4 Reasons An Account May Not Be Included In A Bankruptcy
Are you wondering whether all of your credit or debit accounts will be included in your bankruptcy proceedings? Most people are aware that student loans are difficult to discharge during bankruptcy but they don't realize that other issues can crop up with their other accounts, too. Here are a few reasons an account may not be able to be included in a bankruptcy proceeding.
1. It's a Joint Account
Are you declaring bankruptcy separate from a spouse? Perhaps you've been using a credit card that is also in your parent's name. Whatever the case, a joint account isn't always included in a bankruptcy. If it is included, you may only be able to include up to half of it--and it may be less if you were the sole user of the account. Joint accounts should always be treated with care, so you also don't want to adversely affect the credit of the other person on the account. Since bankruptcy often involves closing account, this can happen.
2. It's a Recent Account
Bankruptcy law actually has quite a few safeguards against people who might be tempted to run up debt and then declare bankruptcy. While you may not necessarily be doing that, having an account that is fairly recent could trigger a red flag and the bankruptcy may not cover that account. Of course, you can always contest the decision with your bankruptcy trustee, but odds are that you probably won't get it included.
3. It Has a Lot of Recent Activity
As an addition to the above, if it is an old account but has suddenly become very active, it could also be seen as potential fraud. Bankruptcy fraud isn't just misrepresenting your debts; it also covers the creation of debts with the intent to later declare bankruptcy. So if you suddenly maxed out all of your old credit cards, this could be seen as suspicious. However, there are mitigating factors. For instance, you might be able to show that you recently lost your job, and thus your expenses increased.
4. It Won't Help to Dissolve It
Surprisingly, car loans and mortgages often fall under this heading. This occurs when dissolving the loan won't actually help your net financial situation. If you owe as much on a house or a car as it is worth, selling it will only give you the exact amount of the loan. In other words, you'll end up with $0 either way. And if you actually owe more money than it's worth, it would actually be detrimental to dissolve the loan. As long as you can afford the monthly payments post-bankruptcy, you are likely to be able to keep a residential home or a car that you are underwater on for exactly this reason.
Of course, every individual's financial situation is different. It's best for you to contact a bankruptcy attorney such as Schneider Steve Atty At Law as soon as possible if you're considering bankruptcy. The attorney will go over your accounts with you and will be able to advise you on them.