Exemptions: Most Important Consideration When Filing Bankruptcy

Section 522 governs debtors’ rights in bankruptcy as this relates to exemptions of property. This section 522, of course, makes bankruptcy more attractive than anything else does. In addition, this gives debtors protection for a fresh start. As usual, the law office of Malik Ahmad at http://www.fastbankruptcynevada.com provides a free consultation to prospective bankruptcy clients. One should have a thorough evaluation of the availability of exemptions before deciding to file bankruptcy. You do not want with too little assets to start your life after bankruptcy. As you may know, the trustee is eager to take away what is not exempted from your estate. Significant assets can be lost in bankruptcy through chapter 7. The exemption provision of the Bankruptcy Code is also related to other parts of Bankruptcy Code. For example, they give the debtor many of the trustee’s power to avoid prepetition transfers of property.

The turnover provisions of Section 542 specifically require that the property, which is in the possession of a third party, and the debtor, which can make it, exempt, must be turned over to the trustee. In addition, the right to redemption applies only to abandoned or exempt property.

What is an Exempt Property?
The Bankruptcy Code has no special definition of exempt property. The exempt property is such property, which the debtors are entitled to keep and which the trustee cannot liquidate and the debtor is permitted to keep it under Chapter 7. Other assets, which are not exempt, can be taken over by the trustee for the benefit of the creditors. As such, we suggest to only seeking legal help from qualified attorneys. Paralegal s are basically typist, cannot provide such exemption list and if provide can be defective and practicing law without a license.

What the Code does not provide?
1. The Code does not specify when exempt property loses its previous character as property of the estate.
2. The Code does not provide who shall possess exempt property during the period before the time for objections has run.
3. The courts had generally assumed that the debtor has the right to remain in possession of the exempt property throughout the case.

What is the Purpose of Exemption?
The sole purpose of exemption is to give a fresh start to the borrowers so that he/she can start his/her life with at least some foundation, and yet to provide him with home , car, furniture, jewelry, IRA accounts, and some other tools of the trade. The basic purpose is that borrowers can have life started again with dignity, self-respect to which we as decent law-abiding society deserves.

Bankruptcy and your delinquent tax liabilities

Lately, we are meeting lots of debtors who have lots of tax liabilities and owe money to IRS. We like to stress that everyone should pay their taxes, and file the tax returns every year. This is a continuous obligation and also we advise to seek a professional in this regard. However, we still come across clients with significant tax liabilities.
As you may know, the IRS has a number of programs available to individuals who have incurred significant tax liabilities. Two of the most common programs are the “installment agreement” program in which the taxpayer pays 100% of his delinquent tax over several years, and the “offer in compromise” program in which the taxpayer settles his account for less than 100 cents on the dollar.

Interestingly, Congress looked to these IRS programs when designing the means test elements of the BAPCPA changes to the bankruptcy laws. The budget expense categories used in means test calculations are derived in part from the approved expense categories that the IRS uses in both installment agreements and in offers in compromise.
Despite what you may have heard tax debt can be dealt with in a bankruptcy. Chapter 7 can discharge “stale” tax debt and Chapter 13 can be used to pay recent tax debt (called priority debt), secured tax debt (when a tax lien has been filed) and unsecured (stale) tax debt.
Bankruptcy is definitely a better tool for dealing with tax liabilities and old tax bills, as there is set procedure for discharged in bankruptcy. So, if you have tax liabilities which you owe more than 3 years, please contact our office for better consultation.

What Are Different Claims in a Bankruptcy Petition?

Today, we are going to discuss some of the basic definitions the knowledge of which is required to settle claims under various bankruptcy petitions.

Definitions:
(1) Insider — Debtors should refer to section 101(31) of the Bankruptcy Code for the definition of a “insider.”

(2) Secured Claim — A claim is secured if the creditor has a lien on property of the debtor (collateral) that gives the creditor the right to be paid from the property before creditors who do not have liens on the property. A claim is secured only to the extent to which the value of the creditor’s interest in a property equals the amount of the debt. Any amount not protected by collateral is unsecured. 11 U.S.C. § 506. Examples of liens include a mortgage on real estate and a security interest in a car, boat, television set, or other item of property. A lien may have been obtained through a court proceeding before the bankruptcy case began; in some states a court judgment is a lien.

(3) Unsecured Claim — If a claim is not a secured claim, it is unsecured. A claim may be partly secured and partly unsecured if the property on which a creditor has a lien is not worth enough to pay the creditor in full.

