Bankruptcy filings result in the discharge of debts in the majority of cases, butsometimes the application for the bankruptcy discharge is rejected. As a result, you won’t get any legal protection to prevent creditors from collecting their debts.
What you will read below are some of the situations when a bankruptcy court may decide to reject the application for a discharge from debt.
1. Not Declaring All the Assets
U.S. Code § 727 is strict about any abuse of the system. You need to be transparent and declare all your assets. Falsifying any assets may result in rejection of the application. If the court finds that the application does not declare all possessions and property, and intends to defraud, hinder, or delay payment to the creditor, the bankruptcy application will be rejected.
The court could also reject your application if it’s found that you have destroyed or transferred property to avoid payment to the creditors.
2. Not Complying with the Court Order
You need to comply with every court requirement after you have filed a bankruptcy application. If you don’t comply with the court orders, such as not filing required documents or paying prescribed fees, your application for Chapter 7 or Chapter 13 may be rejected by the court.
3. Failing the Eligibility Criteria
Certain requirements are present for a person to be eligible for bankruptcy protection. The requirements for Chapter 7 are stricter than that for Chapter 13 protection. In order to qualify for Chapter 7 bankruptcy, you need to meet the income test criteria.
The income test involves assessing your income, the median income, and the number of individuals in the household.
If your medium income is more than the median income for a similar number of household in the area, your application for bankruptcy will be denied. In this case, you can file for a Chapter 13 bankruptcy protection, instead.
However, only Individuals or sole proprietorships are allowed to file Chapter 13 bankruptcy. Partnerships and companies are not eligible for this protection. Moreover, the unsecured debts should be less than $394,725, and secured debts should be less than $1,184,200 to become eligible for Chapter 13 bankruptcy.
4. Not Showing Proof of Tax Filing
You need to show proof of your tax filings when you submit a bankruptcy petition. You should show that you have paid state and federal income taxes for the past four tax years before filing the bankruptcy petition. Your case for bankruptcy could be rejected if you don’t show copies of transcripts or returns for the previous four years.
5. Not Attending First Meeting of Creditors
Every bankruptcy applicant needs to attend First Meeting of Creditors. Not attending the meeting may result in rejection of your application. In case of filing a joint petition, both the partners must appear in the court.
6. Not Taking Required Instructional Courses
The US Bankruptcy Code also requires that applicants of Chapter 7 and 13 bankruptcy plan take two instructional courses. The first course is a credit counseling course that must be taken before filing an application. The second course is a financial management course that must be completed after the case is filed. Both the courses are the requirement for getting bankruptcy protection. The cost of the courses can vary from $10 to $100 depending on the location where you file.
Most of the applications for bankruptcy are accepted. However, lack of honesty or not fulfilling the court requirements can result in rejection of the application. You should consult with a professional bankruptcy lawyer to increase your chances of a successful bankruptcy application.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
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Garnishment is a legal process that allows creditors to deduct money from a debtor’s wages or a bank account. If you are facing severe financial difficulties, you may be able to prevent creditors from garnishing your wages by filing for bankruptcy.
But how does a bankruptcy affect your garnishment? Will you receive back money from the court when you file bankruptcy, and going bank how long? Will the trustee let you keep the money once you file? You will find the answers to these questions here in this article.
How a Bankruptcy Affect Garnishment?
After filing for bankruptcy, you will be protected from the creditors. The court will notify your creditors about the bankruptcy filing preventing them to collect any debt.
Your garnishment will be affected differently depending on the type of bankruptcy you file. Here are the ways in which your garnishment will be affected by a Chapter 7 and Chapter 13 bankruptcy.
Garnishment when Filing Chapter 13 Bankruptcy
When you file a Chapter 13 bankruptcy, all debt collection actions including garnishment must be stopped by creditors. The debts are reorganized in order to be paid over a period of three or more years. However, any remaining debts after the completion of the payment period will be discharged by the court.
