Generally, in order to discharge a tax debt during bankruptcy, the tax debt must meet all four of the following criteria: (1) the tax must be income taxes or “gross receipt taxes;” (2) the tax must be over three tax years old; (3) your tax return must have been filed on time; and (4) the tax debt must not be amended or challenged by the IRS as inaccurate.
There are four different types of tax debts that are automatically excluded from your bankruptcy discharge:
1. unpaid taxes due within three years of the bankruptcy filing;
2. unpaid taxes for returns filed late, but within two years of the bankruptcy filing;
3. unpaid taxes for tax years when the debtor did not file a return; and
4. unpaid taxes due when the debtor filed a fraudulent return or tried to evade the tax obligation.
If you have any question whether your tax debt can be discharged during your bankruptcy, consult with your New York bankruptcy lawyer. Some tax penalties can also be discharged, so be sure to discuss exactly what portion of your tax debt will be discharged, and what portion will survive.
Tax liens can be stripped off during a Chapter 13 bankruptcy to the extent that the lien is more than the equity in property. Tax liens cannot be stripped or otherwise avoided in Chapter 7 bankruptcy. However if the tax is dischargeable in a Chapter 7, the bankruptcy court should determine the extent of the tax lien against your property.
Property taxes are treated differently after filing bankruptcy. Your personal obligation to pay property taxes can be discharged if the tax was last payable without penalty more than one year before you file bankruptcy. However, property taxes are secured with a lien which will generally survive the discharge. If you keep the property, you must pay the tax debt after the bankruptcy. If the property is surrendered during the bankruptcy, you will owe nothing.
The intersection of tax and bankruptcy is a complicated area of the law. It is important to address any tax issues early in your case and have a clear understanding of how you and your Brooklyn bankruptcy lawyer will deal with your tax debt during your chapter 7 or chapter 13 bankruptcy.
For many, walking away from a home loan is the right decision. The recent economic downturn has left many homeowners owing substantially more than their home is worth and it may take many years of payments simply to break even. In other cases homeowners have suffered a job loss, a reduction in pay, or other financial change that makes their present home unaffordable.
The down-side to walking away from a home is that the debt still remains. The mortgage company will take your home through foreclosure and sell it, sometimes at a steep discount, and you will be liable for the deficiency balance. The mortgage company may try to collect or it may assign your debt to a collection company. Harassing phone calls, threatening letters, and finally a lawsuit are inevitable. Often the lawsuit is filed years later and just before the statute of limitations expires. By then you may have rebuilt your credit and be in a much better financial situation. The effect of this lawsuit can be devastating.
Bankruptcy law can help you walk away form your home and discharge your obligation to pay any balance on a home loan once and for all. The instant you file bankruptcy you are under the protection of the United States Bankruptcy Court and creditors are prohibited from taking any collection action against you. The bankruptcy filing immediately stops any foreclosure or repossession action, and any lawsuit. This protection, called the automatic stay, extends through the duration of your bankruptcy case. A creditor must seek permission from the bankruptcy court in order to start or continue the foreclosure process while you are under bankruptcy protection. The filing of a bankruptcy case generally forestalls the foreclosure process for months and gives you the opportunity to walk away on your own terms.
At the conclusion of your bankruptcy case you will receive an order of discharge from the bankruptcy court. This order permanently prohibits all discharged creditors from taking collection action against you.
If you are considering walking away from your home, condo or coop in New York or New Jersey, speak with an experienced New York bankruptcy attorney and learn how bankruptcy can help mitigate your financial exposure. An experience bankruptcy attorney in New York can explain your options and help you decide on a path that makes the most financial sense for your family.
A credit card is a safe and convenient way to pay for life’s necessities. In some cases a credit card is required to purchase goods or services. Debit cards are often a poor substitute for a credit card as bank holds can tie up your account for days.
If you want to keep a credit card during your bankruptcy, there are a few things to know. First, the Bankruptcy Code requires that you list all of your creditors and debts owed on the date of the bankruptcy filing. Consequently, if a credit card has a zero balance on the date that you file bankruptcy, it does not need to be listed and the credit card company does not receive notice.
Second, a payment on a credit card within 90 days before your bankruptcy filing may be considered a preference payment. The bankruptcy trustee may seek a court order compelling the credit card company to turn over any pre-filing payments.
Third, intentional failure to list a credit card with a balance can result in dismissal of your bankruptcy filing in New York. The bankruptcy court expects you to be entirely truthful concerning who you owe, regardless of your intention to pay the debt.
Fourth, consider obtaining credit after your bankruptcy discharge. Many debtors are offered unsecured credit cards shortly after their bankruptcy discharge. Many creditors consider a recently discharged debtor a good credit risk because the debtor is unable to receive another bankruptcy discharge for several years, and likely has a good debt-to-income ratio. Many post-discharge credit card offers carry high interest rates and fees, so choose wisely.
Secured credit cards are another credit option after bankruptcy. A secured credit card requires a security deposit placed with the credit card company who then issues a credit line secured by the deposit. Many banks and credit unions offer their customers secured credit cards at reasonable interest rates.
If you are interested in keeping a credit card during bankruptcy, consult with your New York bankruptcy attorney. Your attorney can discuss your options and help you decide on the best way to maintain a credit card account during and after your bankruptcy.