Rochester Bankruptcy and Debt Relief

When I prepare a bankruptcy petition in either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, I do everything possible to make sure that every creditor is included and given a proper notice of the filing. However, once in a while, a Chapter 7 debtor realizes that he or she forgot to include a creditor after the case has closed.

If you are a bankruptcy lawyer, this occurs periodically.  I file a routine Chapter 7 bankruptcy petition, the case goes proceeds normally, the debtor gets a discharge, and, subsequently, the case is closed.  Then, sometime later, the debtor contacts me to say that a creditor was inadvertently omitted.  The debtor explains that that he simply forgot and that it was an innocent mistake. A bankruptcy lawyer may think that this should not be a big problem since the case can be reopened by motion, and an application can be brought to amend the schedule of creditors to include the omitted one.

However, there have been a great number of cases on this issue, with divergent theories and conclusions. Some have held that the case can be reopened, and some have held that it can’t. Some bankruptcy courts routinely grant debtors’ motions to amend schedules to list previously omitted creditors.  Some cases focus on whether there is prejudice to creditors or whether there was fraud.

Some courts will refuse to permit the case to be reopened, because they believe omitted debts are non-dischargeable.  Yet other courts will refuse to permit the case to be reopened because they believe that omitted debts are automatically discharged even if they are not listed, and therefore reopening the case serves no purpose.

There are two possible approaches that courts can take in addressing this issue. Under the “mechanical approach” courts have denied motions to reopen no-asset cases, finding that the debt owed to an omitted creditor is discharged “as a matter of law.”  Under this approach, there is no reason to reopen a bankruptcy case, provided that it is a no-asset case and the debt is not otherwise excepted from discharge.

Under the “equitable approach,” courts consider whether the debtor’s omission was the result of fraud, recklessness or intentional design, or if it would prejudice the creditor’s rights.  Good faith is an important element.  Courts adopting this approach have held that motions to reopen no-asset cases to list omitted creditors should be liberally granted.

For most garden variety situations where the debtor omits a typical credit card debt and advises the attorney within a few years, the courts will probably be unwilling to permit counsel to reopen the case to add the creditor, asserting that, under the mechanical approach, the debt is dischargeable.  In such cases, the bankruptcy attorney should consider sending a certified letter to the creditor stating that the debt has been discharged, together with copies of the notice of commencement and order of discharge.

However, in situations where the creditor raises objections to this approach, the bankruptcy lawyer should be prepared to file a motion to reopen, in which case the court will probably consider the various factors in the equitable approach.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Periodically I meet with debtors who either have a personal injury law suit pending, or may have a potential personal injury case.  Personal injury lawsuit issues can complicate a bankruptcy since there are limitations on the debtor’s ability to receive a personal injury award, as well as different procedural hurdles imposed by the bankruptcy code.

Initially, personal injury lawsuits and causes of action are assets of Chapter 7 Bankruptcy estate.  Under New York’s bankruptcy exemptions, the debtor can exempt the first $7,500 in net proceeds, but anything over and above that belongs to the bankruptcy estate and would be administered by the bankruptcy trustee.  Since personal injury lawsuit or causes of action are assets, it is critical that the bankruptcy lawyer includes the debtor’s personal injury lawsuit or cause of action in the bankruptcy petition.  If the debtor fails to include a potential cause of action in the bankruptcy petition, that may cause a dismissal of the personal injury action.  According to New York cases, if a plaintiff in a personal injury lawsuit filed a Chapter 7 Bankruptcy petition but failed to list a potential cause of action for personal injuries, then the plaintiff lacks standing to bring the personal injury action.

If the personal injury case or cause of action is included in the petition, the bankruptcy trustee will decide whether the case is valuable enough to administer.  The bankruptcy lawyer is expected to provide the trustee with copies of the pleadings.  Most trustees will consider the right to sue for a relatively small injury as being of “inconsequential value to the bankruptcy estate” and may decide to abandon the trustee’s interest in the cause of action.  Generally, if a personal injury case will not result in any significant non-exempt recovery, then the trustee will not care about administering it.  If the trustee determines that the case has value in excess of the exemption, he may want to administer the personal injury claim as an asset of the bankruptcy estate.

