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Security Deposits and Bankruptcy

What Happens to My Security Deposit If I File For Bankruptcy?

Apartment Security Deposit

Large security deposits are common with apartments. When you leave your apartment, this security deposit money protects you from the landlord seeking damages. Many times the security deposit will be returned to you after the completion of your lease. What happens to your security deposit when you file for bankruptcy?

Your Security Deposit Could Become an Asset Taken in Your Bankruptcy

In Indiana, you may lose your security deposit for your apartment in Chapter 7 bankruptcy. However, usually this is not the case. To lose your security deposit, a few factors will likely need to be necessary in Indiana.

First, you will need to file for Chapter 7 bankruptcy. In Chapter 13, the bankruptcy trustee will not be interested in the security deposit as an asset because you are already paying back an amount to your creditors. Chapter 7, however, focuses on finding assets that can repay creditors.

Second, your security deposit will need to be very large in nature. Your bankruptcy trustee will not likely be interested in a $500 deposit. However, your trustee may very likely pursue a $2000 or greater deposit. The chances of your trustee pursuing such a deposit also increases if there are other assets being collected for creditors on your case.

Third, your security deposit will need to be collectable. If a contact or landlord situation proves too difficult to deal with legally, the trustee will likely abandon the security deposit because pursuing its collection may be cost prohibitive for the bankruptcy estate. Because there is a third party involved (the landlord), the trustee is sometimes dissuaded from entering such an undesirable situation.

Usually Security Deposits Are Not Taken in Bankruptcy

“Asset” cases in bankruptcy are much less common than what the court calls “non-asset” cases in Chapter 7 bankruptcy. This simply means that the trustees in bankruptcy usually do not seek any of your assets or moneys to be turned over during a Chapter 7 case. Unless your security deposit is very large and easily obtainable by your landlord, you will likely not have it taken during the bankruptcy. It is usually not worth the time or effort of the trustee to recover such a small amount for the repayment of creditors.

 

Will My Employer Learn if I Have A Wage Garnishment in Indiana?

After filing Chapter 7, when can I file Chapter 13?

A wage garnishment on your paycheck can come after receiving a judgment during a lawsuit.   This wage garnishment can damage your budget severely.  In Indiana, the creditor will frequently take up to 25% of your gross income.  Will your employer know about the wage assignment?  On some level, it is very likely that your employer will learn that you have a wage garnishment.

Wage Garnishment Orders Are Sent to Your Employer

Wage garnishment orders are sent to the payroll department of your employer.  Small employers sometimes manually deduct this amount from your paycheck.  Smaller employers may be required to set this money aside and manually send these payments to the court for your creditor.  If your employer does not use a payroll service, then the staff must manually send these payments.

Most employers, however, use a payroll service.  If you work at a larger company, your company will either use a payroll service or operate an internal payroll department.  In such cases, only an initial entering of the wage garnishment information is required.  From that point, the payroll system will automatically deduct the amount and send it to the court.

Your Manager and Fellow Employees May Have No Knowledge of the Wage Garnishment

Because many companies use a payroll service, it is very likely that your fellow employees or manager may never learn about your garnishment.   Although the payroll person or department may have knowledge of the garnishment, this information may not be passed to others within the company.   If you work for a larger employer, it is much less likely that this information will be passed to other employees.

Wage Garnishments Can be Stopped by Bankruptcy

If you have excessive debts, you need to consider filing for bankruptcy.  Bankruptcy has the power to instantly stop wage garnishments.   If you are suffering from a garnishment on your check, consider contacting our office for a free consultation.

Can I file for bankruptcy in Indiana if I recently moved here?

If you have only recently moved to Indiana, you can still file bankruptcy within the state of Indiana. You do not generally need to go back to your old state to file.  This can be very convenient and cut down of traveling costs.

Indiana Bankruptcy Filing:  You Must Wait 91 Days (The Greater Part of 180 Days)

The bankruptcy code officially states that bankruptcy filers that want to file in their new state must wait “the greater part of 180 days.”  Therefore, in most situations, you must live within your new state for 91 days to file there.  If you have lived in Indiana more than 91 days, you will be able to file in Indiana for bankruptcy.  This can be much more convenient than traveling back to your old state.  It may save you the cost of an airline ticket if your state is too far away to drive.

