This past Thursday (7/8/10), a Massachusetts federal judge decided that a law barring the federal government from recognizing same-sex marriage is unconstitutional. Follow this link to read more about the decision. The decision will make obtaining bankruptcy relief easier and less expensive for same-sex married couples in Massachusetts.
Prior to the decision, same-sex married couples in need of a Chapter 7 or Chapter 13 bankruptcy filing could not file a joint bankruptcy petition. This was because bankruptcy is a federal legal proceeding, and under the federal Defense of Marriage Act, or DOMA, same-sex marriage was not recognized. As a result, a same sex married couple could not take advantage of the higher median income limit extended to 2-person households. This meant fewer gay and lesbian debtors could avoid the means test than their heterosexual counterparts. Another problem was that a same-sex married couple had to file two individual bankruptcy petitions, pay two filing fees, and typically incur higher legal fees than a heterosexual married couple.
It is not clear whether or not the U.S. Department of Justice is going to appeal the decision. If the decision is upheld on appeal, or not challenged at all, all married couples in Massachusetts will be treated equally throughout the bankruptcy process. The different treatment described above will be no more. The federal bankruptcy court will need to respond to the decision by updating its petition, forms and schedules to accommodate same-sex marriage terms, as many documents use the traditional labels of "husband" and "wife." Perhaps they will use the generic terms "debtor" and "co-debtor."
Frequently we are reminded that the only constant is change. This recent decision changes bankruptcy law in Massachusetts, and sets the stage for change in other jurisdictions. The decision may be upheld or overturned. Whatever the outcome, should financial distress take hold of you or someone you care about, make sure you/they seek counsel from an experienced bankruptcy attorney who remains current in this dynamic and important area of the law.
Matthew S. Rousseau, Esq.
Morrison Rousseau, LLP
www.WorcesterBankruptcyAttorney.com
Showing posts with label Debt Relief. Show all posts
Showing posts with label Debt Relief. Show all posts
Friday, July 9, 2010
Monday, May 31, 2010
The Parent Trap
No, I'm not talking about the Disney movie starring the young, innocent actress Hayley Mills,...later remade with the young innocent actress, Lindsay Lohan. I am talking about the problems your parents can create for you when they transfer assets to you (completely or partially) for their own estate planning purposes.
Parents often transfer assets (usually a home) to their children so the parents' estates may avoid paying back the value of Medicaid benefits (e.g., a nursing home stay) to the State after the parents pass away. This may sound good to some, but serious problems can arise if a child receiving assets becomes insolvent while the parents are still alive, and needs to file for bankruptcy relief.
The transfer increases the child's assets, which can compromise the child's bankruptcy case,...and the parents' estates. This is due to there being only a limited amount of exemptions available to shield assets in bankruptcy.
In a Chapter 7 bankruptcy case, too many assets can result in the sale of the non-exempt assets by the trustee assigned to the case. The fact that the child is only helping their parents will not matter to the United States Trustee's Office. What a tragedy it would be for Mom and Dad to lose their house (which they likely own debt-free) because of their child's bankruptcy, and subsequent inability to protect the house from trustee liquidation.
All too often, a child who is holding assets for a parent is forced into filing a Chapter 13 bankruptcy in order to protect the assets. As a result, the child must endure the more expensive and longer duration bankruptcy proceeding. In a Chapter 13 case, too many assets can result in higher Chapter 13 plan payments. Sometimes, the child cannot afford the higher Chapter 13 plan payment, and is prevented from filing altogether.
Parents who are contemplating a transfer of assets to their children would be wise to make sure their children are not highly leveraged or otherwise in financial distress. Children who are highly leveraged, in difficult relationships, uncertain about job security, etc. would be equally wise not to accept a transfer of assets from their parents.
An open and frank discussion of a child's financial situation with a qualified attorney prior to a transfer of assets from parent to child can avoid substantial harm to the parent's estate, and the child's chance for meaningful debt relief through bankruptcy.