The Bankruptcy Code requires that all attorneys who render services to a debtor must be approved by the court.  A trustee may employ as special counsel under a contingency fee arrangement, any attorney who has represented the debtor in pre-petition litigation, when it is in the best interests of the bankruptcy estate and the attorney has no interest adverse to that of the debtor or the estate. Theoretically, the trustee can hire any attorney of the trustee’s choosing to represent the debtor in the personal injury lawsuit, and can even take the case away from the existing personal injury attorney.

The automatic bankruptcy stay imposed by Section 362 of the Bankruptcy Code does not stay any actions brought by the debtor.  The automatic stay only acts to stay actions brought against the debtor including cross-claims, counter-claims and third-party claims.

The greatest unknown in a personal injury case filed by the bankruptcy debtor, is what interest the bankruptcy trustee will take in the case.  Debtor’s bankruptcy attorney would do well to contact the trustee at the earliest opportunity to get an idea of the trustee’s intentions with respect to the personal injury lawsuit.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

I am often asked if the debt discharged in bankruptcy is treated as debtor’s income and is subject to taxes.  The answer to that question under the Bankruptcy Code, for both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy is unequivocally no.  Debt discharged in bankruptcy does not result in taxable income to the debtor.

While I have written previously about the problems with debt settlement, this is one more advantage that bankruptcy has over various debt settlement arrangements.  If the debtor has his debt reduced or cancelled, the creditor may issue an IRS Form 1009-C form and the debtor would have to report it on his taxes.  As a result, the amount of cancelled debt will be added to the debtor’s income as miscellaneous income, and while not subject to self-employment or social security tax, it will be subject to income taxes.  If the amount of the cancelled debt is significant, the debtor may face an unexpected tax liability amounting to thousands of dollars.

One exception to the above is cancellation of mortgage debt. The Mortgage Debt Relief Act of 2007 generally allows debtors to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief as well.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.  For a detailed discussion of IRS’ position on these issue, please follow this link.

Occasionally, even the debtor who filed fro bankruptcy may receive 1099-C from one of his creditors. Nonetheless, if the debtor received a discharge as a result of either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, the debtor is able to file IRS Form 982, which will inform the IRS that the debtor went through the bankruptcy and any discharged debt should not be included in his gross income.  If you are considering your options between a bankruptcy or debt settlement, one of the issues that you should discuss during a consultation with a bankruptcy lawyer is what impact either approach would have on your tax liability.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Whenever there are judgments against real property, owned by the debtor who files Chapter 7 Bankruptcy, those judgments, under appropriate circumstances, can be removed by filing 522(f) motion.  The judgment can be removed provided that the debtor’s equity in the property does not exceed $50,000.00 per single filer, or $100,000 per married couple.  The $50,000.00, otherwise known as a homestead exemption, comes from the present version of New York’s Debtor and Creditor Law.  Prior to August 30, 2005, New York’s homestead exemption was $10,000.00 per single filer, or $20,000.00 per married couple.

One issue that was not conclusively resolved in Western New York bankruptcy court was what happened in a situation where the creditor’s judgment was perfected prior to August 30, 2005.  If the judgment was perfected prior to the effective date of the increase in the homestead exemption, would the new homestead exemption or old homestead exemption would apply if the debtor filed Chapter 7 Bankruptcy?

According to the United States Bankruptcy Court Judge Bucki in Buffalo, the applicable homestead exemption amount is the new $50,000.00.  In Re Calloway, Judge Bucki held that once the New York statute was amended, the homestead exemption amount became $50,000.00, and it would apply regardless of the date it was perfected.  Judge Bucki wrote that to hold otherwise, would disregard the meaning of the statute and its interpretation under New York law.  Specifically, he wrote that “C.P.L.R. § 5206 was immediately changed to provide that a homestead “not exceeding fifty thousand dollars in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof.””

Pursuant to the Debtor and Creditor Law § 282, the debtor has exercised her right to exempt her property from the bankruptcy estate.  Therefore, pursuant to 11 U.S.C. §522(f), the debtor may now avoid judgment liens that impair a homestead not exceeding $50,000 in value.

Therefore, debtor’s bankruptcy attorney does not need to be concerned with the date when the judgment was perfected.  As with most §522(f) motions, the biggest concern that a lawyer would have is the value of the property and whether debtor’s equity in it does not exceed the homestead exemption.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

I have previously written about the requirements that a debtor must meet in order to file for Chapter 7 Bankruptcy.  As long as the debtor is able to meet the means test and disposable income test, the debtor can file for Chapter 7 Bankruptcy. However, there are a number of conditions that would disqualify a debtor from filing Chapter 7 Bankruptcy. The following post will address those conditions.

