Posts Tagged ‘Massachusetts Bankruptcy lawyer’
12 Common Myths About Bankruptcy
September 9th, 2009 | 
Author: I have been practicing Bankruptcy law in Massachusetts for over eight years. Throughout that time, I am confronted with clients who come into their intake interview with several misconceptions about bankruptcy. Therefore, I decided to compiles a short list of the most common myths about bankruptcy based on what I have heard from my own clients through the years. If you are considering bankruptcy, and are afraid because of what someone told you that you shouldn’t because…. I hope that you take the time to read this.
1. Under the new Bankruptcy Laws Everyone has to repay their creditors. False: In 2005, the bankruptcy laws were changed to provide a test to see who can qualify for a Chapter 7 Bankruptcy. Essentially, if someone has sufficient income, and the ability to repay a portion of their debt, then they will have to file a chapter 13 which will require them to enter into a court supervised repayment plan with their creditors. The new law does not prevent people from filing and in most situations people are still able to get the same relief now as before the law changed.
2. Once I file Bankruptcy my credit is ruined for life. Not Quite…while bankruptcy is a blow to your credit rating; it is not permanent. Because most people have numerous charge offs and sometimes even a collections lawsuit on their credit report before they decide to file, most people will actually seen an increase in their credit score within 1-2 years. Moreover, most of our clients report that they are able purchase cars and homes within 2 – 3 years.
3. Only deadbeats and losers file for bankruptcy. False…Most people file for bankruptcy after a life-changing experience, such as a divorce, unemployment or a serious illness. They’ve struggled to pay their bills for months and just keep falling further behind.
Moreover, some famous people who have filed bankruptcy who were (or are) successful include: Walt Disney, three US Presidents, Larry King, Donald Trump, and Henry Ford.
4. All debts can be discharged in a bankruptcy filing. False…certain debts cannot be discharged through bankruptcy. For example, child support, student loans and most taxes, and debts incurred by fraud (to name a few) cannot not discharged. This list has exceptions and is not exhaustive. If you have questions, contact a bankruptcy lawyer.
5. You can’t get rid of back taxes through bankruptcy. Generally speaking, this is true. However, under some circumstances income taxes are dischargeable. The rules concerning discharging taxes are complicated; so if you owe income taxes, an experienced bankruptcy lawyer can tell you if you can discharge the taxes.
6. Filing bankruptcy could cost you your job. No. The current bankruptcy code prohibits discrimination against an individual who is in bankruptcy or who has bankruptcy in the past.
7. You will never be able to own property again. Not True. Once you receive your bankruptcy discharge, you bankruptcy if finished. You can continue to live your life and can purchase and sell property like everyone else. Creditors will eventually lend to you again to help you with large purchases and you are able to purchase whatever you can afford.
8. Everyone will know I filed for bankruptcy. False. Bankruptcies, like all court records are public; however, in order to see the records, one has to actually go to the court and look for them. Bankruptcy is not published generally the only people who are going to know are those who you tell. Some people think that newspapers carry bankruptcy filing information, this is simply not true.
9. I will lose everything I own. Again this is false. Once you file bankruptcy, you will be able to keep certain property up to a certain value; this property is known as exempt. Most bankruptcies are known as “no asset” bankruptcies, meaning that you get to keep all of your property and all of your unsecured debts are discharged. Exemptions vary from state to state, so it is important to speak with an experienced bankruptcy attorney in your area.
10. Creditors can still harass me if I file for bankruptcy. Not Legally. When the bankruptcy is filed, automatic protection is put onto you and all of your property instantly. Creditors are not allowed to contact you for any reason, which includes calling or even billing you. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.
11. I can be turned down for filing bankruptcy. Mostly False. So long as you are honest on your petition, don’t try to conceal assets and don’t lie about your income an experienced bankruptcy will be able to file you in the proper chapter bankruptcy and your debts will be discharged. The bankruptcy statute is designed to help ALL honest debtors who need help. If you lie on your petition, or try to conceal assets, then the justice department will seize your assets to repay your creditors and you will not have your debts discharged. Moreover, you could end up in jail.
12. Bankruptcy is easy; I don’t need an attorney. False. The bankruptcy code is extremely complex; so complex that a lot of attorneys choose not to practice in the field. If you fail to take all the proper steps leading up to filing bankruptcy, then you risk losing your home, and/or all of your assets. We have represented several clients who wanted to save money and who filed bankruptcy without an attorney and messed up on their petition and/or filed under the wrong chapter. They ended up paying us three or four times more in legal fees to fix the mess that they made than they would have paid us to file their bankruptcy in the first place.
By no means is this an exhaustive list and there are many more misconceptions out there. If you have any questions, then you should contact us and schedule a free appointment. You have nothing to lose and we can provide you with the facts you need to make an informed decision.