Matthew S. Rousseau, Esq.
Morrison Rousseau, LLP
www.WorcesterBankruptcyAttorney.com
Parents often transfer assets (usually a home) to their children so the parents' estates may avoid paying back the value of Medicaid benefits (e.g., a nursing home stay) to the State after the parents pass away. This may sound good to some, but serious problems can arise if a child receiving assets becomes insolvent while the parents are still alive, and needs to file for bankruptcy relief.
The transfer increases the child's assets, which can compromise the child's bankruptcy case,...and the parents' estates. This is due to there being only a limited amount of exemptions available to shield assets in bankruptcy.
In a Chapter 7 bankruptcy case, too many assets can result in the sale of the non-exempt assets by the trustee assigned to the case. The fact that the child is only helping their parents will not matter to the United States Trustee's Office. What a tragedy it would be for Mom and Dad to lose their house (which they likely own debt-free) because of their child's bankruptcy, and subsequent inability to protect the house from trustee liquidation.
All too often, a child who is holding assets for a parent is forced into filing a Chapter 13 bankruptcy in order to protect the assets. As a result, the child must endure the more expensive and longer duration bankruptcy proceeding. In a Chapter 13 case, too many assets can result in higher Chapter 13 plan payments. Sometimes, the child cannot afford the higher Chapter 13 plan payment, and is prevented from filing altogether.
Parents who are contemplating a transfer of assets to their children would be wise to make sure their children are not highly leveraged or otherwise in financial distress. Children who are highly leveraged, in difficult relationships, uncertain about job security, etc. would be equally wise not to accept a transfer of assets from their parents.
An open and frank discussion of a child's financial situation with a qualified attorney prior to a transfer of assets from parent to child can avoid substantial harm to the parent's estate, and the child's chance for meaningful debt relief through bankruptcy.
Matthew S. Rousseau, Esq.
Morrison Rousseau, LLP
www.WorcesterBankruptcyAttorney.com
Monday, May 24, 2010
Think Twice Before You Cash In Your Retirement
As a general rule, it is unwise to borrow against or liquidate your retirement savings to pay your debts. The U.S. Bankruptcy Code does not require you to liquidate your retirement savings to pay your bills before, or after, you file for bankruptcy relief under Chapter 7 or Chapter 13. Most forms of retirement savings and pensions are protected in bankruptcy proceedings.
Many people facing insolvency do not understand this fact. They withdraw or borrow against their retirement, thinking their financial situation will soon improve. When it doesn't and their financial distress becomes intolerable, they finally seek the help of a bankruptcy attorney. It's usually at the first meeting with the bankruptcy lawyer that the debtors receive the unpleasant news that they did not have to liquidate their retirement savings.
Other fallout from liquidating retirement savings includes the penalties associated with early withdrawals, and the potential for additional income taxes on the amounts withdrawn.
There are some instances when it makes sense to tap into your retirement account to pay your debts, but they are few and far between.
For most of us, the use of retirement funds to pay our debts is a mistake we will regret throughout our golden years, and should be avoided.
Matthew S. Rousseau, Esq.
Morrison Rousseau, LLP
www.WorcesterBankruptcyAttorney.com
Many people facing insolvency do not understand this fact. They withdraw or borrow against their retirement, thinking their financial situation will soon improve. When it doesn't and their financial distress becomes intolerable, they finally seek the help of a bankruptcy attorney. It's usually at the first meeting with the bankruptcy lawyer that the debtors receive the unpleasant news that they did not have to liquidate their retirement savings.
Other fallout from liquidating retirement savings includes the penalties associated with early withdrawals, and the potential for additional income taxes on the amounts withdrawn.
There are some instances when it makes sense to tap into your retirement account to pay your debts, but they are few and far between.
For most of us, the use of retirement funds to pay our debts is a mistake we will regret throughout our golden years, and should be avoided.
Matthew S. Rousseau, Esq.
Morrison Rousseau, LLP
www.WorcesterBankruptcyAttorney.com
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