Generally, any debtor who is qualified to file and complete a Chapter 7 Bankruptcy case is eligible for a Chapter 7 Bankruptcy Discharge, unless the debtor falls into one or more of the following categories:

A person who has been granted a discharge in a Chapter 7 Bankruptcy case that was filed within the last 8 years.  This limitation prevents debtor from filing another Chapter 7 Bankruptcy case despite meeting all other qualifications.  The bankruptcy petition specifically asks debtors regarding any prior bankruptcy filings.

A person who has been granted a discharge in a Chapter 13 Bankruptcy case that was filed within the last 6 years, unless 70% or more of the debtor’s unsecured claims were paid off in the Chapter 13 Bankruptcy case. Therefore, if the debtor’s Chapter 13 Bankruptcy case paid less than 70% of the unsecured claims, the debtor is limited to filing Chapter 13 Bankruptcy within the 6 year period.

A person who files and obtains court approval of a written waiver of discharge in the Chapter 7 Bankruptcy case.

A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the Chapter 7 Bankruptcy case. This relates to the provisions denying discharge to the debtor who committed that type of conduct.

A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.

A person who makes false statements or claims in the Chapter 7 case, or who withholds recorded information from the trustee.

A person who files to satisfactorily explain any loss or deficiency of his or her assets.

A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.

A person who, after filing the case, fails to complete an instructional course on personal financial management. This is the reason that it is critical for the debtor to complete the course within 45 days of the meeting of the creditors.

A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law violation.

If the debtor meets on or more of the above conditions, he is not eligible for a Chapter 7 Bankruptcy discharge and should not file a Chapter 7 Bankruptcy.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Periodically, I meet with debtors who own either second vehicles or motorcycles, and would like to keep them, after either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy filing.  Filing for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy doesn’t always mean that you have to give up your second vehicle or motorcycle, as long as the payments are considered a reasonable vehicle expense.  The second vehicle, referred to above, is the vehicle that is an extra one for the single debtor, or the third one for joint filers.

How does the debtor know if the second car or motorcycle will be considered a reasonable expense?  The answer to this question initially depends on the type of bankruptcy being considered: Chapter 7 or Chapter 13.

Since with Chapter 7 Bankruptcy there is no repayment plan for creditors, the secured debts, like vehicle loans, are either continue to be paid by the debtor or the vehicles are surrendered. The debtor is obligated to list his/her income and expenses in the bankruptcy petition. The purpose of listing income and expenses is to show that after deducting reasonable expenses, the debtor has no money with which to repay his creditors. If there is any significant money left over in the budget (more than about $100), the debtor will not qualify for Chapter 7. Instead, he will be required to file a Chapter 13 Bankruptcy where creditors are repaid some or all of what they are owed.

If the Chapter 7 debtor’s monthly income equals to his/her monthly expenses, the debtor has no money with which to repay his creditors in a Chapter 13. However, those expenses must be reasonable or the trustee will object to the bankruptcy. This is the critical issue in whether the debtor will be able to keep the second vehicle or motorcycle.  Usually if teh budget shows that even befor the payment on the second vehicle or motorcycle, the debtor is either at break-even, or is in the negative territory, the bankruptcy court will not require him to give it up.  If the debtor wants to spend less on other expenses, the debtor can do that.  If the debtor wants to make the payments, he can keep the second vehicle or motorcycle.  An additional caveat has to do with any equity in such second vehicle.  If there is any equity, the trustee is likely to demand that such equity be paid to the bankruptcy estate since it would not be protected by teh bankruptcy exemptions.

The above also applies for Chapter 13 Bankruptcy.  In Chapter 13, any vehicle payments allowed in the repayment plan take money away from what the unsecured creditors receive.  So a payment for the second vehicle or motorcycle will reduce the money the trustee has available to repay other claims and is likely to be objected to.  Here in Rochester, the bankruptcy trustee will permit the debtor to keep the second vehicle or motorcycle if the plan repays all unsecured debtors at 100%.  So, if the joint debtors, for example, are a couple with three vehicle payments, three vehicle payments are not necessary for “the effective reorganization of the debtor” required by the bankruptcy statute.  The second vehicle or motorcycle is likely to be toy, and allowing the toy to be paid off in the plan reduces the amount the unsecured creditors receive.