(4) Contingent Claim — A claim is contingent if the debtor’s liability depends on a occurrence of a certain event, such as when the debtor is a co-signor on another person’s loan and that person fails to pay.

(5) Unliquidated Claim — An unliquidated claim is a claim the amount of which is not completely certain. The claim exists, but the amount is presently unknown. For example, a debtor may have been at fault in a car accident, but there is no judgment yet establishing the
amount of the debtor’s liability. The debtor will have to estimate the amount of such a claim and designate it as unliquidated.

(6) Disputed Claim — A claim is disputed when the debtor and creditor do not agree on the debtor’s liability or on the amount of the debt.

(7) Setoff — A “setoff” is when all or part of the debt owed by the debtor to the creditor is “canceled out” by a pre-existing debt owed by the creditor to the debtor.

Can you be arrested in a civil action (garnishment) in Nevada?

The Law Office of Malik Ahmad had been asked this question many times if the defendants can be arrested in a civil action. The answer is yes, but only under the following conditions:

NRS 31.470 Arrest in civil cases. No person shall be arrested in a civil action except as prescribed by this chapter.

NRS 31.480 Cases in which defendant may be arrested. The defendant may be arrested, as hereinafter prescribed, in the following cases:

1. Recovery of Money: In an action for the recovery of money or damages on a cause of action arising upon contract, express or implied, when the defendant is about to depart from the State with intent to defraud the defendant’s creditors, or when the action is for libel or slander.

2. For Fine or Penalty: In an action for a fine or penalty, or for money or property embezzled, or fraudulently misapplied or converted to his or her own use by a public officer, or an officer of a corporation, or an attorney, factor, broker, agent or clerk in the course of his or her employment as such or by any other person in a fiduciary capacity, or for misconduct or neglect in office, or in professional employment, or for a willful violation of duty.

3. For Personal Property: In an action to recover the possession of personal property unjustly detained, when the property, or any part thereof, has been concealed, removed, or disposed of so that it cannot be found or taken by the sheriff.

4. Guilty of Fraud: When the defendant has been guilty of a fraud in contracting the debt or incurring the obligation for which the action is brought, or in concealing or disposing of the property, for the taking, detention or conversion of which the action is brought.

5. Conversion: When the defendant has removed or disposed of the defendant’s property, or is about to do so, with intent to defraud the defendant’s creditors.

Who would give order of arrest?

NRS 31.490 Order for arrest. An order for the arrest of the defendant shall be obtained from a judge of the court in which the action is brought.

NRS 31.500 Order for arrest made when plaintiff’s affidavit shows a sufficient cause; requisites and filing of affidavit. The order may be made whenever it shall appear to the judge, by the affidavit of the plaintiff or some other person, that a sufficient cause of action exists, and the case is one of those mentioned in NRS 31.480. The affidavit shall be either positive or upon information and belief; and when upon information and belief it shall state the facts upon which the information and belief are founded. If an order of arrest be made, the affidavit shall be filed with the clerk of the court.

NRS 31.510 Undertaking from plaintiff. Before making the order the judge shall require a written undertaking, payable in lawful money of the United States, on the part of the plaintiff, with sureties, to the effect that if the defendant recover judgment, the plaintiff will pay all costs and charges that may be awarded to the defendant, and all damages which the defendant may sustain by reason of the arrest, not exceeding the sum specified in the undertaking, which shall be at least $500. Each of the sureties shall annex to the undertaking an affidavit that the surety is a resident and householder or freeholder within the State, and worth double the sum specified in the undertaking over and above all the surety’s debts and liabilities, exclusive of property exempt from execution. The undertaking shall be filed with the clerk of the court.

NRS 31.520 Order and arrest; return of order. The order may be made to accompany the summons, or any time afterwards before judgment. It shall require the sheriff of the county where the defendant may be found forthwith to arrest the defendant and hold the defendant to bail in a specified sum, naming the money or currency in which it is payable, and to return the order at a time therein mentioned to the clerk of the court in which the action is pending.

NRS 31.530 Delivery of affidavit and order to sheriff and defendant. The order of arrest, with a copy of the affidavit upon which it is made, shall be delivered to the sheriff, who, upon arresting the defendant, shall deliver to the defendant the copy of the affidavit, and also, if desired, a copy of the order of arrest.

NRS 31.540 Arrest of defendant. The sheriff shall execute the order by arresting the defendant and keeping the defendant in custody until discharged by law.

