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Recent Blog Posts
Bankruptcy Timing and the Holidays: The "Luxury" Presumption of Fraud
If you’re considering filing bankruptcy, try to avoid using credit cards to finance the holidays. But if you do, there are some extra risks.
Using Credit Shortly Before Filing Bankruptcy
Using credit during the holidays if you’re contemplating bankruptcy is dangerous. It could be considered fraud if you run up debt that you don’t intend to honor.
What is “Fraud” in Bankruptcy?
The bankruptcy system rewards honesty. One of the core principles in bankruptcy is that debts which are entered into honestly can later be written off, while debts entered into through cheating cannot.
When you incur a debt, you are agreeing to pay the debt. If at the time you are incurring a debt you actually don’t intend to pay it, that would be cheating. Falsely saying or implying that you intend to pay the debt would be a misrepresentation and likely a fraud. There is a risk that such a debt would not be written off (“discharged”) in bankruptcy.
Bankruptcy Timing and the Holidays: Extra Income in December Affecting the "Means Test"
We show step-by-step how filing bankruptcy before the end of December can enable you to qualify for Chapter 7 “straight bankruptcy.”
Have you received or are you expecting any extra money from any source during December? It’s probably the month when that’s most likely. If you are fortunate you may receive a bonus from your employer, or you’re working a part-time Holiday job or getting bigger paychecks because of overtime. Or you may get a cash gift from a parent or some other relative, either for yourself or to help buy gifts for your kids.
In our last blog post a couple days ago we explained the reasons why filing bankruptcy DURING the calendar month that you receive some usual income can help you qualify for Chapter 7, and avoid being forced into a Chapter 13 case. Today we give you an example to help make sense of this.
Quick Summary of the Income Timing Laws in the “Means Test”
Bankruptcy Timing and the Holidays
Filing bankruptcy in December instead of January can make the difference between qualifying for Chapter 7 and being forced into Chapter 13.
If you have a serious debt problem, you may be doing your best during the holiday season to work around it. You feel you need to get through the next few weeks and then you can deal with it early next year. It’s hard to find the time to get the holiday obligations taken care of much less find the time and attention to focus on what you should do about your debts.
But it may be worthwhile to find that time and attention.
Bankruptcy Timing Laws
Bankruptcy has many timing rules. Some of those rules can give you major advantages if you filed your bankruptcy case even just a few weeks sooner. Or you may be able to get advantages by filing later. But you wouldn’t know if you didn’t get legal advice about it. Getting that advice sooner rather than later can make a huge difference. Here’s one reason why.
Giving Final Thanks for Chapter 13 "Adjustment of Debts"
Chapter 13 helps if you owe divorce debts, have personal property collateral, are behind on property taxes, or owe old and new income taxes.
In the last two blog posts we covered 6 extremely helpful features available only under Chapter 13. Here are 4 more, to make it an even 10. Again, none of these come with Chapter 7 “straight bankruptcy.’
7) Write Off Non-Support Divorce Debts
Neither Chapter 7 nor 13 can “discharge,” or write off child or spousal support. But Chapter 13 can forever discharge non-support divorce obligations. So if you owe any of this kind of debt you should seriously consider filing a Chapter 13 “adjustment of debts.”
What are non-support divorce obligations?
These are usually related to the division of marital property or marital debts in your divorce degree. Non-support obligations are generally referred to in your divorce decree two ways:
Giving More Thanks for Chapter 13 "Adjustment of Debts"
We’re lingering in the Thanksgiving spirit by appreciating what Chapter 13 has to offer.
Beyond the first 3 we covered a couple days ago, here are 3 more impressive features of Chapter 13 which are completely unavailable under Chapter 7 “straight bankruptcy”:
4) The “Co-Debtor” Stay
The “co-debtor stay” enables a person filing a Chapter 13 case to immediately prevent a creditor from requiring a co-signer to pay a co-signed consumer debt. Depending on what you want, that protection can be either temporary or permanent.
The protection is temporary if the creditor asks the court for permission to pursue your co-signer and you don’t do anything to prevent that from happening.
The protection of your co-signer is permanent if you arrange in your 3-to-5-year Chapter 13 payment plan to pay the co-signed debt in full. Most of the time you are allowed to pay a co-signed debt in full through your Chapter 13 payment plan while paying less, or sometimes even nothing, to most of your other debts. That is, in most parts of the country you can completely favor your co-signed creditor to the detriment of your other creditors.