You can also get bank money garnished by creditors in certain situations after filing a bankruptcy. While the specific rules differ in each state, generally, you can get back the money, if:
- The debt is dischargeable, or exempted in the bankruptcy petition
- Money was garnished within 3 months (90 days) of filing for Chapter 7 or 13 bankruptcy
- The amount taken was greater than $600
Other Things to Remember Regarding Garnishment and Bankruptcy
Keep in mind that it may take a few days to a few months before you can get back the garnished money. Also, you should remember that there are certain exemptions to this rule — most notably student loans and child support collections.
Furthermore, whether you file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, the Trustee has the legal right to claim the money. In most cases, the Trustee does not claim the garnished money that you get back unless the amount is greater than $2,000. But if the Trustee makes a claim, the amount will be used to pay back your creditors.
Lastly, you should remember that if your bankruptcy request is denied within a year of filing, an automatic stay will last for 30 days. The automatic stay won’t kick in when you file a bankruptcy for a third time during a year.
Contact a professional bankruptcy attorney to know more about how a bankruptcy will affect your garnishment. An experienced attorney will offer you qualified legal guidance based on your specific situation.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
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A judgement lien is a court ruling that gives security interest to a creditor against a debtor’s property. Once a creditor obtains a judgement lien, the property can be sold to fulfill debt obligations.
An important question that comes up quite often when filing a bankruptcy is: how does a bankruptcy affect a debt that is now a judgment lien? In this article, you will learn what happens to a judgement lien after filing for a bankruptcy, and also whether you can avoid it.
Here are some important facts that you should know regarding bankruptcy and judgement Liens.
1. Judgement Lien is Not Discharged After a Bankruptcy
Judgement liens generally pass unaffected after a bankruptcy discharge. The lien will not be released until the debt has been repaid by the debtor.
A bankruptcy discharge only gets rid of a debtor’s personal liability. A lien on a property that is liable for fulfilling debt obligations will remain.
2. Debtor Must Make a Request to Avoid a Lien
While a judgement lien is not discharged, a debtor can file for a formal motion in the bankruptcy court to eliminate the judgement lien. The motion should specifically mention the statutory elements as per the Bankruptcy Code that gives the right to the debtor to avoid the lien.
A bankruptcy judge may grant the request to avoid judgement lien in case the following two conditions are met.
- The judgement lien was ordered on debt that was presented before you had filed for bankruptcy
- The property does not have a significant equity to pay the judgement lien
Remember that the right to avoid judgement lien is available for both Chapter 7 and Chapter 13 bankruptcies. If you have filed Chapter 7 Bankruptcy, you should check the “Property is claimed as exempt” on the Statement of Intention to claim the exemption.
Sometimes a judgement lien is overlooked when filing a bankruptcy, and it pops up only when you are about to refinance or sell a house. In such as a case, you need to reopen a bankruptcy case to gain exemption.
An order to void a judgement lien may take about 45 to 60 days after filing a motion. So, you need to plan appropriately. In case you can’t wait long to refinance or sell your house, you should consider requesting an escrow to hold the money until a court order is made in this regard.
3. Statutory Judgement Liens Cannot be Eliminated
Statutory judgement liens cannot be eliminated in Chapter 7 bankruptcy. For instance, you cannot claim exemption from tax liens when filing the bankruptcy.
In a Chapter 13 bankruptcy, you can avoid statutory tax liens if the lien is greater than the value of the underlying asset.
Summing it All Up
Judgement liens are not eliminated after filing for bankruptcy. The liens survive the discharge during a bankruptcy. However, you have the right to request for the lien to be voided.
You can request a court to void a judgement lien on a property that has little or negative equity. A professional bankruptcy lawyer will help you make a successful request in court. The legal professional can advise you whether you can eliminate the judgement lien by filing a motion.
