Bankruptcy observations - Does the little guy ever win?

[day2day]

I am not close to bankruptcy, but with everything that I have read and situations some of my friends are in, I have pondered a few concepts. Some "legal", some "illegal, and some possibly just "unethical."

I find it very difficult to understand, considering our current state of the economy, and the disgusting big business practices that have ended with CEO's and businesses prevailing, leaving the general public and little guys high and dry.

Is there actually anything wrong with planning a bankruptcy, while trying to maintain the cash/assets you may have left?

Do people maximize their unsecured debt 60 or more days previous to filing when they have every intention of filing and keeping their funds/proceeds secured somewhere else.

Obviously this is a fraudulent practice, but in today's time, I find it no different that a corporation going tits up, while a CEO walks away with a golden parachute.

It seems that rich people or businesses call this a strategy to protect themselves, and with the little guy it is fraud.

Can someone set my opinion straight?

[leftyf]

Be very careful...those Trustees have a way of finding things out that you'd never expect. The CEO's are not doing anything illegal, generally. Their boards have authorized the payments and they're taking them. If you don't like it, vote for people who want to tax the hell out of 'em. At my 341, the couple in front of me got grilled for 45 minutes on all sorts of land transactions that sounded fishy. They looked very surprised that the trustee was bringing them up...and, yes, the 2005 law definitely screwed the little guy. Bankruptcy fraud, hiding assets, is very illegal. Ridiculous executive compensation is disgusting, but usually not illegal. Good luck and beware.

[keepmine]

Nothing at all illegal in preplanning a bk. You want to shift nonexempt assets into exempt assets. Happens all the time.
Personally, I believe the day you think bk is a viable option is the day you quick using those cards. The hole is deep enough. No need in giving a creditor any grounds to object.

[jp2861]

Everyone has different tolerance levels when it comes to dealing with being a crook. I guess the question would be how tolerant you are to being considered the fresh fish in the big house. Ask yourself is it really worth it.

As far as preplanning goes, it happens every day, I'm sure. One example would be waiting 6 months to file to minimize the chances of objections.

There's a difference between using your head to make sure your case flies without being questioned and doing something stupid to try to get over on the system.

Let's see...do it right and have my debts discharged or do something stupid and risk getting busted. It's really not a hard decision for a smart person.

Does the little guy ever win? In the BK world I'd have to say yes. I don't see how anyone could think of it any other way when we have a chance to be debt free and start over. I'd say that's a win.

[One Half Full]

I think that planning is fine, but hiding assets is totally illegal.

Believe it or not, people undergoing Bankruptcy are moral, and many are in total shock. Many have tried for many years to get it together and it just gets worse and worse. Look at the "cause" of a lot of this: predatory lenders and inflated valuations, or skyrocketing medical costs. These are not character issues, this is the tip of the iceberg of a nearly institutionalized practice of cheating consumers. This is not the debtor's fault, because debtors are taught to trust authority. It is a real shock to the system to find that your full time job will not pay for basic expenses and things like that, or that one month your house costs one thing and the next month it costs twice that amount. Planning, like if you know you will give up your huge new truck so you find an old one and fix it up is common sense pre-planning. I think when you are shell-shocked and think that you will lose everything you struggled for for many years, there is a tendency to at least try to squirrel things away at first. I don't think this is cheating. Human beings are programed for survival. If a person believes his or her survival is threatened then possibly he or she will try to hide something. BK is set up to protect consumers and allow people to leave their debts and retain some dignity.

When I started this journey, I was scared witless. I think any unscrupulous BK Mill or Credit repair company could have taken advantage of me. Instead of running to a payday loan office, I ran typed "Bankruptcy Forum" into my browser. I have found strength, compassion, and level heads here where I might have found rumors, innuendo, and rejection elsewhere.

The internet has made people more sophisticated. It provides knowledge. Those who use a site like this are really maximizing their chances of walking out of a bad situation with better than they would have if they had remained ignorant. I don't think anyone is here to cheat. I think people are here to see what is, and is not correct and to see what the limits may be, in the same way as those people who paied the CEO the Golden Parachute. Knowledge is power.

[day2day]

Thanks for the replies everyone.

I am not in a position for bankruptcy, luckily enough. I just ponder some of these situations and wanted to seek better educated opinions.

I think what bothers be is the predatory lending, the bigwigs with better strategies to "hide" assets, and the fact that people who need a break are not given them by the same corporations(credit card companies, mortgage, brokers, ENRON, WORLDCOM...) who are let off the hook all the time.

I may not understand the ins and the outs that many of you do, but theres some going wrong with the way the current system is set up.

[Flamingo]

May I make a point here...the majority of people who end up having to file do not even think about preplanning. They are scared, confused, get given a lot of bad advice and until forums like this came into existence, made a lot of bad mistakes. Most people are in debt and can manage it; however, when the job loss hits or a major medical event occurs just blowing away savings, loss of income, etc., it sends you to places you have never been before. File bankrutcy? No Way....preplanning? What's that... In the past there are those people that filed one BK after another; actually utilizing BK as a budgeting tool (in plain words, preplanning). The new law change in 10/05 was supposed to put a dent in those occurances causing more detailed searches for fraud.

I wish I had known about this forum when we filed - we would have found out that 401(k)s were exempt; we utliized my husband's to try not to file hoping he would find a comparable job (lost in 2/01; we filed in 4/02) so we would not have to file. Didn't happen. Thankfully I did not touch mine; but the attorney seemed uneasy when we advised him what we did with my husband's 401(k) and he said we should have investigated filing early or did our homework prior to using the 401(k). I guess you could call that some sort of "preplanning" but in my mind at the time the only thing was to try to get out of the mess we were in and not look back through my checkbook for a year to see what needs to be hidden.

[buchanj]

no

[Flamingo]

no

Was that "no" a response to my posting?

[day2day]

I think the reply of "no" was to my question of the does the little guy ever win?

[HHM]

I think you need to steer away from the class warfare issue as that is not really the problem. First, for people that have little or no assets, they really don't need asset planning, so I don't fault wealthy people for making use of tools that are available to them. It is not as if other people cannot use those same tools, but they don't have a need for them. Most people in this country have a negative net worth (liabilities exceed assets), so what good are LLC's, offshore accounts etc, to a person in that position.

There is nothing illegal about BK planning (to a certain degree). As has already been pointed out, there is a fairly distinct line between planning and fraud. Most people do not go out and run-up debt just before filing (although that is what the CC companies wanted you to believe in order to get the new law passed). But yes, people, when they find themselves near BK, will (and need to) educate themselves on the process and what they can and cannot do.