The Law Offices of Ken McCartney P.C.

Do's & Do Nots

 

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You can imagine that troubled minds often  consider even more troublesome actions.  Here are a few questions we are frequently asked.  Without being exhaustive, these are examples of where to be careful.


  • Should I put it in my wife's name?
  • Should I pay back mom or dad so that I no longer have the money on hand?
  • Can I give my guns to my son?
  • Should I draw out my IRA and spend it before we file?
  • Which is better, bankruptcy or consumer credit counseling for the next 60 months?
  • HIGHRATE Credit Card will settle for 20 cents on the dollar. Should I just settle that one?

Bankruptcy awards the honest debtor with excellent protection and the relief for a fresh start.  It  has some built in protections against dishonesty, and can be cruel to the not well intentioned or perhaps even just uniformed, debtor.

  • Do not make any gifts while you are insolvent and considering bankruptcy.  The subject of the transfer can be recovered for a bankruptcy estate.
  • Do not pay a relative more than $600 on an antecedent debt within a calendar year, or an unrelated part, within 90 days.  To do so creates a recoverable preference.
  • A transfer to a wife or any other party without consideration is a gift, and recoverable by a bankruptcy estate.
  • Most retirement vehicles are protected by exemption laws, and are best left where they are.
  • Consumer Credit Counseling is a really necessary service available from for-profit and not-for-profit organizations.  It has its place.  Many clients are referred to this office from CCC organizations.  The entire time a debtor is under the supervision of a credit counseling service, and is struggling to pay back unsecured debt, the credit reporting agencies show very negative standing.  It is often better and quicker to reestablish credit after a bankruptcy than after years of credit counseling.
  • There is a trap in settling credit card debt that many people get caught in.  Generally speaking, if the card debt was incurred by the individual who settles the claim for 20 cents on the dollar, the borrower has had 80 cents on the dollar canceled or forgiven.  The Internal Revenue Code treats cancelled debt as ordinary income. Pay 20 cents, and then owe 28 more cents in taxes on the balance.  Canceling credit companies are required by law to report cancelled debt on income reporting form 1099 at year end.
 

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