The easiest way to determine whether the second vehicle or a motorcycle will be viewed as an allowable expense in Chapter 7 bankruptcy or Chapter 13 Bankruptcy  is to discuss these issues with a bankruptcy lawyer prior to making a decision to file.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

If you are contemplating filing Chapter 7 or Chapter 13 bankruptcy, you should stop using your credit cards.  Once you’ve decided to file for bankruptcy, any credit card use after that point will be highly scrutinized by both the credit card issuer and the bankruptcy trustee, and is likely to be viewed with a great deal of suspicion.  The reasons for this are obvious.  If the debtor decides that he is seeking to eliminate his credit card debt through Chapter 7 bankruptcy, or pay a lesser amount though a Chapter 13 filing, then incurring additional credit card debt can be considered fraudulent.  Specifically, the credit card issuer will make an argument that the additional debt was incurred without intention to repay, then the discharge can be objected to. Also, the issuer will also look at all of the transactions to verify that the money was not spent on such things as vacation trips, or that other unnecessary spending didn’t take place.  If a credit card issuer learns that a debtor used a card without any intention of making full payment, then the credit card company has the right to object to the debtor’s discharge of that particular debt.

Also, if the bankruptcy trustee, or United States Trustee, learn that the debtor intentionally ran up his credit cards before filing, then either trustee can seek to have the debtor’s discharge denied or move to have the case dismissed.  There is also the possibility that the debtor can be found to have engaged in bankruptcy fraud, which is a criminal offense.

While consumer Chapter 7 bankruptcy allows the debtor to eliminate all credit card debts and get a fresh new financial start, the debtor should not jeopardize his ability to seek bankruptcy protection by engaging in self-serving or foolish behavior.  There is simply no reason to create problems for the upcoming bankruptcy filing.  Therefore, don’t use your credit cards once you’ve decided to file bankruptcy.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a New York bankruptcy lawyer.

When a potential client calls my office to ask bankruptcy-related questions, I usually suggest that he or she come in for a free initial consultation.  I also ask that when we meet, you bring  your bills, tax returns, pay stubs and any other documents that may be related to your situation.  The reason I ask for such documents is to assess your overall financial picture and to come up with possible solutions to existing problems.

At the consultation, I ask questions to find out what assets are owned by the potential client and also what their debts are.  Depending on the responses I receive, I ask follow-up questions about the issues that may determine the course of action:

1. Recent significant use of credit cards/balance transfers/cash advances;
2. Transfers of property to third parties without payment or adequate consideration;
3. Values of assets which may exceed applicable New York exemptions in a Chapter 7 bankruptcy and may force a Chapter 13 bankruptcy filing instead;
4. The level of household income to make sure that the client can meet the means test and file a Chapter 7 bankruptcy;
5. Whether the debtor recently repaid a debt to a relative or friend which may be a preference;
6. Whether the debtor has a personal injury lawsuit pending, or the right to bring such lawsuit;
7. Whether the debtor had any prior bankruptcy filings;
8. Whether the debtor owes any non-dischargeable debts, such as student loans, maintenance and child support, and some income taxes;
9. Debts incurred as a result of fraudulent conduct or drunk-driving.

After I ask all of these questions, I am able to recommend the course of conduct for the debtor.  I typically will explain if the bankruptcy a good option; what are its costs; and how a typical bankruptcy gets prepared, filed and proceeds in bankruptcy court.  If a bankruptcy is likely to solve debtor’s problems, I will discuss which type of bankruptcy is available and what are the advantages and disadvantages of Chapter 7 and Chapter 13 bankruptcy?

In the event you decide to proceed with a bankruptcy filing, I will ask you to sign a retainer agreement. You will leave my office with a bankruptcy questionnaire which will ask you to provide information on your income, expenses, assets and liabilities.  I will also provide you with a checklist of the documents I am going to need to prepare your petition and file your bankruptcy, including paystubs and tax returns.  In addition, I will provide you with a list of organizations providing consumer credit counseling course, so you can meet pre-filing requirements.

I will also tell you how to deal with continuing phone calls from your creditors.  There are times when I am not able to answer every questions, and may ask for additional documents to figure out the debtor’s circumstances.  I believe that the free consultation benefits both me and the potential client.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

In these uncertain economic times, I am getting this question more and more from people considering filing for bankruptcy all over Western New York.   So can someone in Rochester making more than $75,000 file for Chapter 7 bankruptcy?  The answer to that question is likely to be yes.

