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Recent Blog Posts
Bankruptcy and the Eviction Moratorium
The CDC’s recent order stopping all U.S. residential evictions gives you a new tool to use with some wise bankruptcy planning.
Last week’s blog post was about a new federal order temporarily stopping certain residential evictions throughout the country. Please see that blog post about which renters and rental properties are covered, and how renters qualify for the moratorium.
If you are a tenant and are considering filing bankruptcy, this eviction moratorium can affect the timing and tactics of your filing. We start addressing that today.
The Moratorium Ends on December 31, 2020
The most important aspects of the eviction moratorium are that it is temporary and does NOT forgive any rental payments. The “order prevents you from being evicted or removed from where you are living through December 31, 2020.” However, “[y]ou are still required to pay rent... .”
New Federal Eviction Moratorium
The Centers for Disease Control and Prevention (CDC) just asserted its COVID-fighting power to stop most residential evictions through 2020.
On Friday, September 4, 2020, a federal order went into effect temporarily stopping certain residential evictions throughout the country. Issued by the Centers for Disease Control and Prevention (“CDC”), it’s titled “Temporary Halt in Residential Evictions To Prevent the Further Spread of COVID-19.” The legal basis and purpose of the Order is “to temporarily halt residential evictions to prevent the further spread of COVID-19.”
It covers residential rentals, NOT home mortgage foreclosures.
The Renters Covered by this Order
The CDC Order states that any “landlord... shall not evict any covered person from any residential property... during the effective period of the Order.”
Which Type of Bankruptcy Is Best for My Financial Situation?
Bankruptcy is often seen as a last-ditch effort to overcome the financial burden that you may be experiencing. While this is typically the case, the level of debt that one may be in can vary greatly depending on their circumstances. Some may have no income and are struggling to pay basic bills, while others may have a steady income but have found themselves buried by exponential medical or credit card expenses. There are two common ways that Texans can file for bankruptcy: Chapter 7 and Chapter 13 bankruptcy. By looking at your unique circumstances, you can determine what type of bankruptcy filing is appropriate.
Chapter 7
When imagining what filing for bankruptcy looks like, people often imagine something along the lines of Chapter 7 bankruptcy. Also known as “liquidation bankruptcy”, this form of bankruptcy has the trustee sell the debtor's property and use the money collected to pay off their debts, as close to the total amount as possible - all remaining debts will be forgotten. This form of bankruptcy may seem preferable to some, since the process only takes about six months and some debts may be forgotten, but it is not available to all debtors. If the debtor’s income falls below the state’s median household income, which in Texas is $59,570, he or she is eligible to file for Chapter 7 bankruptcy. The debtor will not lose all of his or her assets during the bankruptcy process, since some personal property can be claimed exempt from the process.
States' Reactions to Trump's Unemployment Benefits Extension
How are states responding to Trump’s Memorandum providing $400 (or maybe $300?) weekly extended unemployment benefits? It varies widely.
Last week we explained the President’s Memorandum of August 8 which extended reduced federal unemployment benefits. The $600 weekly benefit had expired on July 31. The House of Representatives had previously passed a bill extending the $600 benefits into early next year. The Senate had proposed to extend the benefits but at only $200 weekly. The two Houses of Congress were not resolving their differences. Then the Memorandum directed the Federal Emergency Management Agency (FEMA) to fund supplemental unemployment benefits out of its Disaster Relief Fund. This was to cover $300 of a $400 weekly benefit. The remaining $100 weekly was to come from the states.
Trump's $400 Weekly Unemployment Benefits Extension
Trump’s Memorandum Providing $400 Weekly Unemployment Benefits from August to December Is Complicated.
A Quick History
The CARES Act’s $600 per week additional federal unemployment benefits expired on July 31, 2020. Section 2104 of the CARES Act. Back in May the U.S. House of Representatives had passed the HEROES Act extending these $600 benefits through January 31, 2021. Section 50001 of the HEROES Act. Then on July 27 the Senate announced its HEALS Act; it reduced the additional federal benefit to $200 per week. (This was to last through September, and then transition into a total unemployment amount of 70% of lost wages.) The Senate bill did not come up for a vote in the Senate. Intense efforts to reconcile the House of Representatives’ HEROES Act and the Senate’s HEALS Act have so far gone nowhere.
Does Filing for Bankruptcy Damage Credit?
