TOP TEN BANKRUPTCY MISTAKES

# 4

Paying from Exempt Assets

The Bankruptcy Code in keeping with equitable treatment of creditors and fresh start considerations for debtors provides a comprehensive set of exemptions. Exemptions in Michigan are also provided under state laws so that the debtor may choose that set — either Federal or State — which are the most favorable.

Upon the filing of a petition in bankruptcy, 11 USC 541 states that all of the debtor’s property – legal or equitable – and wherever situated, becomes the property of the estate. The exemptions determine what property a debtor may keep for his fresh start. It is therefore critical to determine, based in the facts of each case, which set of exemptions to choose and whether the filing may proceed or should be delayed.

Competent advice on these issues is essential. When debts start to appear overwhelming get immediate advice. Otherwise, you may with good intentions hurt your family by paying dischargeable bills from exempt assets, which you could otherwise keep. For instance, it may be foolish to borrow from your 401-K (an exempt asset), with tax penalties, and use the money to pay a bill which could be eliminated by a Chapter 7 discharge. Before you make a major mistake make sure to talk to a bankruptcy lawyer so that your family is best protected.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]