Getting the help of a professional bankruptcy attorney will be worth it as it will help you in keep possession of your property when you file a bankruptcy.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
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Everyone who files for bankruptcy must attend a meeting of creditors. Attending the meeting is a mandatory part of any bankruptcy proceeding in the US. Your application for bankruptcy will be denied if you don’t attend the meeting.
Here you will learn what is the Meeting of Creditors and how you can prepare for one after filing a bankruptcy plan.
Meeting of Creditors: An Overview
The Meeting of Creditors takes place between 20 to 45 days after filing for bankruptcy. The meeting is carried out to confirm that the assets you have disclosed in your bankruptcy petition are complete and accurate.
This meeting is also known as 341 Meeting of Creditors. The meeting is aptly named since it is required by section 341 of the Bankruptcy Code.
The meeting is generally held in a federal building, but it does not take place in the courtroom. Most likely you may be required to meet in a conference room. The Bankruptcy Trustee will conduct the meeting. While creditors may be present in the meeting, but this is not always the case.
How to Prepare for the Meeting of Creditors?
Here are some of the important things you need to do before you attend the Meeting of Creditors.
1. Verify Information
Before attending the meeting, you should verify that all the information in the application is accurate. Make sure that the personal information in the bankruptcy petition matches with the state issued identification card.
Also, you should double check that you have listed all the assets in the application. This is critical as your application will be rejected if you don’t declare all your assets.
2. Gather Required Documents
You should have with you all the documents that are mentioned in the letter sent by the Bankruptcy Trustee. The following are some of the documents that are generally required for the meeting.
- Pay stubs
- Tax returns (last two years)
- Mortgage documents (copies)
- Car titles
- Property deeds
Apart from the above, you may also be required to bring documents that can be used to check your identity. These include government ID that mentions the name and social security number, driving license, US passport, resident alien card, etc.
3. Anticipate Questions
The Trustee can ask you anything during the Meeting of Creditors. However, generally, the question relates to the declared assets.
You may be asked to confirm under oath that you have declared all your assets. You may also be asked that all the information in the bankruptcy petition is accurate. You will be asked whether you want to make any changes in the document.
The Trustee may also ask if you have any claims such as personal injury or worker compensation claims. As well as if you have read the information in the Bankruptcy information statement and know the difference between different types of bankruptcy such as Chapter 7., 11., and 13.
Final Remarks
A Meeting of Creditors is a mandatory requirement when filing a bankruptcy application. The aim of the meeting is to ensure that the applicant has divulged all the information, and also that he/she understands the procedure moving on forward. The meeting is not a cross-examination but an attempt to ensure the applicant is honest and fully understands the purpose of filing bankruptcy.
You should consult with a professional bankruptcy lawyer. An experienced bankruptcy attorney will provide you detailed information and fully prepare you for the Meeting of Creditors.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
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Filing for a chapter 7 bankruptcy helps a debtor discharge debt and get a fresh start. The bankruptcy protection essentially wipes out most debts. However, when filing this repayment plan, you must list all your assets and liabilities in the paperwork. Failing to do so can land you into legal trouble.
Here we will explain the legal repercussions of hiding assets when filing for chapter 7 repayment plan.
Legal Repercussions of Hiding Assets Explained
Hiding assets means not divulging all assets in the Schedule of Assets section of the bankruptcy petition paper. Many debtors hide assets in various ways.
- Lying about the asset’s ownership
- Transferring of an asset to another person
- Creating fake documents to show the asset has zero value
Here are some of the things that might happen if you hide assets when you file for a repayment protection plan.
Reverse Decision to Discharge Debts
When hidden assets are discovered, the trustee may reverse the decision to discharge debts. The trustee may order to take back all or some of the debts up to one year after the discharge date.
As a result, you will still owe the debts that you wanted to discharge by filing for Chapter 7 repayment plan. In addition, you won’t be able to discharge these debts in subsequent bankruptcies.