NRS 31.550 Defendant to be discharged on bail or deposit. The defendant, at any time before execution, shall be discharged from the arrest either upon giving bail or upon depositing the amount mentioned in the order of arrest in the money or currency therein named, as provided in this chapter.

NRS 31.560 Defendant may give bail. The defendant may give bail by causing a written undertaking, payable in the money of the contract (if any be named), and in other cases as directed by the judge, to be executed by two or more sufficient sureties, stating their places of residence and occupations, to the effect that they are bound in the amount mentioned in the order of arrest; that the defendant shall at all times render himself or herself amenable to the process of the court during the pendency of the action, and to such as may be issued to enforce the judgment therein; or that they will pay to the plaintiff the amount of any judgment which may be recovered in the action.

NRS 31.570 Bail may surrender defendant. At any time before judgment, or within 10 days thereafter, the bail may surrender the defendant in their exoneration; or the defendant may surrender to the sheriff of the county where the defendant was arrested.

NRS 31.580 Arrest, delivery and surrender of defendant by bail; exoneration of bail. For the purpose of surrendering the defendant, the bail at any time or place before they are finally charged may themselves arrest the defendant; or by a written authority, endorsed on a certified copy of the undertaking, may empower the sheriff to do so. Upon the arrest of the defendant by the sheriff, or upon delivery of the defendant to the sheriff by the bail, or upon the defendant’s own surrender, the bail shall be exonerated; provided, such arrest, delivery or surrender shall take place before the expiration of 10 days after judgment; but if such arrest, delivery or surrender be not made within 10 days after judgment, the bail shall be finally charged on their undertaking, and be bound to pay the amount of the judgment within 10 days thereafter.

NRS 31.590 Action against bail. If the bail neglect or refuse to pay the judgment within 10 days after they are finally charged, an action may be commenced against bail for the amount of the original judgment.

NRS 31.600 Bail exonerated by death, imprisonment or discharge of defendant. The bail shall also be exonerated by the death of the defendant, or by the defendant’s imprisonment in a state prison, or by the defendant’s legal discharge from the obligation to render himself or herself amenable to the process.

NRS 31.610 Return of order; plaintiff may except to bail. Within the time limited for that purpose, the sheriff shall file the order of arrest in the office of the clerk of the court in which the action is pending, with the sheriff’s return endorsed thereon, together with a copy of the undertaking of the bail. The sheriff shall retain the original undertaking in the sheriff’s possession until filed, as herein provided. The plaintiff, within 10 days thereafter, may serve upon the sheriff a notice that the plaintiff does not accept the bail, or the plaintiff shall be deemed to have accepted them, and the sheriff shall be exonerated from liability. If no notice be served within 10 days, the original undertaking shall be filed with the clerk of the court.

[1911 CPA § 159; RL § 5101; NCL § 8657]

NRS 31.620 Notice of justification of bail. Within 5 days after the receipt of notice, the sheriff or defendant may give to the plaintiff or the plaintiff’s attorney notice of the justification of the same, or other bail (specifying the places of residence and occupations of the latter), before the judge of the court, or clerk, at a specified time and place; the time to be not less than 5 nor more than 10 days thereafter, except by consent of parties. In case other bail be given, there shall be a new undertaking.

NRS 31.630 Qualifications of bail. The qualifications of bail shall be as follows:

1. Each of them shall be a resident and householder, or freeholder, within the county.

2. Each shall be worth the amount specified in the order of arrest, or the amount to which the order is reduced, as provided in this chapter, over and above all debts and liabilities of the bail, exclusive of property exempt from execution; but the judge, or clerk, on justification, may allow more than two sureties to justify severally in amounts less than that expressed in the order, if the whole justification be equivalent to that of two sufficient bail.

NRS 31.640 Examination of bail. For the purpose of justification, each of the bail shall attend before the judge, or clerk, at the time and place mentioned in the notice, and may be examined on oath, on the part of the plaintiff, touching the bail’s sufficiency, in such manner as the judge, or clerk, in the exercise of discretion may think proper. The examination shall be reduced to writing, and subscribed by the bail, if required by the plaintiff.

NRS 31.650 Allowance of bail exonerates sheriff. If the judge, or clerk, find the bail sufficient, the judge or clerk shall annex the examination to the undertaking, endorse the judge’s or clerk’s allowance thereon, and cause them to be filed, and the sheriff shall thereupon be exonerated from liability.

