Posted on April 18, 2016 in Bankruptcy And Divorce

You can’t legally write off child support or spousal support.

Our last blog post was about the conditions under which bankruptcy can discharge—write off—all income tax debts that meet certain conditions. Those conditions are mostly met by the passage of time. In contrast, unpaid child and spousal support is simply not discharged through bankruptcy. Not now. Not ever.

Support is Not Discharged, IF It’s Really Support

There IS one possibility, although admittedly this doesn’t often come into play. The Section of the Bankruptcy Code that defines support refers to a debt “in the nature of” child or spousal support. (See Section 101(14A).)

This “in the nature of” language means that an obligation could be called support in a divorce decree or court order, and yet NOT actually be “in the nature of” support. The bankruptcy court is not bound by what your divorce court labeled as support. The bankruptcy court looks beyond the language used in your separation or divorce documents to the kind of debt it actually is under the specific facts of your divorce.

Continue Reading ››

 Posted on April 15, 2016 in Income Taxes

Bankruptcy DOES discharge--permanently write off--certain income taxes. It's mostly just a matter of time.

Taxes Can Be Discharged (Legally Written Off)

Some special kinds of debts can never be discharged through bankruptcy. Examples are child and spousal support, and criminal fines and restitution. A bankruptcy filing does not write off these kinds of debts.

Income taxes are not like these. Almost all income taxes can be discharged, once a few conditions have been met.

Once the tax you owe meets those conditions, it is discharged exactly like any other debt. The IRS and your state taxing authority are no different than your credit card creditor. Once a tax debt is discharged, they can never chase you for that debt again.

The Two Main Conditions to Discharge Income Taxes

For most people the conditions are not complicated. They require filing your tax returns and waiting out a certain amount of time.

Continue Reading ››

 Posted on April 13, 2016 in Bankruptcy

Bankruptcy can’t discharge—permanently write off—criminal debts, but it can still help in indirect but potentially game-changing ways.

If filing a bankruptcy case does not discharge criminal debts, how could it possibly help?

In a number of practical ways, bankruptcy enables you to focus on your criminal defense and to deal with any potential fallout. If you’ve been charged with a significant crime you need to make that your highest priority, financially and emotionally. Here’s how filing bankruptcy can help you do that.

1) Discharge Your Other Debts

If you’ve been charged with a serious crime, you have to figure out how to pay for a good criminal attorney and for the other costs of your defense. Considering what’s at stake, you need to consider not paying all or most of your creditors. It may make sense to sell some of your assets and/or even get early access to any retirement funds.

Either in addition to or instead of these tactics, often the fastest way to reduce your debts and quickly improve your cash flow is by filing a Chapter 7 "straight bankruptcy." Then you can immediately stop paying the debts you intend to discharge. The discharge itself usually happens within only about 4 months after your case is filed, freeing you of your debts.

Continue Reading ››

 Posted on April 11, 2016 in Discharge of Debts

Most debts can be discharged—permanently eliminated—in bankruptcy. Here are the exceptions.

The vast majority of debts are “discharged”—legally written off—when you file a “straight bankruptcy” Chapter 7 case.

All Debts Discharged Unless Fits an Exception

Bankruptcy law strongly states that as long as you go through the process appropriately your debts will be discharged. That includes all debts unless you have any debts that are on a limited list of the kinds of debts that are not discharged.

Debts that MAY not be Discharged vs. WILL not be Discharged

These exceptions to discharge are of two categories: 1) debts which MAY not be discharged if the creditor objects and succeeds in that objection, and 2) debts which WILL not discharged even without any objection raised by the creditor.

Creditor Must Object to Stop Discharge

Continue Reading ››

 Posted on April 08, 2016 in Discharge of Debts

In your goal of getting a fresh financial start, your most important tool is the "discharge"--the permanent legal elimination of your debts.

Whether you file a Chapter 7 “straight bankruptcy” or Chapter 13 “adjustment of debts,” they are both designed to finish with a discharge of some or all of your debts. A discharge gives you permanent relief from your debts. It does so by making it illegal for your creditors to take any further collection action on them.

Chapter 7

Most Chapter 7 cases finish in less than 4 months with a court order discharging all or most of your debts. Sometimes you have to give up some asset(s) in return, but not usually.

Chapter 13

Chapter 13 cases take a lot longer and usually (but not always) require paying at least something to all your creditors. Chapter 13 requires proposing and getting approval of a formal plan of payments lasting usually 3 to 5 years. Your successful completion of this payment plan results in the discharge of all or most of your remaining debts.