Sell Assets
The trustee may also order to sell the assets that you had tried to hide. The proceeds from the assets will be used to discharge the debts. Moreover, you will owe any debts that are left over after that. In this way, you may lose ownership of your personal assets such as your house or a car.
Criminal Charges
When you file for a bankruptcy protection, you state that all information is true and accurate. In case hidden assets are discovered, later on, you could face a criminal conviction for committing bankruptcy fraud. This can result of imprisonment of up to twenty years, a fine of up to $250,000 or both.
An exception is when you had made a genuine mistake when filling the paperwork. The trustee would understand if you are able to convince him that you had no intention of committing a fraud. For this, you need to hire an experienced bankruptcy attorney. A bankruptcy lawyer will help convince the court that no deception was attempted and that assets were not divulged due to confusion when filling the paperwork, if that is the case.
You should talk to an experienced bankruptcy lawyer before you file a Chapter 7 bankruptcy protection.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
In this article, you will learn debts that are discharged in these bankruptcy protection plans when filing a divorce.
1. Attorney Fees
Attorney fees incurred during a divorce case can be discharged in Bankruptcy.
2. Non-Divorce Related Debts
Chapter 13 allows you to discharge certain non-support related divorce debts. For instance, debts that relate to the division of property can be discharged under the protection plan. Other types of non-support related debts that can be discharged include the following.
- Debts incurred for the malicious and willful destruction of property that does not result in personal injury
- Debts incurred due to divorce proceedings
- Debts incurred due to the payment of non-dischargeable tax obligation
- Retirement account loans
- Certain fines owed to the government
- Homeowner association fees after the filing date
The above debts can be discharged under the Chapter 13 protection plan as ‘general unsecured debt’. However, these debts cannot be discharged in case of a Chapter 7 bankruptcy. In addition, you should note that support-related debts such as alimony, child support payments, can be paid over a period of time in Chapter 13 but not in Chapter 7.
3. Joint Marital Debts
Joint marital debts can be discharged in Chapter 7 and Chapter 13 bankruptcy case after a divorce. But the divorce decree should contain the language that the partner will hold harmless or indemnify the other party to a joint debt. If no such provision is made in the divorce settlement, the other partner who has not filed for a bankruptcy protection plan will still be liable.
Summing it Up
Chapter 13 bankruptcy option plan helps more in easing the personal and divorce debt burden. Under this protection plan, you can also stop your partner from putting a lien on your home for payment of non-support financial obligations. In this way, you will be able to make payments on your home loan. These obligations are not discharged in a chapter 7
To understand the best option for bankruptcy protection when filing a divorce, you should speak to an experienced bankruptcy attorney.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
Bankruptcy can be a solution for solving financial problems faced by individuals and businesses. It is sometimes the only workaround to the debt problem. Financial experts recommend considering this option as a last resort to ease the debt burden.
In a Chapter 7 bankruptcy, a lawyer will represent you in the court to discharge debts. Debts that are discharged no longer require any payment. This will ease the burden of having too many debts that you cannot repay.
An important consideration when choosing Chapter 7 bankruptcy is the kinds of debts that will be discharged. Here you will learn about the debts that can be discharged when you file.
Debts that Can be Discharged in a Chapter 7 Bankruptcy
You can discharge certain pre-petition debts when you file for the bankruptcy protection. Pre-petition debts are those obligations that have incurred before the filing date. Some of the pre-petition debts that you can discharge include the following.
- Medical bills
- Credit card debt
- Personal loans including car, truck or other vehicle loans
- Promissory notes
- Lines of credit
- Mortgages including second and third mortgages
- Certain lawsuit judgments
- Obligations under contracts and leases owed by a sole proprietor including residential and commercial property leases
- Unsecured business debts owed by a sole proprietor to consultants, suppliers, and professionals such as architects or accountants.
All the above types of debts are dischargeable under the Chapter 7. Once you file the protection plan you may be able to discharge these loans. It’s advisable to contact a professional bankruptcy lawyer who can help you discharge maximum loan amount.
