Chapter 7 Bankruptcy RoundUp – 10/12/12

by Amy K. Butler on October 12, 2012

This is not the average Chapter 7 client.  The US Bankruptcy Court for the Western District of Arkansas is probably going to want to take a look at the contract signed by Arkansas football coach John L. Smith, who, by the terms of his contract, is scheduled to receive $300,000 in compensation at the end of December, and another $300,000 in February of next year, after completion of his Chapter 7 Bankruptcy.  I should have such problems.  This case illustrates nicely the fact that the timing of a Chapter 7 can be important.

NFL Player Warren Sapp has reached a deal with his Chapter 7 trustee to buy back some of his stuff, including the rights to his 2002 Super Bowl ring, if it ever turns up.  The deal includes a 70,000 payment to the Trustee in exchange for, what this article lovingly refers to as: “his crap.”  In addition to reminding me of one of my favorite George Carlin routines, this article illustrates a great point that transfers to smaller Bankruptcy Estates.   Contrary to conventional wisdom, a Chapter 7 Bankruptcy does not necessarily mean that you lose all your worldly possessions.  First – under a Chapter 7, you have certain exemptions at your disposal under State or Federal law (depending on your jurisdiction).  Once you have applied those exemptions, the Trustee takes control of your property, and arranges to liquidate it to satisfy as much of your debt as possible.  You have, in effect, the option to be the buyer of this property.

One question I get frequently regarding Bankruptcy is “But won’t a Bankruptcy ruin my credit for 7 to 10 years?”  My answer is generally “Not necessarily.”  First, normally, by the time you are thinking of bankruptcy, your credit is in disrepair.  If it is not, then a bankruptcy may not be the best solution for you.  Second, once you have received a Chapter 7 discharge, you may not file for bankruptcy again for 8 years.  You may very well find companies lining up to offer you credit.  Here’s the down side.  The terms of that credit are probably pretty lousy.  This piece about getting a mortgage post-bankruptcy includes some helpful steps for rebuilding your credit, and using credit after a Bankruptcy discharge.

Happy Friday!

 

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