Planning On Chapter 7 Filing, Unknown Waters

[Vermeer]

Hello Everyone,

I have been reading a learning on this forum as we find ourselves in this position. My hubby was laid off 2+ years ago, has been able to get a part time job, not even an interview for a full time job, earns approx 250.00 per week. Unemployment has run out, his earning has always fallen with in the unemployment guidelines, he is trying to work.

I have a business on Ebay, sales are approx 650.00 per week on, and money goes through Paypal, for Ebay fees, supplies only as needed, and what is left, food, gas and trying to pay bills. My inventory is worth very little as I list paper and booklets, and misc. People buy my stuff because of names, family stuff, memories etc.

Another issue is I started school and my tuition is being paid as a gift for now. The first payment 6000.00 was in July, a check given to me, stipulation was for the tuition and nothing else, I put it in the back and paid the bill [this is before we thought we would have to do this filing].

If we live basic, and all the unsecured debt is gone approx 43000.00, I think we can keep our modest home. The home has a near full mortgage on it. I need advise of problems that may arise from my Ebay business, how the inventory maybe considered, my Paypal account that I have to have to sell on Ebay now. We need Ebay to make it, I have been doing it for 13 years now.

We are going to call an attorney that was recommended to us that is suppose to be good. We are trying to prepare before hand so not to do anything stupid.

Any advise is really appreciated for this concerned and nervous prefiler. I am from Pennsylvania.

[justbroke]

The key is always, what are your expenses relative to your income. If that difference is under $182.50 (or $109.58 in some circumstances), then you are eligible to receive a discharge in a Chapter 7.

• Your inventory is "property", and depending on your State, you may be able to exempt all of it under a "business" related exemption (e.g. tools of the trade, although that wouldn't cover "inventory").
• Your PayPal account would be a "cash" asset, just like having money in a regular checking/savings account. You'd need to exempt that as well.
• If keeping your home you will need to balance what it's worth and how much you owe. You may not want to reaffirm the debt even if you have equity. The amount of equity may affect other exemptions

Since you're in Penn. you will probably choose the Federal Exemptions over Penn's. There "should" be sufficient exemptions, so long as your small business inventory isn't excessive (over $5K). Any business "tools" or trade or books have a separate exemption that will protect up to about $2.1K (federal exemption).

You are going about it the right way by retaining an attorney. They should be able to help you navigate the exemptions and protect as much property as they can.

[tcreegan]

Hi Vermeer,

Glad to see you are getting an attorney, the business issues, consumer vs non-consumer, tuition gift, state vs federal exemptions, lots to deal with! The wisdom of the forum is to shop around several attorneys, even a half dozen or so, until you find someone who is a good fit for you. You feel comfortable with them, they seem confident and competent. The most common complaints about attorneys are about communication, not returning phone calls, paralegal handles questions, not using email, those sorts of things.

Good luck with this.....remember the old saying; you have to kiss a lot of frogs....

Tom in Colo

[Vermeer]

Justbroke, I have been trying to find the info on the 5000.00 small business exemption, this can be used under a personal bankruptsy? I know the sole proprietorship has be covered under personal BK. That exemption would work well. thanks for any info.

[tcreegan]

Hi Vermeer,

I think this is what justbroke is referring to:

§ 522(f) (3) In a case in which State law that is applicable to the debtor—
(A) permits a person to voluntarily waive a right to claim exemptions under subsection (d) or prohibits a debtor from claiming exemptions under subsection (d); and
(B) either permits the debtor to claim exemptions under State law without limitation in amount, except to the extent that the debtor has permitted the fixing of a consensual lien on any property or prohibits avoidance of a consensual lien on property otherwise eligible to be claimed as exempt property;
the debtor may not avoid the fixing of a lien on an interest of the debtor or a dependent of the debtor in property if the lien is a nonpossessory, nonpurchase-money security interest in implements, professional books, or tools of the trade of the debtor or a dependent of the debtor or farm animals or crops of the debtor or a dependent of the debtor to the extent the value of such implements, professional books, tools of the trade, animals, and crops exceeds $5,000.

BUT....without much need to exempt home equity, you can use up to around 10K of the homestead exemption as a wild card on the federal exemption scheme

Good luck to you on your case,

Tom in Colo

[justbroke]

What tcreegan wrote is what I would have pointed you to.

[Vermeer]

Thank you for your info and help. I am note real good with legal type talk. Does it mean, I have an additional 5000.00 for my business inventory besides the home exemption and other personal exemptions? Thanks!

[tcreegan]

Hi again Vermeer,

In the federal exemptions you get ~ 2K exemtion for 'tools of the trade' x2 for a joint filing, close but not quite 5K...

I'm pretty good at some legalese, but § 522(f) is too dense for me, and I am plenty dense....

I think the 5K relates to liens on 'tools of the trade' rather than exemptions....maybe, not sure, possibly, could be,

Tom in Colo