Debts Not Dischargeable Under Chapter 7 Bankruptcy
You should also know about the loans that can’t be discharged when you file for the Chapter 7 bankruptcy plan. Post-petition loans that you rack up after filing the paperwork are not dischargeable. In addition, certain financial obligations can’t be discharged whether you obtain them prior to or after submitting the paperwork for initial bankruptcy, such as:
- Alimony
- Child support
- Student loans (unless there is extreme hardship)
- Fines and penalties owned to government
- Payment for driving under the influence
- Divorce settlement agreements
- Loan from pension plans
- Personal injury judgments
You should discuss your options with a professional bankruptcy law attorney.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
Chapter 13 bankruptcy allows the debtor to pay some or all of the debts. The debts can be paid over a period of three to five years as per a court-approved repayment plan.
The decision to file a Chapter 13 Bankruptcy should be weighed carefully. You should consider the benefits before making a move. Here are five benefits of this debt relief option that you should consider to make an informed decision.
1. Flexible Payment Terms
The trustees of chapter 13 bankruptcy are usually flexible about payment terms. You may be allowed to reduce debt payments, extend the payment period, or give up an asset that you are making payments on.
When you file a chapter 13 bankruptcy, you may also consolidate some debts. The debts can be reorganized into one affordable payment that you can pay in up to five years.
2. Bankruptcy Shown on Credit Report
An advantage of chapter 13 bankruptcy over chapter 7 bankruptcy is that it’s shown on the credit report for a lesser period.
With chapter 7 bankruptcy, bankruptcy is shown in the credit report for 10 years. On the other hand, it’s shown for just 7 years in the chapter 13 bankruptcy. As a result, creditors will know about the bankruptcy for a longer period if you file chapter 7 bankruptcy as opposed to a chapter 13 bankruptcy. This is important since the report is viewed by house loan, vehicle loan, and credit card companies.
3. Save Your Property
Another benefit of a chapter 13 bankruptcy is that you may be able to save your home if you file before the foreclosure date. The mortgage payments due known as arrearages can be paid back over a period of three to five years.
In addition, if you have a second or higher mortgage, you may only have to pay the first mortgage through a process known as ‘lien stripping’. To become eligible for this option, the home value must be equal to or lower than the amount owed on the first mortgage when the bankruptcy was filed.
4. Lower Payments
In some cases, chapter 13 bankruptcy will reduce the balance owned. In this way, you can continue to make payments for your personal loans such as a car loan. It will prevent repossession of your asset and you can catch up on the loan payments.
5. Reduce Tax Amount
Your taxes can be paid through a chapter 13 payment plan. The IRS will not hound you to make payment in full, and accept the amount is agreed by the bankruptcy court.
Eligibility for Chapter 13
Only individuals can file for chapter 13 bankruptcy. Businesses are not allowed to file for this repayment plan. However, sole owners and partners can file for the relief option individually.
To be eligible for the chapter 13 bankruptcy, you must have enough income to repay the debts as per a court-approved repayment plan. In addition, unsecured debts must be less than $394,725 to be eligible for chapter 13. For more information about the other benefits and also the eligibility criteria, you should contact a professional bankruptcy law attorney.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
If you are contemplating about filing for a bankruptcy, you probably have a lot of questions regarding the aftermath. At the top of the list will probably be questions about your tax refund.
Before you file, it’s important you understand that it could affect your refund. In this article, you will learn how chapter 7 could affect your tax refund and also what measures you can take to protect it.
Tax Refund and Chapter 7 Bankruptcy
When you file for Chapter 7 bankruptcy, a court-appointed trustee who is a representative of your creditors will collect your assets and liquidate them. The proceeds are used to pay your creditors.
All your assets will be transferred to the bankruptcy estate when you file chapter 7. This includes both tangible assets like your house and car, and intangible assets such as tax refund that is owed to you, but not yet paid.
