Can I Discharge My Taxes?

Posted on March 27, 2013 by Staff Writer

Is tax debt dischargeable in bankruptcy? Generally the answer is no, however, there are exceptions to this rule. If the debt is not discharged then it will still be owed at the end of a chapter 7 bankruptcy or you’ll have to repay them in full in a Chapter 13 bankruptcy repayment plan.

When You Can Discharge a Tax Debt

You can discharge debts for federal income taxes in Chapter 7 bankruptcy only if all of the following conditions are met:

The due date for filing a tax return is at least three years ago.

The tax return was filed at least two years ago.

The tax assessment is at least 240 days old.

The tax return was not fraudulent.

The taxpayer is not guilty of tax evasion.

Non-dischargeable Tax Debts

The following type of non-income-related tax debts cannot be discharged in a Chapter 7 bankruptcy:

Tax liens. A Chapter 7 bankruptcy discharge of income taxes wipes out the personal obligation to pay the tax and prevents the taxing authority from going after your bank account or wages. However, tax liens, also known as secured taxes, will remain attached to your property. This rule applies only to tax liens recorded against your property before you file for bankruptcy. This means that although you might not be personally liable for the tax debt, you’ll have to pay the lien from any profits when you sell the property.

Recent property taxes. If a property tax is incurred before you file for bankruptcy, the tax is nondischargeable. However, this only applies to property taxes last payable within one year of your bankruptcy filing. You can discharge your personal liability for property taxes that were payable more than one year before your bankruptcy filing. Keep in mind, though, that many counties attach a lien to your property upon assessment or one year afterwards. If you have a lien against your property for the property tax, that lien will remain after your Chapter 7 discharge.

Taxes that a third party is required to collect or withhold. This covers the so-called “trust fund” taxes such as FICA, Medicare, and income taxes than an employer must withhold from the pay of employees, and sales taxes paid by the debtor’s customers that the debtor is required to send to a governmental unit.

Certain employment taxes, excise taxes, and custom duties, depending on specific time periods.

Non-punitive tax penalties on nondischargeable taxes if the transaction or event that sparked the penalty occurred less than three years before filing the bankruptcy petition.

Erroneous tax refunds or credits relating to nondischargeable taxes.

Students Loan on Debate in Legislation for Bankruptcy Qualification

Posted on March 11, 2013 by Staff Writer

Bankruptcy was put into place to assist people with getting their finances back on track and freshly doing over debts that were making them drown in financial problems. However, student loans have not been part of the bankruptcy plan – for federal loans, since 1978, and for private loans, 2005. Legislators now want to reverse a law put into place in 2005 to allow students to put private student loans on bankruptcy to eliminate these types of student loans.

The Fairness for Struggling Students Act of 2013 cosponsored by Senators Dick Durbin (D-IL), Sheldon Whitehouse (D- RI) and Jack Reed (D-IL), looks to allow students to eliminate their private student loan debt. Student loans happen to be the largest consumer debt – over a $1 trillion nationally, which is not allowed to go under bankruptcy. The interesting thing is that federal loans have better rates in comparison to private loans where it typically has a double digit interest rates and no income based repayment options. Allowing private loans to be dismissed in bankruptcy would greatly benefit those who are financially struggling.

There are many organizations that are in support of this bill such as American Association of University Women, Consumer Financial Protection Bureau, the U.S. Department of Education, FinAid.org publisher Mark Kantrowitz, The Institute For College Access and Success, and Sallie Mae all are seeking some sort of reform and change to assist those who struggle with the repayments in financial hardships.

Bankruptcy lawyers are here to help understand this new law and other aspects of bankruptcy. If you have questions and/or need assistance, please contact an attorney in the Nevada area.

What is a Bankruptcy Discharge? | Arizona Bankruptcy Lawyer

Posted on March 9, 2013 by Staff Writer

A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

Although a debtor is not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has not been avoided (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property secured by the lien.

A Ch. 7 bankruptcy discharge normally occurs approximately 90 days after the bankruptcy case was filed, assuming the debtor satisfied all of his or her requirements for receiving a discharge. A Ch. 13 bankruptcy discharge will not occur until debtor satisfies all of his or her requirements set forth in the filed reorganization plan. Normally, this should take between 3 or 5 years.

Please take notice that not all debts are allowed to be discharged in a bankruptcy. While there are many specified debts that are deemed non-dischargeable, the most common types of these include the following:

Recent back taxes
Alimony or child support arrearages
Student loans
Governmental fines/debts
Recent usage/fraud
Non-listed debts

You should always consult with an experienced bankruptcy attorney to determine what your options entail. Knowing which chapter in bankruptcy to file due to the types of debts you have is very crucial to maximizing your eventual bankruptcy discharge. Call my office today to discuss.

Can a Trustee revoke my discharge from Bankruptcy?

Posted on February 2, 2013 by Staff Writer

So you’ve filed bankruptcy and want to know if the Trustee can revoke your discharge? The answer is yes! A discharge is a release of a debtor from personal liability for certain dischargeable debts. A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor or the debtor’s property to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including through telephone calls, letters, and personal contact.

In a typical Chapter 7 bankruptcy case, a discharge order is entered by the court roughly four months after the bankruptcy is filed. However, just because a discharge order has been entered, doesn’t mean that it can’t be revoked by the Trustee. There are several common reasons a Trustee will revoke a discharge. The most common reason for the revocation of a discharge is for fraud or misrepresentation of material facts. Trustee’s and their staff are very skilled at what they do and can sniff-out a liar from a mile away. So don’t lie! Not only can you lose your discharge but concealing assets in a bankruptcy is a felony and punishable by up to 5 years in prison.

Another reason a Trustee will revoke a discharge is if a person fails to provide the Trustee with additional documentation. A Trustee may ask for additional bank statements, pay stubs, tax returns or documentation surrounding a transaction. Just because you’ve received your discharge doesn’t mean you can ignore your Trustee. Give him whatever he asks for by whenever he asks for it.

Lastly, a Trustee’s main form of communication is through the mail. So if you move during your bankruptcy let your attorney know so he can file a change of address with the court. Otherwise the Trustee may be sending you letters requesting additional documents and you will not be able to comply.

Can I include my student loans in my bankruptcy?

Posted on January 27, 2013 by Staff Writer

Generally speaking student loans are not dischargeable in bankruptcy. The US Bankruptcy Code at 11 USC 523(a)(8) provides an exception to bankruptcy discharge for education loans. However, student loans may be discharged if you can show that payment of the debt “will impose an undue hardship on you and your dependents”.Courts use different tests to evaluate whether a particular borrower has shown an undue hardship. But a common test is the “Brunner test” which requires a showing the following:

1) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the student loans;

2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and

3) the debtor has made good faith efforts to repay the loans.

The second element of the Brunner test is the most difficult hurdle for most people. The difficulty lies is proving to the court that you won’t be able to pay off the loan in the future. The burden is on you to prove that you’ll never be in a better financial situation—one where you could pay on the student loan. Unless a person has experienced some type of permanent disability it’s tough to prove that there’s no way you could find yourself in a situation to pay off your student loans. Because it’s theoretically possible that next month you’ll get a job at FaceBook making a million dollars a year.

Come speak with one of our attorneys during a free consultation to see if your student loans may be dischargeable in bankruptcy.