Question:

Why would a home owner preparing to declare bankruptcy be advised to quit their job in CA?

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The situation is that this person's vehicle has already been repossessed, but has equity in the home. Wants to move out of state. Has around 50K in credit card debt. Is partner in a business. Has a separate full time job. I'm trying to understand why this person would say their lawyer/adviser suggested that they quit their full-time job and work with the business partner?

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  1. BK is the last think someone would want to do.

    I am not an attorney so I would seek legal advice from several attorney's who are veteran experts (20+ years BK law experience) in this area before I do anything. I have experience working with attorneys including in this area and help people get in better shape financially to deal with any future storm (such as a BK).

    Given that disclaimer, this is my understanding.

    In CA, if you file BK and have assets they will be gone except for about $22.5K (exempted from BK).

    http://research.lawyers.com/California/B...

    This means the house can be taken. CA is the worst state to own a home with equity and file for BK. I believe that you are only protected from $50 to $150K in CA depending on income, marital status, and other factors.

    http://www.sacramento-bankruptcy.com/Pra...

    http://www.california-bankruptcy.info/ca...

    Given the housing market, I'd get a new appraisal on the house to see how much equity there is.

    Some states such as FL have greater homestead protection in a BK. $137,000 in personal assets (single), and no limit to the value of a home purchased in FL if it is the primary residence and lived there for 6 months before filing BK.

    http://www.alperlaw.com/constitutional_p...

    This is why OJ can live in FL in a multi-million dollar home, live off a multi-million dollar NFL pension, and his assets are except from law suits from the Goldman's wrongful death judgment. Oj's creditors can't touch his FL house or pension either.

    Back to unfriendly CA. If you make too much money, you cannot file CH7.

    It would make more sense to sell the home, move to a more BK friendly state, wait 6 months to establish residency in that state (required before a BK can be filed), see a BK attorney in that state (before do anything), quit the job, and work with the bus partner and earn what is needed to survive, or just live off the proceeds of the home, or buy a primary home and live in FL for example and wait 6 months before filing.

    If the person who files BK, if they own the business or any part of it, that amount could be liquidated, or more likely attached to the filing.

    BK fraud exist when there is a failure to disclose assets in the persons name that could be attached in the filing, or such assets are grossly undervalued.

    Quitting a job at any time for any reason including before a BK, is not fraud. In fact it is illegal to force anyone in the USA to work. The 13th Amendment of the US Constitution makes it illegal to force a person to work against their free will ("anti-slavery law").

    http://www.law.umkc.edu/faculty/projects...

    In a BK, it is best to not own many assets. Any other legal strategies one can employ should seek legal advice.


  2. Sounds like the full time job gives him too much income to qualify for bankruptcy.  It also sounds like fraud to me.

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