Is it Time to File Bankruptcy?
Video Transcript: Hello again, everybody. Edward Kelly from 188 Debt Line here to answer your bankruptcy questions. Today we’re going to talk about a question I get a lot. “Is this a good time for me to file bankruptcy?” Well, that’s going to depend on three main factors: your assets, your income, and your debt. So first, assets. So in a bankruptcy, generally your home, and this varies a little bit. In Oklahoma, we’ve got a really good exemption. Varies from state to state as far as how much of your property is exempt and Florida being the best, Oklahoma being right up there. Your homestead exemption is what you apply to your residence and within city limits you’ve got pretty much unlimited up to an acre. Have to be careful though. If you have more than an acre within city limits, you’re going to have some troubles. So be sure your attorney’s aware of that. And second, up to a certain acreage outside of city limits. But again, Oklahoma, chances are your home’s going to be okay. Although, make sure.
As far as your vehicles, Oklahoma again is pretty good compared to other states and jurisdictions, $7,500 in equity per vehicle. So that’s if you have a note on it, if you sold it, paid off the note, what do you have left over? Or if it’s paid off, what’s the Blue Book? So you’re going to be okay on those, but if at this point in your life you’ve got oil royalties, land, a cabin, jet skis, all of those things are going to be up for grabs and will not be exempt. So if you have a bunch of that stuff, may be better down the road when you’ve sold it or liquidated some more assets before you think about bankruptcy because you’re just going to lose them. You don’t so much to lose them, but they’ll be taken by the bankruptcy trustee and they’ll be sold and the proceeds will pay the trustee for their work and then be paid to your creditors. So, those are things you’re going to have to give up.
Second, your income. So if you are working a whole lot of overtime, for example, and you’re going to do a Chapter 13 where you going to pay your disposable income, not the best time. In both a 7 and a 13 the government determines your income by the last six months. So if you have unusual amount of overtime, you’re going to have an inaccurate reflection of your real income. Might be better to wait until a time when it’s closer to what you normally get or even less. That’s going to reduce your disposable income, which will give you a lower Chapter 13 payment and perhaps qualify you for a 7 if you haven’t already. Or if you’re on the line with the cutoff, and there are income cutoffs for Chapter 7 based on your household size, if you’re close to that limit, if you wait until a time when your income’s more reflective of a lower amount, you may just qualify.
So last thing, your debt. So if you’ve got $5,000 in little payday loans, you know, I have some clients that, rather than pay more than what they might be able to negotiate in a payoff, they’ll hire me for much less money just to negotiate that payoff. Which by the way, is not something just debt counselors can do. An actual bankruptcy attorney actually has a lot more leverage to say, “Hey, accept this or we’re just going to file a Chapter 7 and you get zero.” But I charge anywhere from $1,500 to $2,000 or a little more based on the complexity of the bankruptcy number of creditors.
So if you’re under, say, twice that you may be better off negotiating some kind of payoff settlement and avoiding the bankruptcy on your record. So there’s a lot of other factors, but we’ll talk about that another day. So there’s the long and short. Depending on that, I’ve got low income, low assets, and high debt. And oh, let me say one last thing. So let’s say that you have a bunch of bills that haven’t come in yet. You might want to wait till those all come in so there’s no question, particularly in a 13 where there may be a pot to divide, that those creditors are included and fully discharged in the bankruptcy. So again, low assets, low income, high debt, that’s the time to pull the trigger. Okay, see you next time at 188 Debt Line. Thank you.