Giving Thanks for Chapter 13 "Adjustment of Debts"
It’s way past Thanksgiving but Chapter 13 has many features that make you take notice and appreciate what they can accomplish.
During Thanksgiving week we told you about 10 features of Chapter 7 “straight bankruptcy.” It only seems fair to bring you the same for Chapter 13 “adjustment of debts.” These are mostly ones that are not at all available under Chapter 7. Here are the first 3 of these features, with more to come a couple days from now.
1) The Long “Automatic Stay”
The “automatic stay” stops against almost all collection actions against you and everything you own as of the moment your bankruptcy case is filed. The big difference under Chapter 13 is that this protection lasts so much longer than under Chapter 7. That’s because a Chapter 13 case lasts so much longer—3 to 5 years instead of only about 3 or 4 months—and this stopping and preventing of creditor actions can last throughout those years.
Giving More Thanks for Chapter 7 "Straight Bankruptcy"
Here are more features of Chapter 7 worth knowing and taking advantage of.
The day before Thanksgiving we talked about the following features of “straight bankruptcy”:
1) The “Automatic Stay”: The IMMEDIATE stopping of virtually all collection actions against you and everything you own.
2) Property “Exemptions”: Protection for ALL you own, for most people who file bankruptcy.
3) “Reaffirmation” of Vehicle Loans and Other Secured Debts: The ability to be selectively choose to keep SELECT secured debts and the collateral securing them—if and only if you want to.
4) Paying Favored “Creditors” If You Want: The right to choose to pay a SPECIAL debt that you feel a deep moral or family obligation to pay, after the bankruptcy is over and you’ve legally discharged (written-off) the debt.
Giving Thanks for Chapter 7 "Straight Bankruptcy"
Chapter 7 has many important features deserving appreciation.
Filing a Chapter 7 bankruptcy case gives you many astounding benefits. We’ll start with 5 today, the day before Thanksgiving, and give you another 5 the day after Thanksgiving:
1) The “Automatic Stay”
The moment your case is filed you and everything is own gets covered by a blanket of protection against virtually all the collection activities of your creditors. All the laws that provide procedures for creditors to get you to pay their debts are automatically thrown out the window. The automatic stay is this one law that defeats just about all the collection laws.
The automatic stay stops ongoing wage and bank account garnishments, lawsuits, vehicle repossessions, home foreclosures, and more. Also, during the time your Chapter 7 case is active it prevents new garnishments from being delivered to your employer and your financial institution, a new lawsuit from being filed and served on you, a tax lien from being recorded against your home and other assets, and such.
Thanksgiving for the Rule of Law
This Thanksgiving, even in the midst of scary personal financial pressures, there is much to be thankful for.
Everybody can make their own individual inventory of people and situations to be appreciative of Here is a short list of what to be thankful for in the world of bankruptcy:
1. The Rule of Law:
We’re thankful that we live in a country that, for all of its continuous challenges, is a civil society. Without getting into the politics of it all, we can generally rely on our local, state, and national governments to fulfill their basic functions. We don’t live in anarchy. People, from the lowest to the highest, generally try to operate their daily lives following the rules that we have all agreed to live by, our laws.
There are serious challenges to all our institutions—from the U. S. Congress to the U. S. Postal Service. But most of us can generally go about our daily lives without being concerned about being physically harmed by either the police or by other people. Our U. S. Constitution continues, after 226 years, to protect our basic rights. And that includes a system of federal bankruptcy law.
Chapter 7 and Chapter 13--An Income Tax Lien Secured by Equity in Your Home
If you have enough equity in your home to cover a recorded tax lien, to keep your home you must pay that tax. Here’s how bankruptcy helps.
Our last blog post laid out the options if a tax lien was recorded against your home but there WASN’T equity in the home to cover that tax lien. Today’s blog post is about dealing with an income tax lien recorded against a home which DOES have enough equity to cover the full amount of the income tax owed on that lien.
Let’s make this clearer with an example. Assume your home is worth about $20,000 more than you owe against on your mortgage(s). Imagine that you owe $6,000 in income taxes to the IRS for the 2011 tax year that you’d been struggling to pay when the IRS recorded a tax lien on your home a few months ago on that tax. The equity in your home is larger than the amount of that tax lien, so the entire $6,000 tax is now secured by your home.
What are your options for dealing with this tax?
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