Sometimes, people with seemingly higher incomes and large assets file a personal bankruptcy. This may be due to a temporary financial crisis or a long-term buildup of debt that the individual eventually could not handle. Bankruptcy can be a useful remedy for lawyers, doctors, and others who need to wipe out certain dischargeable financial burdens in order to move on with their lives. These considerations apply in Arkansas as well throughout the country.
In all cases, if the person’s assets exceed the amount of available exemptions, then the trustee will generally sell the non-exempted property and distribute the proceeds to creditors. The issue of bankruptcy exemptions and the retention of property is a complex area that is best explained by a bankruptcy attorney in a confidential consultation. As a general rule, however, in most cases the average consumer debtor does not give up personal property and essential belongings in a bankruptcy.
A recent bankruptcy filing demonstrates how an apparently wealthy individual may find it desirable to file bankruptcy. The lawyer who guided Shelly Sterling to a victory in the sale of the L.A. Clippers filed what appears to be a Chapter 7 in the U.S. Bankruptcy Court in Los Angeles. He told reporters that his divorce is the main reason that he filed, and that he now wants to move forward with his life. He listed $7.4 million in assets and $118,500 in assets. He claims about $2 million is owed to his former wife.
Some bills arising from a divorce proceeding, settlement or judgment may be discharged in a bankruptcy in Arkansas. However, most support and similar obligations owed by one spouse to another from determinations made in a divorce, are not dischargeable in bankruptcy. An exception is made for non-support payments owed to the former spouse due to property settlements. Payments due on the division of marital property may thus be dischargeable. All unrelated unsecured debt is dischargeable, such as all credit card expenditures taken on to finance the proceeding.
Source: Los Angeles Times, “Shelly Sterling’s attorney for Clippers’ sale files for bankruptcy“, Nathan Fenno, Sept. 24, 2014