NRS 31.660 Deposit by defendant in lieu of bail. The defendant may, at the time of the defendant’s arrest, instead of giving bail, deposit with the sheriff the amount mentioned in the order. In case the amount of the bail be reduced, as provided in this chapter, the defendant may deposit such amount instead of giving bail. In either case the sheriff shall give the defendant a certificate of the deposit made, and the defendant shall be discharged from custody.

Application required to the court for garnishment

NRS 31.249 Application to court for writ of garnishment.

1. No writ of garnishment in aid of attachment may issue except on order of the court. The court may order the writ of garnishment to be issued:

(a) In the order directing the clerk to issue a writ of attachment; or

(b) If the writ of attachment has previously issued without notice to the defendant and the defendant has not appeared in the action, by a separate order without notice to the defendant.

2. The plaintiff’s application to the court for an order directing the issuance of a writ of garnishment must be by affidavit made by or on behalf of the plaintiff to the effect that the affiant is informed and believes that the named garnishee:

(a) Is the employer of the defendant; or

(b) Is indebted to or has property in the garnishee’s possession or under the garnishee’s control belonging to the defendant,

Ê and that to the best of the knowledge and belief of the affiant, the defendant’s future wages, the garnishee’s indebtedness or the property possessed is not by law exempt from execution. If the named garnishee is the State of Nevada, the writ of garnishment must be served upon the State Controller.

3. The affidavit by or on behalf of the plaintiff may be contained in the application for the order directing the writ of attachment to issue or may be filed and submitted to the court separately thereafter.

4. Except as otherwise provided in this section, the grounds and procedure for a writ of garnishment are identical to those for a writ of attachment.

5. If the named garnishee is the subject of more than one writ of garnishment regarding the defendant, the court shall determine the priority and method of satisfying the claims, except that any writ of garnishment to satisfy a judgment for the collection of child support must be given first priority.

(Added to NRS by 1973, 1181; A 1985, 1012; 1989, 700)

How defendant can request discharge of attachment in Nevada?

NRS 31.200 Grounds for discharge of attachment.

1. The Defendant may also, at any time before trial, apply by motion, upon reasonable notice to the Plaintiff, to the court in which the action is brought or to the judge thereof, for a discharge of the attachment, or the money or property attached through the use of a writ of garnishment, on the following grounds:

(a) That the writ was improperly or improvidently issued.

(b) That the property levied upon is exempt from execution or necessary and required by the Defendant for the support and maintenance of the Defendant and the members of the Defendant’s family.

(c) That the levy is excessive.

2. If the court or the judge thereof on the hearing of such motion shall find that any of the grounds stated in subsection 1 exist, the attachment and levy thereof shall be discharged. If the motion is based upon paragraph (c) of subsection 1 only, and the fact is found to exist, the discharge of attachment shall be only as to the excess.

What kind of execution order required for garnishment in Nevada

Below you will find what an execution or order for garnishment in Nevada looks somewhat like.

NOTICE OF EXECUTION

YOUR PROPERTY IS BEING ATTACHED OR

YOUR WAGES ARE BEING GARNISHED

Plaintiff, ……………….. (name of person, filing garnishment or attachment), alleges that you owe the plaintiff money. The plaintiff has begun the procedure to collect that money. To secure satisfaction of judgment, the court has ordered the garnishment of your wages, bank account or other personal property held by third persons or the taking of money or other property in your possession.

Certain benefits and property owned by you may be exempt from execution and may not be taken from you. The following is a partial list of exemptions:

1. Payments received pursuant to the federal Social Security Act, including, without limitation, retirement and survivors’ benefits, supplemental security income benefits and disability insurance benefits.

2. Payments for benefits or the return of contributions under the Public Employees’ Retirement System.

3. Payments for public assistance granted through the Division of Welfare and Supportive Services of the Department of Health and Human Services or a local governmental entity.

4. Proceeds from a policy of life insurance.

5. Payments of benefits under a program of industrial insurance.

6. Payments received as disability, illness or unemployment benefits.

7. Payments received as unemployment compensation.

8. Veteran’s benefits.

9. A homestead in a dwelling or a mobile home, not to exceed $550,000, unless:

(a) The judgment is for a medical bill, in which case all of the primary dwelling, including a mobile or manufactured home, may be exempt.

(b) Allodial title has been established and not relinquished for the dwelling or mobile home, in which case all of the dwelling or mobile home and its appurtenances are exempt, including the land on which they are located, unless a valid waiver executed pursuant to NRS 115.010 is applicable to the judgment.

