Those thinking about filing for bankruptcy understandably have many questions about the process. These inquiries can range from how exactly their debts will be affected to questions about the procedure and players involved in their bankruptcy case. One person who plays a large part in bankruptcy proceedings, and of whom many petitioners are not aware, is the trustee appointed to the case.
We are often asked whether a client should pay outstanding tax liability with a credit card. After all, credit card debt is commonly discharged in a Chapter 7 Bankruptcy; on the other hand, tax liabilities are often not dischargeable except under limited circumstances (the discharge of tax liabilities are discussed in a separate blog).
There are several risk factors that bear on this question. The court may determine that the credit card payment to the IRS is non-dischargeable due to fraud, i.e., it was simply an attempt to convert a non-dischargeable tax liability to a dischargeable credit card debt. The bankruptcy filing itself suggests that the debtor had no intention to repay the credit card obligation; if the debtor was unable to pay regular living expenses such as a mortgage, utilities, etc., it may be assumed that the debtor had no ability or intention to repay the credit card obligation.
Moreover, 11 USC §523(a)(14) and 11 USC 523(a)(14A) provide that if you do use your credit cards to pay a non-dischargeable tax debt, the credit card obligation is also not dischargeable.
Whether a credit card payment of a tax becomes dischargeable with the passage of time is an open question. It is possible that a Bankruptcy Court will decide that if a substantial period of time passes between the credit card payment and the bankruptcy filing that the credit card obligation is dischargeable. This is more probable if payments were made on the credit card in the interim.
For further information, contact the experienced bankruptcy attorneys at Hoffman, Larin & Agnetti PA.
Chapter 13 Bankruptcy Can Keep You in your Home
Consider the following (unfortunately) common situation faced by many homeowners: their home in the current depressed real estate market is worth $150,000. They have two mortgages on the property that they obtained during the real estate boom several years ago. They have a first mortgage of $160,000 (they are a little ‘underwater’, that is, they owe a little more than the property is worth). They are not happy, but can manage the payments. The problem is the second mortgage of $100,000 that they put on the property when it was worth much more; they are not able to keep up with this mortgage and just received a notice of acceleration and imminent foreclosure from the lender.
There is a remedy for these homeowners which will allow them to keep their home- CHAPTER 13 BANKRUPTCY.
Seeing a lawyer for a bankruptcy problem is much like seeing a dentist. You try to ignore the pain as long as you can before you make an appointment. When you finally do, you wonder why you waited so long and went through months or years of unnecessary discomfort.
As an attorney who sees clients in Miami-Dade, Broward/Fort Lauderdale and from Key Largo to Key West, I often advise a new client that the most difficult decision they have had to make concerning their financial problem is whether to call my office. From then on, we deal with solutions, not problems.
How then, should you choose a bankruptcy lawyer?
Do not go to a bankruptcy ‘mill’
How Did This Happen?
I doubt that you planned to be sued in foreclosure. Most likely, you planned for your home or other real estate to be a primary investment. Unfortunately, the economy didn’t cooperate. Or, in a world of constantly rising real estate prices, you kept borrowing against imagined equity, assuming that the market would never turn. Or, you or your spouse lost a job in suzhou and unemployment benefits are a fraction of your old income. Or, you bought in to the sales pitch of mortgage lenders who held out the promise of easy money without concern about your income or debts.
Anyway, here you are. You are 6 or more months behind in your payments, loan modification has been denied, or hasn’t been considered or is under review. What can you do?
Defend the Florida Foreclosure Lawsuit!
Not all loans are alike.
A tuition bill is not a student loan. As a general rule, student loans are non-dischargeable debts, which means that you will still have to pay the loan off even after filing for Chapter 7 or Chapter 13 bankruptcy. Under current law, this is true for both federal and private loans, even if it’s a private loan from for-profit lenders such as Citibank or the student loan specialist Sallie Mae. Private student loans (also called the alternative student loans, e.g., FFELP and FDSLP) are generally given to supplement federal loans (Stafford loans, Perkins loans or the PLUS loans.)
If you default on your student loan, the U.S. Department of Education can have money deducted from your federal income tax refund to collect on defaulted federal student loans (tax offset) or force your employer to withhold a portion of your pay (wage garnishment) or both.
Ordinary tuition bills have different considerations. Generally, so long as the family did not sign a promissory note (which would cause them to be considered educational loans), unpaid tuition bills and other college bills can be discharged in bankruptcy. A Florida Bankruptcy attorney should review of all documents signed in connection with the unpaid tuition bills to determine whether they are dischargeable in bankruptcy.
There are remedies.
Bankruptcy is intended to give you a fresh start- all of your credit card debt, medical bills, deficiency judgments and unsecured debt become nothing more than a bad memory. But what about your nasty tax liabilities? Will they follow you forever? This is a question my clients frequently ask.
Well, it depends.
In general, if returns were properly filed (even though the taxes were not paid) income taxes more than three years old can be discharged in bankruptcy. Pay attention: only income taxes are dischargeable; other taxes, such as payroll taxes or fraud penalties cannot be discharged. Penalties on taxes that are dischargeable are also discharged.