My New Credit Card

Vincent Howard and our Claremont consumer bankruptcy lawyers wrote recently about a Ninth Circuit BAP case that established a fairly new right for bankruptcy filers — exemptions for individual retirement accounts that the filers inherited from another person. The right to exempt the filer’s own IRA is clear and the right to inherit from a spouse had been established, but the right to exempt an IRA inherited from a non-spouse was new to the Ninth’s BAP, and also to the Fifth. In Chilton v. Moser, Robert and Janice Chilton of Texas sought to exempt an IRA inherited from Chilton’s mother from their Chapter 7 bankruptcy. Trustee Christopher Moser objected that this IRA was not exempt, and while the bankruptcy court agreed, the district court and the Fifth U.S. Circuit Court of Appeals did not.

Shirley Jean Heil died in 2007 and left an IRA worth $170,000 to Janice Chilton. Chilton established her own inherited IRA to receive the proceeds of Heil’s. The Chiltons filed for Chapter 7 bankruptcy in 2008 and sought to exempt the inherited IRA.

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Much is written on the “biggest financial mistakes” that people make with helpful tips for avoiding them. We’re used to seeing many common examples of how people can get themselves in trouble through certain activities, such as charging up credit cards, making minimum interest payments, buying cars new rather than used, not shopping auto insurance plans, etc.

The list of common mistakes people make in their finances can fill a book, yet they are all rooted in the failure to adhere to the most basic rules of finance. If you follow these rules, you will be less likely to make the common mistakes. If you fail to follow the rules you will be committing one of the seven deadly sins of personal finance and the mistakes will likely follow.

Not Setting Achievable Financial Goals

“If you don’t know where you’re going any road will get you there” – a quote oft attributed to life sage, Yogi Berra, best describes those who wander aimlessly through life without goals. In finances, as

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Vincent Howard and our team of Lake Elsinore consumer bankruptcy attorneys were interested to see a case addressing the issue of when bankruptcy debtors may resume paying into 401(k) retirement accounts. This issue arises because the bankruptcy code, like the tax code, gives these accounts a special protected status that many other financial instruments don’t enjoy. In Seafort v. Burden, the Chapter 13 trustee for Deborah Seafort and Frederick and Carrie Schuler challenged their two bankruptcy plans. Both plans would have permitted debtors to start paying into their 401(k)s as soon as loans from those accounts were paid back, even though unsecured creditors would not be fully paid at that time. The bankruptcy court permitted this, but the Bankruptcy Appellate Panel of the Sixth U.S. Circuit Court of Appeals and the Sixth Circuit itself ruled against it.

Seafort and the Schulers filed separate bankruptcy petitions in 2008. Both estates were eligible for 401(k) accounts under ERISA and were in the process of paying back loans they had taken out from those accounts.

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It can sometimes be very difficult to get bank loans when you have bad credit history. Bad credit history can be understood to be a negative financial reputation: wherever you go it follows you and try as you might, you can’t shake it off. Usually most banks pefer to stay away from people with bad credit. Those who are willing to brave the perils do so by levying astronomically high interest rates.

While these traditional responses to bad credit history are still the most popular ones, the times are changing and it has become easier to get loans from banks, despite a less than flattering credit reputation.

One of the time tested tricks of getting a loan with bad credit is to use collateral. There is a certain risk involved in using your valuable assets as collateral, but if you are able to give back what you owe, this can also help improve your credit ratings. Thus, on the whole, you stand to gain much more than you stand to lose.

If you want to, you can try going to a credit union instead of a bank. T Full Post…