What Happens to a Debtor’s Property Located in Another State? and more...

 
Here is a sample subscription for you. Click here to start your FREE subscription

What Happens to a Debtor’s Property Located in Another State?

Most New York bankruptcy debtors own all their assets in New York State, though it’s probably more common for them than others to own assets in nearby jurisdictions. (How frequently do people open bank accounts in New York but then move to New Jersey?) Even more commonly, many older debtors own property in New York and Florida, and others own vacation homes in Pennsylvania. The question they may ask, then, is what happens to all these assets that are located in different states if they file New York bankruptcy?

The answer is: the same thing that would happen if they were located in New York, which can have good or bad consequences for debtors.

To begin with, the issue here is what effect New York bankruptcy exemptions have on property outside of the state. The rule is that debtors get only one set of exemptions for all their property wherever it’s located. Assets in New Jersey or Florida are still subject to the same set of New York exemptions in a New York bankruptcy case. Moreover, debtors can only apply the exemptions once. So owning a second car in another state is not going to double a debtor’s exemptions for automobiles.

The question then shifts to what debtors can do if another state’s exemptions are more favorable to New York’s or the federal government’s. For example, some states offer significantly more generous homestead exemptions than even New York. Here. The term here is venue in bankruptcy. Venue means the appropriateness of the court to hear the case, not whether the court is competent to do so regarding the parties to the case (personal jurisdiction) or the case’s legal issues (subject-matter jurisdiction).

The venue for a bankruptcy case is any district containing the debtor’s domicile, residence, principal place of business, or principal assets for the 180 days preceding the filing. Because nearly all bankruptcy cases are initiated by debtors, venue is usually not issue worthy of dispute, especially because in a personal bankruptcy the debtor must appear at the section 341 meeting of the creditors, and it’s unlikely that a debtor would file bankruptcy in a district that would make this meeting inconvenient to attend.

However, sometimes debtors have multiple options for choosing a venue, and the creditors might object to one or another. This is one more reason to choose the best venue before proceeding to avoid needless litigation.

(Click to read more about “venue” and New York bankruptcy.)

Debtors who own property in multiple jurisdictions are probably best off filing where they live, but it’s possible that exemptions in a different state will give them an advantage. If you own assets in multiple states and you’re experiencing serious financial difficulties, then talking to an experienced New York bankruptcy lawyer is crucial to deciding where it’s best to file.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

The post What Happens to a Debtor’s Property Located in Another State? appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.

  

Related Stories

    
View commentsTrack comments


The High Cost of Dying in Debt

According to a study conducted by Credit.com last year, a surprising 73 percent of Americans die in debt, leaving behind a mean-average balance of $61,500. The most common form of debt was credit-card debt (68 percent), followed by mortgage debt (37%) and then others. Given how frequently Americans die with debt, what are the consequences and how can talking with a New York bankruptcy lawyer provide better alternatives?

Before answering those questions, I’ll clarify the study’s findings. Researchers sampled data from the credit-reporting agency Experian, comparing consumers who had debts in October 2016 to those from that same group who had died by December 2016. Although a majority of debtors carried credit-card debts, the average balance was about $4,500. Auto loans (25 percent) went up to $17,000, but student loans (6%) ran as high as $25,000. Oddly, the average amount of mortgage debt wasn’t listed. Additionally, the typical age of these debtors wasn’t given either, which would’ve been more useful than simply giving numbers for everyone who died in just one month.

Still, it’s pretty clear that the types of debts with larger mean-average balances tend to be less common among Americans who pass away. This is a good thing.

So what are the consequences of dying with debt? Generally, the property of a person who dies (a “decedent” in law) goes through probate, which is similar to bankruptcy but operates in state court, not federal court. The decedent’s assets are placed into an estate, then they’re sold off as necessary to repay the creditors. Anything leftover goes to the decedent’s heirs or beneficiaries if there’s an estate plan. Thus, debts interfere with a decedent’s ability to transmit assets to his or her heirs.

That fact might not bother some debtors (and even their heirs). Others might be very upset by it.

Additionally, some debts might transfer to spouses on death, if they’re co-signed. Others might be extinguished on death, such as most federal student loans. (Private student loans to persist like other debts, even if it leads to grieving parents paying for their kids’ co-signed debts.)

So what role can bankruptcy play in preventing people from dying with debt? For Americans who have the opportunity to plan their estates, bankruptcy can actually help. In particular, bankruptcy exempts some types of assets from the bankruptcy estate that probate would not, particularly home equity. Social Security and disability payments are also protected in bankruptcy. Debtors who wish to leave more money for their children when they die can consider discharging the debts they have while keeping assets that would otherwise go to creditors in probate.

An alternative to bankruptcy, for retired debtors at least, is paying down debt before or during retirement. The nemesis here is lower incomes and interest charges. Interest is like a negative investment return, so it prevents wealth from accumulating via compound interest. Debtors who save more money earlier—and paying debts is technically saving—will have more money later.

