Filing a Bankruptcy After or Shortly Before a Personal Injury Settlement
My question involves bankruptcy in the state of: NY
Does it make sense to file bankruptcy if you are expecting a large personal injury settlement (100k+) and you have about 40k credit card debt over 10 cards?
I've read that you can exempt a small amount of a PI settlement in a bankruptcy - about 22k + possibly another 11k or so. This would leave a lot of it (40k) potentially applicable to the 40k debt right?
Does it make more sense to negotiate with each creditor/collection agency (many are getting close to SOL anyway and a couple that filed a lawsuit have been dismissed with prejudice) and go about it this way as opposed to having to pay out for sure so much money at one time?
I'm thinking this option is better and is the way I have been proceeding but I don't understand the full law or have experience with B. and am looking for feedback. Some have told me, oh he should file for bankruptcy and this doesn't make sense on the surface to me.
Thanks in advance.
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OK, I just while posting this decided to go through it and it seems to my surprise that all of the debt has exceeded the SOL. So my understanding is he most likely can't be successfully sued for this if the judge is informed that the debt is beyond the SOL. So it seems to me bankruptcy as an option is out unless I'm missing something.
Re: Filing a Bankruptcy After or Shortly Before a Personal Injury Settlement
You should expect that, with the inclusion of your personal injury case as an asset in the bankruptcy, the trustee and your creditors will be interested in pursuing the proceeds of your case to pay your debts. A debtor should not file a proof of claim for an expired debt but, as with a mortgage or car loan, sometimes a debt will be secured by a lien or note.
If you are interested in pursuing bankruptcy, you should discuss your situation with a bankruptcy lawyer.
Re: Filing a Bankruptcy After or Shortly Before a Personal Injury Settlement
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OK, I just while posting this decided to go through it and it seems to my surprise that all of the debt has exceeded the SOL. So my understanding is he most likely can't be successfully sued for this if the judge is informed that the debt is beyond the SOL. So it seems to me bankruptcy as an option is out unless I'm missing something.
Assuming you know how the SOL works (6 years in NY), and you haven't done anything to toll the SOL (stop it from running) and all your defaults were more than 6 years ago, you appear to be home free as any lawsuits filed past the expiration of the SOL won't succeed provided you raise the SOL as a defense.
Re: Filing a Bankruptcy After or Shortly Before a Personal Injury Settlement
Yes that is the case adjustjack. Thanks for your answer and to MrKnowItAll above.
Question... Are these debts which are legally uncollectable, passed the SOL, often eventually "forgiven" by the creditor with a 1099 issued creating a tax liability?
Does it make more sense for them to not forgive the debt and instead hold on to it - passing it around from agency to agency hoping that the debtor either eventually pays some small amount on his own or restarts the SOL? Is there a time limit for a creditor to forgive a debt? Let's say you had a CC debt and the SOL on it expired 10 years ago. Could the creditor so many years later suddenly "forgive' this debt and issue you a 1099 which is now considered income to you creating a sudden unexpected tax liability?
I assume that even though he can no longer be sued for the debt that we will still have to deal with the taxman eventually correct if these are forgiven?
Just trying to figure out the likelihood of that happening and how that works.
Thanks again.
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Another question: What events can toll the SOL?
Does this refer to acknowledging the debt in phone calls or in writing? Haven't done that.
He has been sued more than a few times (by the same few) and we answered all of them and dealt with the judge and all but one was dismissed with prejudice (creditor decided not to pursue due to situation of defendant) so those are dead.
The one that was dismissed without prejudice - this one could be sued for again. Did that one toll at all or does it die once past the month after the last payment made? Thanks again.
Re: Filing a Bankruptcy After or Shortly Before a Personal Injury Settlement
Whether or not a creditor "forgives" a debt, and when that occurs, is up to the creditor. If the statute of limitations has run and you've never received a 1099, I wouldn't personally worry too much about it -- but if you have cause to believe you're going to be flooded with 1099's that's something to discuss with your bankruptcy lawyer as you can avoid tax liability with a prior discharge.
In terms of tolling, the most common reasons why a creditor might be able to argue tolling are a debtor's absence from the state, the debtor's residence within the state under a false name, or (for debts originating in a foreign country) war. Partial payment of a debt or written acknowledgment of the debt by the debtor may renew the statute of limitations.
Re: Filing a Bankruptcy After or Shortly Before a Personal Injury Settlement
Thanks Mr Knowitall
So, in a bankruptcy then, if his unsecured debts are all past SOL, he won't need to pay them back out of a settlement because of this and he can also benefit by eliminating a tax liability? I'm not sure he is going to be flooded with 1099s and he has not received one in 8 years - I'm just wondering how to deal with them if they come. I've read that you can also file a special form with the irs that can eliminate the liability if you are insolvent - assets are less than your debts but I'm not sure what year the assets are looked at and counted. Not sure how him having a large settlement in the bank in the future could impact that and/or if the assets are only looked at in the year the 1099 cancellation of debt is issued for. Would that be when the debt is considered cancelled?
Thanks again for the information.