Continue Reading ››

 Posted on April 06, 2016 in Bankruptcy Procedure

Your debts can be “secured,” “priority” or “general unsecured.” How bankruptcy treats your debts depends on which kind they are.

The purpose of bankruptcy is to deal with your debts. You want to know:

• Will you still owe anything to anybody after filing bankruptcy?
• What happens to debts you want to keep like a vehicle loan or home mortgage?
• How about special debts like income taxes and child support?

To answer these you have to know the 3 kinds of debts:

• secured
• priority
• general unsecured

Secured Debts

All of your debts are either secured by something you own or are not.

Usually it’s quite straightforward. If you have a vehicle loan, the vehicle’s title shows your lender as the lienholder. That lien on the title, plus what you agreed to in the documents you signed with that lender, makes the loan secured by the vehicle. So the lender has certain rights as a secured creditor related to your vehicle. It has the right to repossess your vehicle if you fail to make payments. It can likely “force-place” insurance and make you pay for it if you let your insurance lapse.

Continue Reading ››

 Posted on April 04, 2016 in Bankruptcy Law

Bankruptcy is federal law. The U.S. Constitution has said so from the beginning. Find the Bankruptcy Code in Title 11 of the U.S. Code.

If you’re considering bankruptcy and are trying to read up on it, this may help make sense of it.

The U.S. Constitution

The Constitution gave Congress the power “to establish... uniform laws on the subject of bankruptcies throughout the United States.” (Article 1, Section 8, Clause 4.) This particular power is near the top of a long list of legislative powers the Constitution granted to Congress.

Why Bankruptcy is in the Constitution

Bankruptcy may seem like a minor issue in the grand scheme of setting up a new nation. But making bankruptcy a federal responsibility instead of a state one actually went to the heart of what the Constitutional Convention of 1787 was trying to address.

Continue Reading ››

 Posted on March 23, 2016 in Chapter 7

“Income” is not what you think it is—it’s much broader than usual and fixates on the 6 full calendar months before your bankruptcy filing.

Our last blog post a couple days ago was about an upcoming cost of living adjustment of median family income amounts. This adjustment is going in effect for bankruptcy cases filed on and after April 1, 2016. (See Section 101(39A) of the Bankruptcy Code.) These median family income amounts are important because they can determine whether you can pass the “means test” and qualify for a Chapter 7 “straight bankruptcy” instead of a Chapter 13 “adjustment of debts.”

That’s important because a consumer Chapter 7 case usually take only 3 or 4 months to finish. It usually does not require you to pay anything to most of your creditors. In contrast a Chapter 13 case usually takes 3 to 5 years, and requires you to pay all you can afford to your creditors throughout that period of time.

Continue Reading ››

 Posted on March 18, 2016 in Qualifying For Bankruptcy

You qualify for Chapter 7 without having to pass the “means test” if you fit within these very specific military-related exemptions.

Short Introduction to the “Means Test”

The “means test” determines whether you have enough income after your expenses to pay a meaningful amount back to your creditors. If you do, you don’t pass the “means test” and you don’t qualify for Chapter 7 “straight bankruptcy.”

But like many people who want to file a Chapter 7 case, you may easily pass this test simply by having low enough income. As long as your income is no more than the current published “median income” amounts for their state and family size (as being updated on April 1, 2016), you don’t have to consider the amount of your expenses—you automatically qualify for Chapter 7.

Continue Reading ››

 Posted on March 07, 2016 in Chapter 7

As of April 1, 2016 you can have a little more "disposable income" and still pass the "means test" to qualify for Chapter 7 bankruptcy.

Means Test

The “means test” determines whether you have enough income after your expenses (that is, enough “disposable income”) to repay your creditors a certain amount. If you don’t have enough disposable income, then you qualify for Chapter 7“straight bankruptcy.” Otherwise you must instead deal with your debts through a Chapter 13 “adjustment of debts” case.

Chapter 7 allows you to discharge (legally write off) all eligible debts in a process taking 4 months or so. In contrast Chapter 13 requires you to pay debts as much as you can afford to in a payment plan lasting usually 3 to 5 years. Chapter 13 may give you some significant advantages over Chapter 7. But in many other situations being able to discharge debts in a matter of a few months makes Chapter 7 the much preferred option.

Continue Reading ››