay to pursue the claim. The Federal exemption is slightly better. You may also be able to exempt additional amounts that can be attributed to future lost earnings. In many personal injury claims, a significant portion of the award is based upon the expectation that you will not be able to work in the future or might have reduced earnings. To the extent that we can prove this, a larger percentage of the award may be protected.

Even if a portion of your personal injury claim is not exempt from creditors, it may still be wise to file for bankruptcy protection. Personal injury claims can take many years to resolve, and it is unlikely that your creditors are going to wait for payment. A bankruptcy filing can give you immediate protection while you pursue the personal injury claim. This will prevent you from settling the claim too quickly due to financial pressures. If the claim is successful, it may well be that your creditors will be paid in part or in full. However, since there is no guarantee of any recovery in appropriate cases, bankruptcy protection may be necessary as a protective measure.

All claims that you have against any person, employer, or entity due to an accident, injury or disability must be listed in your bankruptcy petition. All available exemptions to protect the recovery or ongoing benefits will be claimed on your behalf, and the ramifications of the bankruptcy filing will be fully explained to you.

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