A report on the Credit.com survey is here.

Of course, dying with debt is not a humiliation, and bankruptcy won’t always protect people’s assets to allow them to live the lifestyle they want afterwards. However, for some people dying debt-free is important, as is leaving as much as possible for the next generation. If you are retired, or approaching retirement, but you owe substantial debts, then talking to an experienced New York bankruptcy lawyer can help you assess your options.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

The post The High Cost of Dying in Debt appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.

  

Related Stories

    
View commentsTrack comments


Medical Debt May Not Be a Significant Bankruptcy Trigger

The New England Journal of Medicine (NEJM) is not a source most New York bankruptcy lawyers would turn to for scholarly discussion of bankruptcy in the United States. However, in March 2018, the medical publication ran a perspective piece arguing that medical debt as a principal cause of bankruptcy is vastly overblown, despite alarming media reports suggesting otherwise. Here are some of the article’s arguments—and why they may matter to New York bankruptcy debtors.

The NEJM article specifically pointed to a claim—which according to my research has never appeared on this blog—that 60 percent of all bankruptcies are caused by unpayable health-care bills. This claim originates from two research surveys that asked bankruptcy debtors whether they had experienced “health-related financial stress such as substantial medical bills or income loss due to illness,” or, “whether they went bankrupt because of medical bills.”

The article’s authors attacked the research producing these claims for several reasons. The first is just a basic understanding of causation: Just because survey respondents say medical debt played a role in their bankruptcies does not mean the debts caused them. The medical debt may be a salient factor, but analytically speaking the root cause of a bankruptcy is not necessarily what a debtor believes it is.

The NEJM authors’ second point is simple math: If only 20 percent of Americans report significant medical debt, and only 1 percent file bankruptcy each year, then owing medical debts in itself is unlikely to cause medical bankruptcy for most debtors. This is simply asserting that a causal relationship exists when any two variables coincide.

To arrive at a more accurate percentage, the authors compared a large sample of people who were admitted to hospitals for any non-pregnancy reason, linked them to their credit reports, and then evaluated whether and when they filed bankruptcy. Comparing the people in the sample who filed bankruptcy to all bankruptcies, the authors estimated that the out-of-pocket costs and lost income from the hospital stays contributed to about 4 percent of bankruptcy filings, which is much lower than 60 percent.

One might think, then, that the NEJM piece settles the argument on the frequency of medical bankruptcy, but it doesn’t. The NEJM gave the researchers who produced the studies making the 60-percent claim a chance to respond. In their rebuttal, they stressed a few important points: One, hospitalization is not the best measure of medical costs. Two, many of the people in the study were filing bankruptcy at higher rates before the hospitalization occurred, indicating that medical problems played a role. Third, they argued that out-of-pocket costs are more relevant to measuring bankruptcy risk than total costs, which means the study’s authors excluded more than 80 percent of medical spending. They also excluded costs spend on behalf of adult partners and children, which can also bankrupt a family. Finally, unpaid medical debts account for the bulk of debts sent to collections.

Possibly a significant contributor to this debate is defining what “medical bankruptcy” is. It’s one thing to argue that a bankruptcy after an expensive medical problem, a loss of health insurance, and a job loss isn’t purely a medical bankruptcy. But it’s another thing entirely to assert that the debts of people who don’t file bankruptcy matter when investigating people who do in fact file bankruptcy.

The NEJM perspectives piece is here (pdf), and the letter responding to it is here.

The 60 percent figure does seem to be a bit of stretch, but it makes sense given that debts for medical costs are more common than, say, irresponsible spending. If you have significant medical expenses, then the lesson from this academic exchange is that bankruptcies can happen for interrelated reasons. For example debtors can’t work to earn the money to pay for medical procedures. Whatever the statistic really is, if you are struggling under debts for medical bills, then talking to an experienced New York bankruptcy lawyer can help you assess your options.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.

The post Medical Debt May Not Be a Significant Bankruptcy Trigger appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.

 

Related Stories

    
 


In the Real World Anonymous Data Is Not So Anonymous

An unfortunate cause of New York bankruptcy cases is identity theft. If a thief gets a hold of a consumer’s personal financial information he or she can easily open false accounts in that consumer’s name and run up substantial charges. Medical identity theft is also a possibility. Consumers can reverse many of these activities, but it takes time, and it might not be possible to do so before other bills become due, leading to bankruptcy. A crucial step to preventing this from happening is for consumers to protect their personal financial information, but as the Equifax breach demonstrated, it increasingly falls to third parties to safeguard people’s information—third parties that may not have much of an incentive to do so, unlike the government. If that wasn’t enough, a recent article in U.K. publication The Guardian recently shows that it’s quite easy to de-anonymize large datasets of personal information. How serious is this, and what can debtors do about it?