Indiana Bankruptcy Filing: The Bankruptcy Court Understands You Need a Jurisdiction Where You Can File

The bankruptcy court understand that everyone needs a jurisdiction to file bankruptcy. The court desires bankruptcy relief to be readily available for those who need it. Generally, there is not an excessive analysis of the proper jurisdiction in which you must file bankruptcy.  Therefore, generally extensive proof of residency within a state is not required. If you live in multiple states, generally it is best to pick the state in which you spend the most time throughout the year.  

Indiana Bankruptcy Filing:  Your Bankruptcy Exemptions Do Not Change as Quickly

If you move to a new state, you may be able to file there quickly. However, your bankruptcy exemptions  will usually not change for two years.  The bankruptcy court will allow you to file in the new state in only 91 days.  The court does not, however, allow “exemption shopping” where people move to a new state just to avail themselves of more liberal bankruptcy exemptions to protect their property.  In Indiana just like all other states, you must wait two years before you can avail yourself of the new state’s exemptions. 

Bankruptcy Waiting Period

Bankruptcy Waiting Period

How Long is the Bankruptcy Waiting Period?

What is the time in which you must wait between filing one bankruptcy to the next?  The bankruptcy waiting period requires you to wait for eight years in between filing Chapter 7 bankruptcy cases.

The Bankruptcy Waiting Period is Based on the Bible

The United States bankruptcy code is patterned after the Bible’s required release of debts that occurred every seven years.  In conformance with the Bible, Congress established that the term was originally to be seven years for the bankruptcy waiting period.  In October 2005, the law was changed to make this period longer.  The bankruptcy waiting period is now eight years.  Remember, even if you’re a full eight years has not yet arrived, you may be able to take advantage of other forms of relief within the bankruptcy code.

Other Bankruptcy Waiting Periods

The other bankruptcy waiting periods determine how long you must wait between other chapters of bankruptcy.  If you’re going between Chapter 7 to Chapter 13, you must wait four years if you want to receive a discharge in the Chapter 13 case.

There are also other waiting periods such as going from a Chapter 13 to a Chapter 7. In such a case, you must wait six years from the date you filed a Chapter 13 to the date you filed for Chapter 7 if you received a discharge in the Chapter 13 case.   There are also less waiting periods in various other situations.

It is important to seek the guidance of an experienced bankruptcy attorney to make sure that you are fully utilizing the bankruptcy code to meet your needs.  Reviewing a bankruptcy waiting period chart may not fully explain what current rights you may be able to take advantage of within the bankruptcy code.

Bymaster Bankruptcy Law Offices offers free consultations.  If you have questions about bankruptcy give our office a call at 317-769-2244.

 

Should I cash out my retirement account to pay bills?

When bills become overwhelming, frequently people turn to their retirement accounts for help.   Sometimes a large withdrawal from a retirement account can appear to be the solution to overwhelming debts.  However, it is usually a very bad idea to use retirement funds to pay off debts.  

Cashing Out Retirement Causes High Taxes and Penalties

Cashing out a portion of your retirement account to pay bills can result in higher tax liabilities and penalties.  You can lose up to 50% or more of your funds just through the additional taxes and penalties you will face.   This is a very inefficient way to deal with debt. 

Loans on a 401k or similar account create less problems than a withdrawal.  Loans on such accounts usually do not cause penalties or new tax liabilities to occur. However, 401k loans are still inefficient due to the interest that you must pay during the term of the loan.  These loans are usually not a sound way to deal with large amounts of debt.

Retirement Accounts are “Exempt” in Bankruptcy

In Indiana, most retirement accounts are exempt in bankruptcy.  This means that you get to keep all your retirement funds when you file bankruptcy.  Therefore, cashing out retirement funds can be an unnecessary loss.  If you are facing large debts, you should consider bankruptcy options before making a retirement account withdrawal.

Unfortunately, withdrawals from retirement accounts do not always rectify the entire financial situation.  Many people completely deplete their retirement savings only to find out that they still need to file bankruptcy only a few months later.   It is usually unwise to deplete retirement savings to pay debts. Speak to a bankruptcy attorney before deciding to withdrawal from your retirement accounts.  Such a withdrawal may be a financial mistake.