Archives for August 2013

Pensions, IRA’s and 401K’s are protected against creditors, but watch out for disqualification

I just returned from the annual conference of the National Association of Bankruptcy Trustees. Trustees are always on the lookout for novel ways to snag assets to collect or sell to pay creditors. I learned that one way this can happen is if a debtor in bankruptcy has done something that renders an IRA or Profit Sharing Plan disqualified. Most IRA’s or Profit Sharing plans are invested in publicly traded mutual funds, stocks, bonds or other investments. But some people think the “investments” can include family loans or money used for other purposes.  If these non-traditional investments fall outside the rules, the plan could be disqualified.

Normally, IRA’s, Profit Sharing Plans, Pensions, and other “ERISA Qualified” retirement plans are completely protected from the claims of creditors. However, if and to these are rendered disqualified because of improper investments or contributions, that protection could disappear in whole or in part. Bad News.

Here is how that could happen. (These are examples and are not necessarily a complete list. The laws and regulations governing pensions and IRA’s are complex). Certain activities are prohibited and could disqualify an IRA. These include borrowing against the IRA or pledging it as collateral for a loan, commingling IRA and non-IRA assets. If the IRA was funded by a rollover from a pension that is disqualifed that rollover could disqualify the IRA as well.

Of related concern is excess contributions to an IRA beyond the amount allowed.  IRA annual contributions are allowed  up to a certain amount each tax year. If you make excess contributions, that might or might now not disqualify the IRA. However, you may expect a  trustee or creditor to object to the excess contributions and  claim that the extra payments were made to improperly avoid paying creditors and that such excess contributions are a fraudulent transfer which the trustee or creditor can get back. Or as happened in one case, the excess payments were not protected as exempt and had to be turned over.

So this is an area to be careful about.

Doctors Being Driven Into Bankruptcy

Bankruptcy Affects Doctors and Other Professionals

According to CNNMoney.com, a disturbing trend over the last few years has been the increasing number of physicians and medical professionals filing for bankruptcy protection. Though many of these bankruptcies are simply Chapter 11 reorganizations, for some bankruptcy sounds the death knell of their practices and careers.

The Causes of Bankruptcy among Doctors

Studies show that the recession, which has been deeper and longer than expected, has taken its toll on medical practitioners, particularly those who specialize in nonessential procedures. With fewer dollars to spend, many consumers are unwilling to part with even the low cost of a copay for an office visit. In addition, the proliferation of urgent care facilities has resulted in “bargain shopping” by people seeking medical treatment. Furthermore, as more and more companies cut back on the health insurance benefits they provide their employees, more employees are reluctant to spend their own dollars on medical care, and either don’t seek care or go to an emergency room at a hospital, where they may be treated without providing insurance coverage or payment.

Doctors also blame shrinking insurance reimbursements, changing regulations, increases in the cost of malpractice insurance and other business necessities. Especially hard hit have been chemotherapy providers, who have experienced dramatic declines in drug and medical supply reimbursements from patients’ insurance carriers. Also heavily impacted are doctors or medical professionals who work in areas where Medicare is prevalent or where many patients either have little or no insurance. In these areas, patients are unable to afford payments that insurance companies no longer make.

Doctors often have large amounts of debt to match their income. In our experience, doctors as a group present more complications than the typical debtor. Careful planning, having the advice and experience of the right attorney is essential to success. But as with so much else, with the right approach and attention to detail, the patient’s prognosis can be excellent!

Contact Neuner & Ventura, LLP

Let us help you take back control of your life! We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every new potential bankruptcy client. (We do, however, reserve the right to charge a fee to review any work done by another attorney). For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request

Representing Clients across South Jersey

How Chapter 13 Really Works When You Are Behind on a Vehicle Loan

Using Chapter 13 to Restructure a Car Loan

If you are facing financial challenges and have determined that bankruptcy is the best way to get a fresh start, you should know that Chapter 13 reorganization is often the best way to renegotiate the debt on your motor vehicle, allowing you to keep your car and pay it off over a three-to-five year period.

How Chapter 13 Works

When you file for Chapter 13 bankruptcy protection, an automatic stay immediately goes into effect, prohibiting your creditors from calling, writing or taking legal action to collect debts. In exchange for the relief from creditor harassment, you put together a reorganization plan, in which you work out agreements with most of your creditors to repay your debt over a three-to-five-year period. As long as you keep your promise, your creditors may not contact you outside of the bankruptcy process to seek to recover funds. When the bankruptcy period is over, any debts run through the bankruptcy should be gone. If you have larger obligations, such as a mortgage, you typically make payments during the bankruptcy process and keep making those payments after the bankruptcy is done.

If you are behind on car payments and file for Chapter 13, doing so will stop repossession while you and your attorney put together a plan to cure the arrears and possibly restructure the loan under certain circumstances.

Some caveats to consider when restructuring a car loan in a Chapter 13 proceeding:

  • Your motor vehicle expenses must be reasonable. In a Chapter 13 bankruptcy, the court seeks to determine the amount of your disposable income and then works to allocate that among your unsecured creditors. Any payments you have to make to secured creditors are used to reduce your disposable income. The bankruptcy court may determine that your vehicle is a luxury item or that your car payment is not proportional to your income or needs. In such a situation, you would not be allowed to deduct the full amount of your car payment from your disposable income.
  • If you have a lot of equity in your car (most people do not), it may result in higher payments into your reorganization plan.

Contact Neuner & Ventura, LLP

Let us help you take back control of your life! We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every new potential bankruptcy client. (We do, however, reserve the right to charge a fee to review any work done by another attorney). For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request

Recognized Quality & Experience