Life After Bankruptcy

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LIFE AFTER BANKRUPTCY
A number of banks now offer “secured” credit cards where a debtor puts up a certain amount of money (as little as $200) in an account at the bank to guarantee payment. Usually the credit limit is equal to the security given and is increased as the debtor proves his or her ability to pay the debt.
Two years after a bankruptcy discharge, debtors are eligible for mortgage loans on terms as good as those of others, with the same financial profile, who have not filed bankruptcy.
The size of your down payment and the stability of your income will be much more important than the fact you filed bankruptcy in the past.The fact you filed bankruptcy stays on your credit report for 10 years.
The truth is, that you are probably a better credit risk after bankruptcy than before.

Chapter 7 or 13 ?

The reality about personal bankruptcy and how the bankruptcy law works is that many people do not have a choice about which type of bankruptcy they file. If you file Chapter 7 personal bankruptcy when you have income that, after reasonable living expenses, is sufficient to pay a significant portion of your unsecured non-priority debt over 3 years, the United States Bankruptcy Trustee will file a bad faith objection to deny your Chapter 7 bankruptcy discharge. Section 707(b) of the bankruptcy code holds that it is bad faith for you to file Chapter 7 personal bankruptcy when you really don’t need it.

Bankruptcy law does not allow you to discharge your debts simply because you want to. You have to prove that you really need the discharge and not simply filing to eliminate debts that you could pay a significant portion of in a Chapter 13 debt consolidation / reorganization plan. Chapter 7 personal bankruptcy is not a get out of debt free card.

If you file a Chapter 13 debt consolidation / reorganization plan (to stop foreclosure or control taxes for example) if you do not have enough income in excess of your reasonable living expenses to make plan payments, the Chapter 13 Trustee will file a motion to dismiss your Chapter 13 debt consolidation / reorganization plan because the Chapter 13 plan is not feasible. Even if there is some additional income above your reasonable living expenses, if it is not enough to pay the debts that are proposed, the Chapter 13 debt consolidation plan will not be approved by the court. Ironically, filing a plan to pay your creditors everything you owe them can be determined to have been filed in bad faith when the plan clearly was not supportable.

There are times when a Chapter 13 debt consolidation plan can be partly supported by sale or refinancing of a home or other property, or a legitimate plan for increased payments later where it is clear that they will have more income to support the raise in payments. Those situations are often very complex and should never be attempted without the guidance of a highly trained bankruptcy attorney (preferably one who specializes in personal and small business bankruptcy).

To be able to determine whether a bankruptcy court or bankruptcy trustee is going to challenge your bankruptcy filing will depend on the combination of 3 factors. They are: (1) the net monthly household income; (2) the reasonable living expenses for the household; and (3) the amount and nature of the debts you have. Having accurate net income information then deducting reasonable monthly expenses will determine your net disposable income. It is then that the trustee (or your attorney) will be able to compare that net disposable income to your actual debts to determine what form of bankruptcy you are legally entitled to file.

It is extremely important that you know what your “net disposable income” is so you can tell which type of bankruptcy you are going to be able to file before you even see the bankruptcy attorney.

When determining what your income is for bankruptcy purposes to see if a filing is a “good faith” filing the trustee will look at what voluntary deductions are being taken out of both your paycheck and your spouse’s paycheck if you are married and not separated. This information is necessary even if your spouse is not going to file with you. Examples of these “voluntary deductions” include payments on debts that are taken out of the paycheck such as loan payments on retirement loans, employer loans, car payments and credit card debts. Other items considered as voluntary deductions include voluntary retirement payments and 401(k) deductions.

Low Fees

There seems to be a misconception between charging a low fee and quality service. Many of our larger competitors go on about their quality of service due their large size and presence. The bottom line is you are paying for their advertising and the service is inferior. Most of the time clients don’t even see the the same attorney they meet with at their 341 meeting. I don’t call that top notch service, and most clients are nervous as it is considering they don’t do this as we do , but that’s the part (and an easy one ) to forget . We do not! Call to schedule a free consultation via phone or in person.

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Bankruptcy And Tax Liens

This question is one of the most commonly asked questions in my office, so I have outlined a detailed answer that summarizes how you can discharge Taxes in bankruptcy. Will Bankruptcy Help With Tax Debts?

In some cases, bankruptcy can eliminate back taxes owed to the IRS as well as to state governments, however the devil is in the details. It is certainly not easy to eliminate tax debts in bankruptcy court. If your taxes don’t qualify for discharge and you file for bankruptcy, the IRS will be waiting for you on the other side with additional time to collect your taxes. Under normal circumstances, the IRS has ten years to collect tax bills, penalties and interest from you. Filing bankruptcy temporarily freezes IRS collection efforts, but the IRS then tacks on the 4-5 months bankruptcy period plus 180 days to their collection window. In essence, a bankruptcy filing that doesn’t discharge tax debts will give the IRS close to an extra year to chase you for back taxes.

So when can back taxes be wiped clean by a bankruptcy filing?

There are three basic timing rules that apply:

Rule #1: The Three Year Rule Your tax debts must be three years old from the date they were due.

Note that this does not mean from the date you filed. Every year, tax returns are due for most Americans on April 15th. This means that your 2004 taxes are not eligible for discharge until April 15th of 2008. This is the case because your 04′ taxes weren’t technically due until April of 05′ and you calculate the three year period from that point forward.

Rule #2: Your Tax Returns Must Have Been Filed for Two Years Before Bankruptcy This is where the IRS really puts the debtor between a rock and a hard place.

The government knows all too well that many who have fallen behind on their tax bill have also failed to file tax returns. Requiring that the actual returns be filed for two years prior to the bankruptcy prevents seriously delinquent taxpayers from filing late returns one day and bankruptcy the next.

Rule #3: the Tax Must Have Been Assessed More Than 240 Days Ago.

This will likely be the easiest requirement to satisfy and essentially requires that the IRS or state taxing authority has formally determined that you owe the taxes you’re trying to get rid of in bankruptcy more than 240 days before you file paperwork with the court. Note that an offer in compromise will delay the 240 day rule while it is pending plus an additional 30 days. What About Tax Liens? A tax lien is a public filing that the IRS uses to put the world on notice that you owe them money. Filing for chapter 7 bankruptcy will only eliminate your personal obligation for tax debts, not tax liens that have attached to your property. Any lien recorded prior to your bankruptcy case will survive the filing.

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