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Westlake Village Legal Blog

Bankruptcy attorneys oppose trustee information request

When people in California file for Chapter 7 bankruptcy, a trustee is assigned to oversee the case. Neither the Justice Department branch in charge of overseeing bankruptcies nor bankruptcy attorneys support the efforts of two trustees in Maryland to collect debtors' passwords for Amazon Prime, eBay and PayPal. The paperwork also says that the debtors will keep the same passwords for a minimum of 10 days and will not close the accounts.

The request for information is seen as invasive by attorneys. Trustees are permitted to examine a debtors' assets and determine whether any can be recovered for the bankruptcy estate. However, asking for passwords is considered an overreach and one that could discourage others from filing for bankruptcy. The issue is not with the request for information but the fact that trustees have made it routine. Ordinarily, a trustee would have the right to pursue inquiries into these types of accounts only if there is a reason to do so. However, there are still other ways of doing so that are less invasive, such as getting statements.

Property division and retirement accounts

California couples who are getting a divorce should be aware of potential tax liabilities in dividing retirement accounts. A qualified retirement plan, including a 401(k), a simplified employee pension plan or a profit-sharing plan, must be divided with a qualified domestic relations order. This is filed with the court and gives the other spouse the right to receive distributions from the account. It also makes the receiving spouse responsible for any income tax on payouts and allows the spouse to roll the payments into an IRA.

Without a QDRO, a person would be responsible for taxes on the distribution to the spouse. The money would be considered a taxable payout. Furthermore, there could be a penalty, and the distribution could also push a person into a higher income bracket for tax purposes. Therefore, it is critical to ensure that there is a QDRO and that it is prepared correctly.

How to simplify your divorce

It may seem like your divorce is your long-awaited meal ticket of freedom from your spouse. However, you cannot finalize most divorces in California overnight. There are many issues that can arise that cause your divorce to take much longer to resolve than you anticipate. For example, your spouse may want to fight to keep you from receiving your fair share of his or her assets. Or your ex may want to challenge your right to child custody and parenting time. Anything can happen and turn your divorce into a messy, stressful and drawn out affair. 

Take a look at the following ways to simplify and speed up your divorce. 

How to decide where to live after a divorce

A marital home may have a lot of sentimental value to a California resident. It may have even more perceived value to parents who are looking to provide a sense of comfort for their children. Therefore, in a divorce, their first thought may be to either ask for the house in the settlement or buy it from the other spouse.

However, this may not be the best course of action. This is because it may be difficult to gather the money for a down payment or meet other mortgage criteria. For some, this is because they will have to make child support or alimony payments. For others, it is because they may need to receive spousal support for six months before it counts as qualifying income. It is also possible that a person's credit score is damaged in a divorce.

Some savings and investments vulnerable during bankruptcy

When there's a bankruptcy filing in California, the court's trustee will scrutinize the financial assets of the debtor. Although federal and state laws build in some protections for certain retirement accounts, real estate and college savings for children, exceptions to the rules could provide creditors with access to investment funds.

In general, the federal Employee Retirement Income Security Act removes 401(k) savings from consideration during bankruptcy proceedings. For people who owe taxes, however, the Internal Revenue Service could make a claim upon a 401(k) plan. As for regular or Roth IRAs, the law exempts personal savings approaching $1.3 million, but funds beyond that might be used to pay debts. People who qualify to make withdrawals from these accounts should know that the money could be considered income and therefore exposed to creditors' demands. Similar regulations apply to self-employed plans.

Fathers trying to establish custody should read this

Fathers may have a tough time just being fathers, as parenting is arguably the toughest job that doesn’t pay anything. However, for unmarried fathers, the road can be exceptionally difficult if they are hopelessly embroiled in petty disputes with the child’s mother, mom has strict standards that dad simply can’t live up to, or the mother has moved to a different state.

If these scenarios describe your situation, there are a number of things that can be done to remedy your situation. 

3 considerations for divorcing parents in California

Divorce is an incredibly stressful situation for all adults involved, but if you have kids, much of that stress can transfer to them as well. This is a major concern for many separating parents, and while you cannot shield kids from all the strain a divorce will bring, you can take steps to mitigate its negative effects and develop the best possible parenting plan.

Here are three basic things to consider if you are a parent going through divorce.