You have likely seen TV commercials about the numerous credit cards available or regarding where you can go to calculate your credit score. These shiny advertisements can leave many young adults applying for credit cards without knowing the impact that this can have on their spending habits. Receiving your first colorful card in the mail can quickly lead to two or three more, each with their own amount of debt steadily piling up. While these bills may seem harmless as a young, single college graduate, the debt enclosed with these credit cards can burden you for years to come. As the debt continues to increase, you may be wondering where you can turn for help. Bankruptcy is a valid option; however, its negative impact on credit scores can have most people seeking out financial alternatives first.
Sell Some Assets
Avoiding Income Tax Interest and Penalties
Bankruptcy timing can affect not only whether you must pay a tax debt but also whether you must pay certain tax interest and penalties.
This blog post is in a series about the importance of smart timing of your bankruptcy filing. Today we cover how good bankruptcy timing can prevent you having to pay certain income tax interest and penalties.
Avoiding Income Tax Interest and Penalties by Discharging the Tax Itself
Two weeks ago we discussed how to time a Chapter 7 “straight bankruptcy” appropriately to discharge an income tax debt. “Discharge” means to legally, permanently write off the tax. Then last week we discussed how to discharge an income tax in a Chapter 13 “adjustment of debts” case. When you discharge a tax in these ways what happens to the interest and penalties tied to that tax?
Generally, if you discharge an income tax debt, that also discharges any interest and penalties associated with that tax. That’s the most straightforward way to avoid such tax interest and penalties.
Timing Chapter 13 to Discharge Income Taxes
Usually you can discharge income taxes (write them off forever) by waiting long enough to file bankruptcy. Here’s how it works with Chapter 13.
Our blog post of three weeks ago introduced the importance of timing your bankruptcy filing right. We gave a list of 15 examples where timing can make a huge difference. Two weeks we covered the first one, timing bankruptcy to cover as many debts as possible. Last week was about discharging/writing off income taxes, specifically under a Chapter 7 “straight bankruptcy.” This week is about doing so under Chapter 13 “adjustment of debts.”
How to Time a Chapter 13 Filing to Discharge a Tax?
See our last blog post about the timing rules under Chapter 7. That’s because whether you can discharge an income tax is the same under Chapter 7 and 13. Very briefly, you can discharge an income tax as long as you file your Chapter 13 case both:
If I Have Overdue Medical Bills, Can I File for Bankruptcy?
The U.S. has some of the highest medical costs in the world, leaving many patients who visit the emergency room or go to the hospital financially destitute. Even those who have health insurance may find that their coverage is not enough to fully cover their necessary medical treatments. No one can predict the manifestation of serious illnesses or accidental injuries, but you rarely have a valid choice, leaving you to choose between unwanted debt or suffer the possibly fatal consequences. If you find yourself overwhelmed with medical debt, you do have legal options to help you payback the costs overtime or relieve yourself of the costs altogether. Filing for bankruptcy may be your last resort, but it may also be your only chance of moving forward.
“Medical Bankruptcy”
Those whose debt is solely made up of pastdue medical bills may believe that they can file for “medical bankruptcy” and avoid their other assets getting involved in the process. There is no type of bankruptcy known as medical bankruptcy; however, medical bills are a common reason that people file for bankruptcy. Medical debt falls under the same category, known as unsecured debt, as credit card debt, personal loans, old utility bills, and borrowed money from family or friends. Since bankruptcy cases must be equally fair for both the debtor and creditor, you must list all of your debts, personal property, and real estate within your bankruptcy case. There are two ways that most people file for bankruptcy: Chapter 7 and Chapter 13 bankruptcy, both of which have a large impact on your credit score.
Timing Bankruptcy to Discharge Income Taxes
Usually you can discharge income taxes (write them off forever) by waiting to file bankruptcy long enough. Here’s how it works under Chapter 7.
Our blog post of two weeks ago introduced the importance of timing your bankruptcy filing right. We gave a list of 15 examples of timing considerations. Last week we started with the first one, timing the filing to cover as many debts as possible. Today it’s about discharging/writing off income taxes, specifically under a Chapter 7 “straight bankruptcy.”
Here are a few eye-catching facts:
- It is possible to discharge many income tax debts, so that you do not owe a dime of that tax.
- You just have to meet a list of conditions.
- Most, but not all, of those conditions involve the passing of time. You need to wait long enough before filing bankruptcy to permanently discharge a tax debt.
- If you don’t meet the conditions, bankruptcy does not discharge the tax at all. You owe it in full. If you filed a Chapter 7 case, you have to pay the tax after completing the case.
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