If you have filed at a time when a tax refund is due, the trustee can claim it or a portion of it along with other assets. Even if your tax return is to be prepared a few months after filing, it will be claimed by the trustee if the refund is owed to you.
The fact that you didn’t know that a tax refund was due does not mean that a refund is not due.
How to Prevent Your Tax Refund from Being Transferred to a Trustee?
Proper timing is important if you want to protect your tax refund. You can prevent your refund from being collected by the trustee if you receive and spend the refund BEFORE you file a Chapter 7 as long asyou spend the money for necessities and you do not pay back money you owe to relatives, and also you do not pay back any creditor more than than the usual payment. Be prepared to tell the trustee how you spent the money at the 341 creditor’s meeting.
However, you should consult with a bankruptcy attorney before using this strategy to protect your refund. You can easily spend the refund in ways that may seem sensible but can raise red flags upon close evaluation.
Another way you can protect your tax refund after filing for bankruptcy protection is through exemptions. Congress and state laws have established exemptions. The federal or state exemptions can be claimed by filing Schedule C: The Property You Claim as Exempt (individuals).
You can use cash-on-hand exemption ($475..00) or wildcard exemptions ($1,250.000) for protecting your tax refund, However, you can use the exemptions only if they have not been used to exempt other assets. Also, you should note that to claim exemptions in a particular state, you must have lived in the state for about two years prior to filing for bankruptcy.
Moreover, earned income credit (EIC) and child tax credit (CTC) are exempted from the bankruptcy estate without the need to claim them. EIC is a benefit for individuals with low to moderate income. On the other hand, CTC provides a credit of up to $1,000 per child under the age of 17.
You should consult with an experienced Cleveland bankruptcy lawyer to understand you options about protecting your tax refund when filing a chapter 7.
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience as an attorney in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.
It is a general misconception that taxes can’t be discharged in bankruptcy. While you cannot eliminate all taxes, there is a possibility of discharging some.
In this article, you will know the cases when you are allowed to reduce your tax liability in bankruptcy.
Taxes in Bankruptcy: What You Should Know?
Bankruptcy can provide you relief from the tax debt. How much relief you can get depends on different factors. Some of the factors that determine which taxes can be eliminated include the following.
- Age of taxes — The tax amount due that you wish to discharge must be due at least 3 years before you file for bankruptcy.
- Assessment of taxes — The IRS must have assessed your income tax due at least 240 days before filing for bankruptcy.
- Type of taxes involved — Only income and sales taxes can be discharged in bankruptcy. You cannot discharge other types such as payroll or property taxes when you file for bankruptcy.
- Timely submission of taxes —The tax return for the amount due must have been filed at least 2 years prior to filing a bankruptcy petition.
- Apart from the above rules, you should also note that bankruptcy won’t help if a person has tried to evade taxes using a fake social security number or other fraudulent manner in the past. However, this exception applies only to willful evasion of taxes. If a person has made an honest mistake in entering the wrong information, the tax liability can be discharged through bankruptcy.
Another important thing you should note is that you can’t eliminate tax lien on your property when you file for bankruptcy. You need to pay the tax lien if you want to sell your property. However, the IRS sometimes agrees to lift the lien. You can request the IRS to lift the lien by filing tax Form 12277.
Final Remarks about Taxes in Bankruptcy
Taxes in bankruptcy is a complex topic. Make sure that you have all tax records before filing. The court will ask you to submit a copy of the most recent tax return.
Getting the help of a bankruptcy lawyer will help you navigate through these complex laws
Attorney Eli Tamkin is a Cleveland bankruptcy lawyer. He has been practicing law since 1989 and in Cleveland Ohio since 1994. Since then, he has dealt with a variety of legal issues, including bankruptcy, real estate, divorce, personal injury, and probate. Many times, answering questions on bankruptcy draws on knowledge of other legal areas as well. His experience in these other areas, as well as in bankruptcy enables him to address your particular needs and to offer you advice that is applicable to your situation.