I love Oklahoma’s favorable bankruptcy protections. Generally, you’re not going to have too much money remaining when you file bankruptcy. In most instances, chapter 7 filers have too much debt, and too little income, that’s why they’re not paying their bills. Chapter 7 is the "liquidation" chapter, meaning you can get rid of all your debts, keep some of your assets, and find a "fresh start" post-discharge. My estimate is that 90% of honest bankruptcy filers fit into the chapter 7 model. The rest are either dishonest ("no discharge for you") or can make some improvements to pay off their debts.
The Oklahoma Statutes outline the property exempt from sale in bankruptcy. One of the great things is that Oklahoma provides an unlimited exemption for your home. This means that you could have $1 million, billion, or gazillion in equity, and not be forced to sell your home. That’s fantastic news for most people, except most people filing bankruptcy are behind on their mortgage notes as well.
There’s a recent case from the 8th Circuit Court of Appeals, that may help individuals in pre-bankruptcy planning. The case involved a couple in Arkansas who sold some business assets, and then used the $140,000 proceeds to pay down their mortgage. They claimed the homestead exemption in order to keep their home. Strategically, this enabled to the couple to go 10 months without paying their mortgage, and survive through the bankruptcy discharge.
I don’t know of any 10th Circuit cases that address this unique issue (if anyone does, please comment). However, those who can come up with this kind of cash (there are particular restrictions on this) might be in position to apply it to favorable uses in their bankruptcy, and come out the end, in a great position.
Remember, the goal of bankruptcy is the "fresh start". Using these methods, you might be able to truly make that fresh start.