According to the article, there are a handful of unvarying markers people use that can essentially identify them without much effort. A pertinent list includes: dates of birth, genders, and ZIP codes. Although statistically it’s quite common for a small group of people to share the same birthdate, the year, gender, and location of any one person makes it all but certain who that individual is, often based on voter registration data or other public databases that combine all these pieces of information.

The potential to successfully identify individuals out of anonymous datasets is quite high. In one study, 87 percent of the U.S. population could be identified with the information listed above. More disturbingly, allegedly anonymous medical records showing patients’ operation dates could also be combined with other public datasets to identify the patients.

The same can be said of geolocation data on mobile phones. Combined with credit-card purchases, researchers can fairly confidently identify people based on their commutes to and from work, their regular spending patterns, and the applications they use.

The article laments that consumers don’t have many options for staying truly anonymous. Using only cash or checks for transactions or abandoning mobile phones are not practical options. They also don’t address the de-anonymizing efforts based on the handful of personal characteristics listed above: birthdate, gender, and ZIP code. Rather, it recommends government and private-sector sources limit researchers’ capacity to duplicate datasets for themselves.

The Guardian article is here.

The truth of the matter is that there’s really no way to perfectly protect your data from anyone. Cautious is warranted, but at least the situations described in the article indicate that the types of information one can glean from a database aren’t the kind that can be used to commit serious identity theft. However, that means information such as Social Security numbers should be given out very rarely because so much else is already available.

If you have suffered identity theft, and it’s affected your ability to repay your debts, then talking to an experienced New York bankruptcy lawyer can help you assess your options.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

The post In the Real World Anonymous Data Is Not So Anonymous appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.

 

Related Stories

    
 


Income-Driven Repayment Plans Don’t Always Help Debtors Afford Homes

It’s often a challenge to discharge student-loan debt in a New York bankruptcy case, which is why I have consistently recommended debtors with federal-education loans choose income-driven-repayment (IDR) plans if they find their monthly payments difficult to afford. These plans reduce monthly payments to a fraction of ten-year repayment plan and offer loan forgiveness after twenty or twenty-five years. Aside from the future problem of a tax liability for a forgiven debt, at least for debtors with large loan balances, IDR plans are the next best thing for federal-student-loan debtors than a chapter 13 New York bankruptcy. This doesn’t mean IDR plans solve all of debtors’ problems. In fact, The Atlantic recently discussed a new problem encountered by debtors on IDR plans: Banks won’t lend them mortgages.

(Note: In past years IDR plans were called income-based repayment (IBR) plans, but because IBR is now merely one type of plan, it’s no longer the generic term for the program.)

Apparently, when lenders look through mortgage applicants’ files, they do not account for the repayment plans student-loan debtors are on. As a result, when debtors indicate they have significant student loans, the banks treat them as though they’re paying the maximum amount per month. In other words, they simply look at debtors’ debt-to-income ratios and conclude that they are credit risks.

Although it’s clear banks should be looking at actual monthly loan payments rather than a big debt figure to calculate them, there are a few reasons to understand why the banks would be hesitant to lend to student debtors, other than inertia from past practices. One is that IDR plans require tedious paperwork, and in some years debtors have needed to scramble to ensure they qualify. Two, IDR debtors’ incomes can fluctuate, and their monthly payments might not catch up. For instance, many debtors pay nothing in the first years of their plans as their last known incomes were nil because they were in school. Finally, there is the risk that the government will modify the terms of IDR plans in a way that disadvantages debtors. Normally this isn’t possible for contracts, but the federal government’s contracts with student-loan debtors work differently.

Some lenders, though, have caught on, namely Fannie Mae and Freddie Mac, the federally controlled mortgage lenders, began taking repayment plans into account when assessing borrowers’ risk levels. The Federal Housing Authority, by contrast, has not, citing a 2013 bailout that has left it risk averse. Private lenders’ practices vary.

The Atlantic article is here.

There isn’t a whole lot student-loan debtors can do to obtain a mortgage if their debt-to-income ratios are high, even if their IDR plans greatly deflate their monthly loan payments. Aside from the obvious advice of discouraging people from taking on needless student loans, particularly Parent PLUS or Grad PLUS loans, one thing debtors can do is save up more money for a down payment. It may seem unfair, but if Fannie or Freddie loans are out, it may be the best debtors can hope for.

If you are struggling under significant student-loan debt, then talking to an experienced New York bankruptcy lawyer can help you assess your options. A chapter 7 bankruptcy can free up money dedicated to other debt payments that can go to your student loans.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

The post Income-Driven Repayment Plans Don’t Always Help Debtors Afford Homes appeared first on Bankruptcy Attorney in Brooklyn, New York | Rosenberg Musso Weiner.

 

Related Stories

    
 


More Recent Articles


 

Safely Unsubscribe ArchivesPreferencesContactSubscribePrivacy