I have previously written about the means test component of the Chapter 7 bankruptcy.  Under BAPCPA, the means test and its income standards were designed to be a bright line dividing those that were able to file Chapter 7 bankruptcy from those who were forced to file Chapter 13 bankruptcy.  But the means test is more complicated than that, and the sheer median family income numbers alone are not alone dispositive, as discussed below.

The first Chapter 7 bankruptcy test the debtor has to pass in New York in order to qualify, is the Median Family Income test.  It is the test that most debtors have heard about.  Most debtors have heard about it from friends or relatives who filed for bankruptcy, usually along the lines “If you make over a certain amount, you can’t file.”  Like most things you hear, these statements are only partially correct.   The current Median Income limit in New York for a family size of one is $46,485.  For a family size of two, the amount is about $58,109.

So how can someone filing for bankruptcy in Rochester who earns over $75,000 possibly file for bankruptcy in New York?  The short answer is that BAPCPA, the bankruptcy law that was passed in 2005, allows you to take certain deductions when determining if you are qualified to file Chapter 7 bankruptcy.  You can take standard IRS deductions that your bankruptcy lawyer knows about.  You can deduct certain childcare expenses.  You can deduct taxes that are being garnished from your wages.  You can deduct your actual mortgage payments.  You can deduct vehicle ownership expenses.  You can deduct health care expenses.  You can deduct food expenses.  In other words, if you’re earning more than that median income test, you still absolutely have a possibility for filing for Chapter 7 Bankruptcy in Western New York.

While most of the deductions are technical in nature and require analysis of the debtor’s expenses and needs, I would recommend you speak with a Rochester bankruptcy lawyer and that lawyer will sit down with you and explain how the bankruptcy law requirements apply to you.  This is what makes a difference to the debtors since a bankruptcy attorney can help someone in difficult financially situations.   When meeting with the bankruptcy attorney, the debtor should discuss the full extent of his/her financial situation and when finished, should understand what course to take.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

One issue that periodically comes up in  Chapter 7 bankruptcy cases is unsatisfied tax liability.  As of late, the IRS and New York State Department of Taxation and Finance, have been aggressive in enforcing their claims with respect to unsatisfied tax liabilities.

One common problem associated with back taxes is that the amount owed by the debtor tends to grow rapidly because of the interest and penalties that are imposed by the taxing authority.  In their collection efforts, the government agencies can engage in a variety of collection activities, including garnishment, levies, tax liens, seizure of physical assets, intercept of tax refunds, and other collection activities.

For many people with unpaid taxes, bankruptcy may be a way to improve their situation by either improving their financial state and having funds available to pay the taxes owed, or by discharging certain tax liabilities.

In Chapter 7 bankruptcy, certain past due taxes can be eliminated depending on how old the unpaid taxes are and whether the debtor filed an income tax return for the year the taxes came due.  For some people filing a Chapter 7 bankruptcy will be a way to permanently eliminate their past-due taxes without having to pay them. To figure our whether or not your taxes can be discharged in bankruptcy you will need to know exactly what taxes you owe and for what years.

There are four general requirements for discharging an income tax in bankruptcy.  Initially, the tax must be one for which the return was not last due within three years of the filing of the bankruptcy.  Therefore, if a 2006 income tax return was last due on April 15, 2007, the three-year requirement would be met after April 15, 2010.

Second, for an income tax to be dischargeable, it must not have been assessed with 240 days of the filing of the bankruptcy.  When a return is timely filed, the assessment date is usually around the time a return is filed.

Third, if a return is filed late, it must not be filed within two years of a bankruptcy for the tax to be discharged. This requirement is subject to the following limitations:  (1) amended returns count as returns for purposes of this rule; (2) if in the course of correspondence with the IRS, the debtor gives financial statements with all the information needed to complete a return, this can also be deemed to be a return.; and (3) the two-year period begins once the taxing authority actually receives the return, not when the return is mailed, as is the case with timely-filed returns.

The fourth requirement is that the income tax return must be filed by the tax payer, it must not be fraudulent, and the debtor must not have attempted to evade the tax.

If the above requirements are satisfied, a bankruptcy lawyer can help you by obtaining a discharge of unpaid taxes.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.