10. All money reasonably deposited with a landlord by you to secure an agreement to rent or lease a dwelling that is used by you as your primary residence, except that such money is not exempt with respect to a landlord or the landlord’s successor in interest who seeks to enforce the terms of the agreement to rent or lease the dwelling.

11. A vehicle, if your equity in the vehicle is less than $15,000.

12. Seventy-five percent of the take-home pay for any workweek, unless the weekly take-home pay is less than 50 times the federal minimum hourly wage, in which case the entire amount may be exempt.

13. Money, not to exceed $500,000 in present value, held in:

(a) An individual retirement arrangement which conforms with the applicable limitations and requirements of section 408 or 408A of the Internal Revenue Code, 26 U.S.C. §§ 408 and 408A;

(b) A written simplified employee pension plan which conforms with the applicable limitations and requirements of section 408 of the Internal Revenue Code, 26 U.S.C. § 408;

(c) A cash or deferred arrangement that is a qualified plan pursuant to the Internal Revenue Code;

(d) A trust forming part of a stock bonus, pension or profit-sharing plan that is a qualified plan pursuant to sections 401 et seq. of the Internal Revenue Code, 26 U.S.C. §§ 401 et seq.; and

(e) A trust forming part of a qualified tuition program pursuant to chapter 353B of NRS, any applicable regulations adopted pursuant to chapter 353B of NRS and section 529 of the Internal Revenue Code, 26 U.S.C. § 529, unless the money is deposited after the entry of a judgment against the purchaser or account owner or the money will not be used by any beneficiary to attend a college or university.

14. All money and other benefits paid pursuant to the order of a court of competent jurisdiction for the support, education and maintenance of a child, whether collected by the judgment debtor or the State.

15. All money and other benefits paid pursuant to the order of a court of competent jurisdiction for the support and maintenance of a former spouse, including the amount of any arrearages in the payment of such support and maintenance to which the former spouse may be entitled.

16. Regardless of whether a trust contains a spendthrift provision:

(a) A present or future interest in the income or principal of a trust that is a contingent interest, if the interest has not been satisfied or removed;

(b) A present or future interest in the income or principal of a trust for which discretionary power is held by a trustee to determine whether to make a distribution from the trust, if the interest has not been distributed from the trust;

(c) The power to direct dispositions of property in the trust, other than such a power held by a trustee to distribute property to a beneficiary of the trust;

(d) Certain powers held by a trust protector or certain other persons; and

(e) Any power held by the person who created the trust.

17. If a trust contains a spendthrift provision:

(a) A present or future interest in the income or principal of a trust that is a mandatory interest in which the trustee does not have discretion concerning whether to make the distribution from the trust, if the interest has not been distributed from the trust; and

(b) A present or future interest in the income or principal of a trust that is a support interest in which the standard for distribution may be interpreted by the trustee or a court, if the interest has not been distributed from the trust.

18. A vehicle for use by you or your dependent which is specially equipped or modified to provide mobility for a person with a permanent disability.

19. A prosthesis or any equipment prescribed by a physician or dentist for you or your dependent.

20. Payments, in an amount not to exceed $16,150, received as compensation for personal injury, not including compensation for pain and suffering or actual pecuniary loss, by the judgment debtor or by a person upon whom the judgment debtor is dependent at the time the payment is received.

21. Payments received as compensation for the wrongful death of a person upon whom the judgment debtor was dependent at the time of the wrongful death, to the extent reasonably necessary for the support of the judgment debtor and any dependent of the judgment debtor.

22. Payments received as compensation for the loss of future earnings of the judgment debtor or of a person upon whom the judgment debtor is dependent at the time the payment is received, to the extent reasonably necessary for the support of the judgment debtor and any dependent of the judgment debtor.

23. Payments received as restitution for a criminal act.

24. Personal property, not to exceed $1,000 in total value, if the property is not otherwise exempt from execution.

25. A tax refund received from the earned income credit provided by federal law or a similar state law.

26. Stock of a corporation described in subsection 2 of NRS 78.746 except as set forth in that section.

Ê These exemptions may not apply in certain cases such as proceedings to enforce a judgment for support of a child or a judgment of foreclosure on a mechanic’s lien. You should consult an attorney immediately to assist you in determining whether your property or money is exempt from execution. If you cannot afford an attorney, you may be eligible for assistance through ……………….. (name of organization in county providing legal services to the indigent or elderly persons). If you do not wish to consult an attorney or receive legal services from an organization that provides assistance to persons who qualify, you may obtain the form to be used to claim an exemption from the clerk of the court.