Posted in Misc. | 
Tags: Bankruptcy, chapter 13, chapter 7, credit, debt, debtor, discharge, law, lawyer, Massachusetts, Massachusetts Bankruptcy lawyer | 
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Personal Income Taxes in Bankruptcy
Income taxes present special problems and issues when it comes to bankruptcy. This article brief summary of this complicated rules that govern taxes for those who file bankruptcy.
The Bankruptcy Discharge
In bankruptcy, a “discharge” is the elimination of a debt. The goal of either a chapter 7 or a chapter 13 bankruptcy is obtaining a discharge of your unsecured debts. However, not all unsecured debts are dischargeable. Examples of non-dischargeable debts are student loans, child support and most taxes. However, while most taxes are not dischargeable, in some cases, income taxes are.
Bankruptcy Discharge of Income Taxes
In some instances Bankruptcy can be an effective way of dealing with past due federal and state income tax debt. Under the Bankruptcy Code, whether a tax obligation is dischargeable is determined by when the tax became due. If a bankruptcy debtor owes state or federal income taxes the taxes are dischargeable if the debtor filed their tax return and:
1. 3 Year Rule: The tax return was due more than 3 years prior to the bankruptcy filing. (If the debtor obtained an extension, the due date would be the extension deadline);
and
2. 2 Year Rule: The debtor’s income tax return was actually filed more than 2 years prior to the date the debtor files his bankruptcy;
and
3. 240 Day Rule: The income taxes were assessed by the IRS or Massachusetts DOR more than 240 days prior to the bankruptcy filing;
and
4. The debtor did not file a fraudulent return or willfully attempt to evade paying taxes.
If a Bankruptcy debtor meets all of the above criteria, then their income tax debt is dischargeable. However it is important to remember that these rules only apply to individual income taxes. Moreover, in a Chapter 7 Bankruptcy if the underlying tax obligation is dischargeable, the interest and penalties thereon are also dischargeable. However, if the underlying obligation is non-dischargeable, so are all related interest and penalties.
Tax Lien in a Chapter 7 Bankruptcy
If the IRS of Massachusetts DOR has already recorded a lien on your property, then their debt is secured, and in the case of a Chapter 7 bankruptcy, the tax cannot be discharged; even if a debtor meets all of the conditions listed above. However, that lien can only be assessed against the property that the lien is recorded. For example, if you owe the IRS $10,000.00 in taxes and you meet all of the qualification above, and the IRS records the lien against property that is only worth $5,000.00, after your bankruptcy, the IRS cannot record a lien against any other property that you own. Moreover, once the IRS sells the property that their lien is recorded against, the remaining balance that you owe is discharged.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, a bankruptcy debtor makes payments to a bankruptcy trustee for a period of 3 to 5 years. The trustee in turn pays the debtors creditors according to a repayment schedule, or “Chapter 13 Plan”. Certain debts are paid in full such as mortgage arrears and certain “priority debts” and general unsecured debts (such as credit cards, personal loans and medical bills) are paid with whatever is left over for a fraction of their value.
In a Chapter 13 Bankruptcy, income taxes are treated as priority debts; meaning that they must be paid before any other debts, and like all priority debts, they must be paid in full through the chapter 13 plan. However in order for an income tax to be considered priority the tax must meet only the 3 year rule and the 240 day rule. If the bankruptcy debtor has any tax debts that fall outside these two rules; that debt is considered a general unsecured debt and the tax debt will be treated the same as the debtor’s other unsecured debts during the repayment period. However, the tax debt will not be discharged. If the bankruptcy debtor does not satisfy these two rules, then the tax debt is considered a priority debt and it must be repaid in full through the Chapter 13 Plan. If the debtor cannot repay 100% of their priority debt through the Chapter 13 bankruptcy, they will have to convert their debt to a Chapter 7 bankruptcy.
Another important consideration for chapter 13 debtors is the accrual of penalties and interest. The filing of a chapter 13 bankruptcy stops the IRS and the Massachusetts DOR from assessing additional penalties and stops the accrual of interest.
Tax Lines in a Chapter 13 Bankruptcy
Another consideration in a chapter 13 is a tax lien. If the IRS of Massachusetts DOR has recorded a tax lien against a debtor’s property for unpaid income taxes, that debt becomes secured debt and cannot be discharged; even if the tax would have qualified for discharge under the 2 year and 240 day rules. However, if the amount of the lien exceeds the value of the property which the lien is attached, a debtor may seek relief from the Bankruptcy Judge and have the portion of the lien that exceeds the value of the property striped; something known as a “cram down”. The portion of the lien that is stripped then becomes unsecured.
Conclusion
The Bankruptcy rules are complex when it comes to dealing with income taxes and tax issues should not be handled by a pro-se bankruptcy filer or even an inexperienced bankruptcy attorney. If you have personal income tax issues you should consult with a Boston Bankruptcy Lawyer who is familiar with the bankruptcy rules regarding taxes and the many exceptions.
Posted in Taxes |
Tags: Bankruptcy, chapter 13, discharge, income taxes, irs, Massachusetts Bankruptcy lawyer |
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