Posted on January 06, 2016 in Income Taxes

As of January 1, 2016 you can include any taxes you owe for the 2015 tax year in your Chapter 13 payment plan.

If you’ve been thinking about filing bankruptcy, and expect to owe income taxes for 2015, you have an extra reason to file a Chapter 13 “adjustment of debts” now that we’re in the new year. That’s because now that 2016 has begun you can include income taxes owed for the 2015 tax year in your new Chapter 13 case and payment plan. Being able to include taxes owed for 2015 gives you significant advantages.

It saves you money, gives you crucial flexibility, and stops future tax liens and other tax collections.

Saves You Money

Including what you owe in income taxes for 2015 in a Chapter 13 payment plan saves you money because almost always you don’t have to pay any additional interest and penalties on the tax owed. The savings can be huge.

That’s particularly true if you have other debts that you want or need to be paid ahead of the 2015 tax. That would delay payment of the taxes owed for 2015. As a result the savings from not paying any accruing interest and penalties would be that much greater.

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 Posted on January 04, 2016 in Income Taxes

With Chapter 13 you may have to pay some part of the taxes that you could just discharge under Chapter 7, but it may be worth it.

Last week just before New Year’s Day we showed how to discharge (legally write off) more of your tax debts (likely for the 2012 tax year) under a Chapter 7 “straight bankruptcy.” Today we show how that’s done under the Chapter 13 “adjustment of debts” form of consumer bankruptcy.

Dealing with Income Tax under Chapter 13

The most direct way bankruptcy deals with older income taxes is by quickly discharging them in a Chapter 7 case. As long as the tax meets the conditions for discharge, under Chapter 7 you would simply not legally owe the tax at all usually within about 4 months after filing the bankruptcy case.

But there are many circumstances in which a Chapter 13 case would be better for you than Chapter 7. Some of these circumstances involve income taxes and some so not.

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 Posted on January 01, 2016 in Bankruptcy

You know bankruptcy gives you an overall fresh financial start. But it can provide special fresh starts you may not know about.

The Overall Financial Fresh Start

You get a new financial life by legally writing off (“discharging”) debts so that you are out from under them and never have to pay them again. With consumer and small business debts you have two main choices about how this happens.

The Chapter 7 Fresh Start

With a Chapter 7 “straight bankruptcy” the discharge of debts happens very fast. The moment your case is filed the creditors can’t take any more action to collect their debts against you, your money, or your property. Then usually about 100 days later the bankruptcy court enters an order discharging your debts. You are debt-free, other than possibly debts you want to keep such as a vehicle loan, and certain debts you can’t discharge like recent income taxes or back child support.

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 Posted on December 30, 2015 in Income Taxes

During the first months of 2016 your bankruptcy can write off more of your tax debts.

Filing bankruptcy at the right time in 2016 can help you deal with income tax debts in two main ways:

• Discharging (legally writing off) more of your tax debts (likely for the 2012 tax year), under a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts”
• Including any taxes owed for the 2015 tax year in your Chapter 13 payment plan, with the advantages that provides

Today we’ll show the first step to this—how to write off more income taxes under Chapter 7 in 2016. We’ll cover the rest during the first days of this coming year.

Discharge of More Income Tax under Chapter 7

The most direct way bankruptcy can help with taxes is through a Chapter 7 case to discharge—permanently write-off—of one or more tax year that you owe. That way you would not legally owe the tax at all usually within less than 4 months after filing the bankruptcy case.

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 Posted on December 28, 2015 in Pre-bankruptcy Planning

Think about filing bankruptcy in early 2016 if you had some extra source of money in mid-2015.

Some people can take advantage of the peculiar way that bankruptcy law calculates “income” for purposes of the “means test” by filing their Chapter 7 case with the right timing. Doing so could qualify them for Chapter 7 when otherwise you may not.

Others can take similar advantage of the way “income” is calculated for purposes of determining their Chapter 13 “commitment period”—the minimum length of time they have to pay into their court-approved payment plan. With the right timing their commitment period would be 3 years instead of 5 years.

Today, after reminding you briefly how “income” is calculated for these two purposes, we’ll give you an example how a January bankruptcy filing could save you a great deal of money.

The Purposes of the “Means Test” and “Commitment Period“

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 Posted on December 23, 2015 in Chapter 13

We show how filing bankruptcy before the end of December could result in a much shorter Chapter 13 “adjustment of debts.”

