Before or After is the Question When Filing Individual Bankruptcy in Indiana

May 5, 2013 1:41 pm Published by

Whether you’re filing Indiana bankruptcy Chapter 7 or filing bankruptcy under Chapter 13 bankruptcy law, it’s fair to say that timing is everything.

Sometimes, it seems better to wait a month or two or even longer before actually filing.  Time is gained to gather documents and all the information needed for the bankruptcy petition.  Meanwhile, waiting can allow debtors to save up money for filing fees.  Other times, though, there’s an immediate emergency, with a home about to be foreclosed on, a lawsuit pending, a car that’s been repossessed, wages about to be garnished.  That’s when waiting doesn’t pay, because filing personal bankruptcy can put a halt to all those legal actions. Then there are times when debtors wait for a tax refund so they can use the cash to pay for their bankruptcy.

Since I’ve been a debt consolidation lawyer in Indiana for more than 26 years, I’ve seen lots of other time-related considerations. In my efforts to help stop foreclosure, for example, it becomes important to fix on a market value for the home or for other property.  The general rule in bankruptcy law is that, as my colleague the Columbus bankruptcy lawyer pointed out, everything is measured and valued based on a bankruptcy filing date.

The one big exception is this: if assets were transferred within the two years leading up to a bankruptcy in Indiana, that facts need to be disclosed to the court. Put another way, the court can “look back” two years to discover whether there were any fraudulent transfers of assets that might have been used to satisfy creditors. If the sale or transfer of any asset is judged by the court to have been solely for the purpose of keeping that asset outside the “bankruptcy estate”, the bankruptcy trustee can cancel the sale and use the property to repay debt.

Under the bankruptcy law system, saving for retirement has always been considered an  important thing to do, even for debtors. That’s why I found the following true case story that happened in Oregon very interesting.

  • One day before filing individual bankruptcy, the debtor requested a cashier’s check from his bank for $42,000, which he then mailed to his 401k company to repay a loan against his retirement account.
     
  • By the time Fidelity (who had the 401K) received the check, it was one day after the bankruptcy had been filed.
     
  • The bankruptcy trustee asserted that was an unauthorized transfer (because it happened after the bankruptcy was filed).
     
  • The court supported that point of view, saying that when John N. received the cashier’s check from his bank, he “owned” that check, and he had no right to make any transfers without going through the bankruptcy court.
     
  •  The money was recovered and used to pay debts.

In bankruptcy (in Indiana or in any other state), timing is absolutely everything!
 

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This post was written by Mark Zuckerberg

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