Property: Is it Real or is it Personal?

A key aspect of Bankruptcy is determining what you owe and what you own.  Usually, what you owe is fairly simple because it seems like whichever way you turn they're there just waiting to tell you what you owe them!  Unfortunately, what you own, while not complicated, may take a little time.

First - property to typically broken into two categories, Real and Personal.  In Law School I heard that an easy way to understand what Real Property is if you can move it it's likely Personal Property - everything else is Real Property.

The formal definitions are that Personal Property is any movable or intangible thing that is subject to ownership and not classified as Real Property.  Real Property is Land and anything growing on, attached to, or erected on it, excluding anything that may be severed without injury to the land.

In every day Americana and in the context of Bankruptcy Real Property is the home you live in, and Personal Property consists of what you would consider your personal possessions.  Real Property is easily inventoried, however, Personal Property make take a little bit of time.

It is important that you capture the extent of your belongings, from socks to lawn mowers.  The easiest way that I have found to do this is approach the task room by room.  Start in the kitchen and develop a list of the pots and pans, silverware, furniture, etc.  Keep in mind that the stove and dishwasher likely came with the house and are part of your Real Property.  Then keep the process moving room by room.

We developed a spreadsheet that provides a handy format for capturing the list.  Once you have the list then you will need to place a value to your property.  This is the replacement value - what you could buy it for from a retail vendor considering its condition and age.

Keep in mind that stocks and bonds, insurance policies, jewelry, cars, collectables, etc., are all considered Personal Property.  Tax Returns are also required to be listed.

If you are looking to start off the New Year with the resolution of getting your finances under control, give us a call today to set an appointment for your FREE consultation.

757-410-9263

Visit our web site at

http://www.KDBLawFirm.com

Be safe, be blessed and be in control!

Creditors; Secured, Unsecured or Priority!

When talking about debts you will often hear folks distinguish between secured and unsecured debt.  A secured creditor, or secured debt, is debt that upon the debtor's default the creditor has the right to proceed against collateral and apply those proceeds against payments owed.


Now, in plain English .... let's take a car loan for example.  When you purchase a car and take out a loan from a bank to pay for it, the bank will secure the loan with the car.  What this means is that if you fall behind on your payments, the Bank has the right to repossess your car.  Once the car is repossessed they will most likely try and sell the car and apply whatever money they get towards the outstanding loan balance.  The Bank may also add any additional fees that they had to pay in repossessing the car, such as attorney fees, etc.  More often than not the money they obtain from the sale of the car will not cover the entire balance left on the loan so they then will come after you for any balance still owed!  So, in the end you've lost the car and still owe money!

An unsecured loan or debt would be something like a credit card, personal loan or student loan.  With this type of loan the creditor does not have the right to repossess the item you purchased, but instead would likely use the courts to obtain any monies owed from you.  Again, let's take an example.  Let's say I purchased a couch on a credit card.  If and when I fall behind on my monthly payments to the credit card company they have the right to file a Warrant-in-Debt against me personally.  Here in Virginia the Warrant-in-Debt is how the creditor asks the courts to verify that you owe the money.  Assuming that you are found to owe the money, then ten (10) days after the court hearing they then can obtain a garnishment and take up to 25% of your paycheck to be applied toward the monies owed.

[A warrrant in debt is a summons to a defendant to appear in court because they are being sued for a debt. For example, in Virginia’s General District Court, the most common means to initiate a claim is the Summons for Warrant in Debt. However, the warrant in debt provides only limited information and therefore is a notice-based pleading. Along with the bill of particulars, the warrant in debt makes the pleading fact-based. A warrant in debt is the initial filing to start a garnnishment proceeding in some jurisdictions.]

Several examples of Secured and Unsecured debts are as follow:

       Secured:       Home mortgage, car loan and high value items such as stereos, computers, air conditioners, etc.

       Unsecured:   Credit cards, medical bills, student loans, etc.
                                  

There is a third type of debt that comes into play during Bankruptcy - Priority Debt.  This category identifies creditors that are given special attention.  The most common examples are income tax debts and past due alimony or child support payments.

If you are considering bankruptcy, then understanding what type of debt you have is important.  Depending on whether you file a Chapter 7 or Chapter 13 Petition will provide you various options in dealing with your debt.  For example, in a Chapter 13 Bankruptcy Petition if you are behind in your car payments you may bring your payments current and keep your car.

Next time we'll talk some about property - what types there are and how it is handled in a Bankruptcy.  If you'd like to come in for a FREE CONSULTATION, please, give me a call!

757-410-9263

Visit our web site at http://www.KDBLawFirm.net

and follow us on Twitter

@norfolk-lawyer.

Be safe, be blessed and be proactive!

How is My Credit Affected if I File Bankruptcy? KDB Law Firm Credit and Bankruptcy Part Three

In Part One and Two of our series on credit and bankruptcy we have discussed how to improve your credit score as well as the impact of missed payments on your credit score. If you are feeling financially overwhelmed and considering bankruptcy, the question of what happens to your credit in the event you file bankruptcy is a common one.

To be very clear, filing for bankruptcy will definitely affect your credit score. But how filing bankruptcy affects your credit score really depends on the state of your credit score prior to filing.  You may be surprised to find out that bankruptcy will not, in some cases, cause as big a hit in your credit score as you assume.

Let me explain: if your credit score is very poor due to delinquent accounts, maxed out credit cards, charged off accounts or collection accounts, filing for bankruptcy protection won’t affect your score that negatively (granted, your score is most likely already low). The reason for this is that once your debt is discharged, your creditors must update your credit report to reflect the account as being “discharged in bankruptcy” and must change the balance owing to “$0”, and all ongoing derogatory reporting must permanently cease. Granted, you aren't likely to see a big jump but if you've just been scraping by, your score isn't likely to fall much further.

On the other hand, if you have remained current on all your payments and your credit score is immaculate, your credit score will take a hit after filing chapter 7 bankruptcy. However, many clients find that discharging the debt they may otherwise never be able to pay off is worth the temporary hit to their FICO score.

Ultimately, if you are considering bankruptcy, how it may affect your credit score is important information to understand, but then again, your credit score alone shouldn't affect whether or not you decide to file bankruptcy.

That said- if your debt payments are crushing you, bankruptcy can give you a much-needed fresh start. While filing for bankruptcy protection will affect your credit score, it may not be as negative as you may think. And with credit repair strategies, you may be giving yourself a much-needed boost to long-term financial freedom down the road.

We will discuss repairing your credit after bankruptcy in Part Four (coming soon) of our series on credit and bankruptcy.

If you want more information on filing bankruptcy, visit http://www.KDBLawFirm.net/.

Be safe and be well! ~KirkBerkhimer, Norfolk Bankruptcy Attorney

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