Two weeks ago we showed how filing bankruptcy by December 31 could enable certain people to file a Chapter 7 case instead of being forced into a Chapter 13 one. They could have their debts discharged (legally written off) within 3 or 4 months under Chapter 7. Otherwise under Chapter 13 they would be required to go through a 3-to-5-year payment plan. And they would only get a discharge of their remaining debts if they’d successfully make it to the end of that payment plan.

If You Need a Chapter 13 Case

But getting to file a Chapter 7 case wouldn’t be any motivation to file your bankruptcy this month if you already knew that you needed a Chapter 13 case anyway. Although Chapter 13 takes so much longer, and is riskier, it can accomplish many things that Chapter 7 simply can’t. Chapter 13 can give you incredible help if you are behind on your mortgage and want to keep your home. It can buy you time and protection and save you a lot of money if you owe tons of income taxes and especially if they span more than one tax year. Chapter 13 can enable you to catch up on child or spousal support better than anything. These are just some of the many ways that Chapter 13 is a great tool for dealing with your creditors.

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 Posted on December 21, 2015 in Bankruptcy

Even bankruptcy cannot help if you drink and drive, cause an accident, and hurt somebody, damage property, or are fined.

There are 3 different kinds of liabilities that can come from driving while intoxicated and getting into an accident: 1) personal injuries to others, 2) property damage, and 3) criminal traffic citation. Today we focus on the first of these.

Personal Injury or Death from Driving while Intoxicated

If you are in a traffic accident and you are injured and there’s not enough insurance to pay for your medical bills, usually you can file a bankruptcy and “discharge”—legally write off—those medical bills. If someone else is injured, you are found to be at least partially at fault, and your insurance doesn’t cover the other person’s medical bills, loss of employment income and any other such damages, you can usually discharge those liabilities by filing bankruptcy.

But not if you drink and drive and hurt somebody. You will not get financial relief from the bankruptcy laws.

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 Posted on December 18, 2015 in Bankruptcy

Gift-giving, or selling for much less than actual value, can cause problems ahead of bankruptcy, but only if it’s a large gift.

“Fraudulent Transfers” Usually Not an Issue

This blog post is about a topic to be aware of but one that’s seldom an issue for consumers or small business owners filing bankruptcy. However, in part because “fraudulent transfers” often involve some version of gift-giving, it’s particularly worth getting an understanding of this during the holiday season.

We’ll briefly explain here what a “fraudulent transfer” is, its two different forms, why neither are a problem for most people, and when you should be concerned.

What’s a “Fraudulent Transfer”?

Basically, it’s a debtor’s giving away (transferring) an asset to avoiding paying creditors the value of that asset.

This legal concept was first addressed more than 400 years ago in English law, which we adopted, so this is an issue that’s been around for a long time.

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 Posted on December 16, 2015 in Bankruptcy

You may have extra motivation and greater ability to repay a personally important debt this time of year. But maybe you shouldn’t.

Careful about Paying a Favored Creditor

Around the holidays you may be extra motivated to pay back a personal loan. The relative or friend may be in real need of the money and pressuring you to pay it. Or if you are considering bankruptcy you may not want it to involve this person, or to have him or her know about it.

You might feel be better able to pay this debt. You may have gotten an annual bonus from work, or more income from working extra hours or a side job during the holidays. You might have even stopped paying other creditors so you have more money to pay who you want.

But when you know the possible consequences you might not want to pay that special debt after all. At least not yet.

The Rare, Dangerous, but Avoidable “Preference”

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 Posted on December 14, 2015 in Bankruptcy Procedure

If you can, don’t do cash advances during the holidays if you’re contemplating filing bankruptcy. If you do, understand the rules about them.

In our last blog post we explained the “luxury” presumption of fraud. This provision in bankruptcy law increases the risk that you would not be able to “discharge” (legally write off) a very particular kind of debt. That kind of debt would be one that resulted from a purchase or a set of purchases totaling more than $650 made during the 90 days before filing bankruptcy.

The “cash advances” presumption of fraud is closely related to the “luxury” one. The dollar amounts and timeframe are just a little different. This “cash advances” presumption increases the risk that you would have to pay a debt tied to a cash advance or set of cash advances totaling more than $925 made during the 70 days before filing bankruptcy. (Notice that for this presumption to kick in, you incur somewhat more credit in a somewhat shorter period of time than with the “luxury” presumption of fraud.)

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