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Does Filing For Bankruptcy Eliminate Debt

Oak Creek Bankruptcy Attorney Answers Your Questions About Clearing Tax Debt

Eliminating debt with personal bankruptcy

Filing for bankruptcy requires meticulous attention to detail and intimate knowledge of bankruptcy law. Attempting to file for bankruptcy by yourself can be frustrating and exhausting without the help of an experienced professional. Steven R. McDonald is the helping hand you need to re-gain control of your financial present and future.

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Top Bankruptcy Attorneys In Middle Tennessee

Making the decision to file for bankruptcy can provide immediate financial relief while giving you a clean slate to rebuild your credit and move forward. To ensure a smooth process, it is invaluable to enlist the help of an attorney you can trust.

Flexer Law has been serving the legal needs of Middle Tennessee residents since 1981. Our experienced bankruptcy attorneys will work diligently on your behalf to provide the best financial outcome for you.

Regardless of your financial situation or employment status, we will guide you through the bankruptcy filing process with confidence. If you are worried about the cost of hiring an attorney, know that we offer payment plans to ease the burden, and in most cases, no money down on Chapter 13 plans.

We have three office locations throughout Middle Tennessee to accommodate your legal needs. Contact us for a free consultation, either in person or virtually, and we will get to work on finding the best solution for getting your financial life back on track.

What About My Tax Refund

This question comes up quite a bit. If you anticipate a large refund, talk about this issue with your attorney. It may be a good idea to delay filing until after you receive your tax year refund for the past year. Technically, when consumers file for bankruptcy, all their non-exempt property goes to the trustee. That includes tax refunds. Since the policies vary depending on where you live, you may be able to use the wildcard exemption to exempt the tax return.

Let’s Summarize…

Owing past-due income taxes can be stressful. These bills are often so high that, even if you fall behind a little, you could end up owing a lot of money. Fortunately, if your debts meet certain requirements, filing Chapter 7 bankruptcy can erase past-due income tax debt in one fell swoop.

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Bankruptcy Court Forbids Prioritizing Certain Debts Over Others

The court considers your friends and loved ones insiders. They know people are more likely to repay loved ones when filing bankruptcy or shortly before filing. The court carefully scrutinizes your recent financial activity to make sure you didnt repay debts to loved ones before filing. If you did, the court considers these preferential payments and can take back the money you paid.

Preferential payments are prohibited and are subject to reversal or clawback by the court.

Keep in mind, preferential payments do not just apply to friends and family. The court categorizes any creditors youve repaid within 90 days of filing as preferential and the debt is subject to a clawback.

Additionally, payments repaid to loved ones are subject to a year of scrutiny. If youve paid back a debt to a loved one within the last 12 months, the court can confiscate that money and include it in your bankruptcy estate. This not only applies to cash repayments, but also any transfer of property. The court treats the transfer of assets to loved ones before filing for bankruptcy the same way as preferential cash payments.

What Will Happen To My Student Loans

What Does Bankruptcy Really Mean?

If you have been out of school for seven years, student loan debt can be eliminated through a bankruptcy or consumer proposal.

Roughly one-third of insolvencies for those 30 to 39 involve student debt. In your 30s there is a high chance that you have been out of school long enough to wipe out your remaining student debt through an insolvency proceeding. If you are a year or two away, talk with a Licensed Insolvency Trustee about the option of waiting to file versus filing now to eliminate other unsecured debt that may be affecting your ability to manage your student loan payments.

If you are planning on returning to school, please advise your trustee. Filing a bankruptcy or consumer proposal can impact your ability to obtain future student loans.

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Will Bankruptcy Affect My Partner Or Family

We know that, among those who file a bankruptcy or proposal in their 30s:

  • 36% are married or in a common-law relationship
  • 14% are separated or divorced
  • 22% are single parents

Being concerned about the impact of bankruptcy on your spouse is understandable.

If your debts are yours alone and your spouse has not co-signed those debts, then your bankruptcy does not affect your spouses debts or credit rating. If, however, you have joint debts and you file insolvency to eliminate your responsibility to pay back those debts, the lender will look to the co-signer to collect.

Divorce or separation is a contributing cause to almost 1 in 7 insolvencies for those in their 30s. Where two partners were paying debts on a combined income, that income may now be stretched further due to support payments and double the living costs. It is worth talking to a trustee about whether to file bankruptcy before or after divorce if you are in the midst of both.

Some other things to consider:

  • Bankruptcy does not eliminate child support or alimony payments
  • Spouses can file a joint bankruptcy or joint consumer proposal for co-signed debts
  • You cannot eliminate your obligation for co-signed or joint debt through a divorce or separation agreement. Your lender must agree to remove one spouse from their contractual obligation to repay the debt.

Can Bankruptcy Stop Tax Liens

Does bankruptcy remove tax liens? The answer is a partial yes. Legal and tax experts agree that bankruptcy cannot completely stop pre-existing tax liens by the IRS.

While the automatic stay will stop new lien petitions, existing liens arent removed when you file for bankruptcy. For bankruptcy and IRS liens which existed prior to bankruptcy, the bankruptcy will be of little effect.

Heres how it works. If you have a federal tax lien placed on any property because of back taxes that you owe, the discharge of that debt during bankruptcy wont remove the lien. The lien will have to be removed separately if you wish to sell your property with clear title.

Therefore, bankruptcy for liens is not the best option. One recommendation is to get back on your feet financially, through bankruptcy, and then attack the liens with help from your lawyer.

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How To Avoid Future Tax Debt Problems

To avoid debt problems in the future, it is important that you understand how you arrived at your current situation, in which you owe a great deal of money to Canada Revenue Agency.

Do you owe taxes because you cashed in the last of your RRSPs to pay your debts? This cant happen again soon, because any remaining RRSPs will be liquidated in your bankruptcy.

On the other hand, if you are self-employed, you can easily find yourself with a tax debt at the end of the year. It is important to prepare for such an eventuality and to make sure that you make payments throughout the year.

We recommend that at the beginning of each year, self-employed individuals estimate the amount of income taxes they will owe and then remit one twelfth of this amount to the tax authorities even if the tax authorities do not require such frequent payments. Then, at the end of the year, tax time will actually be enjoyable as you will have minimal or no accumulated income tax debt. You might even receive a refund!

Finally, make sure you have realistic expectations concerning your lifestyle and your expenses . When do we accumulate tax debt? When we dont feel we can afford to pay it. Proper budgeting and business management can eliminate the monthly deficit that often contributes to serious tax arrears.

Does Filing For Bankruptcy Eliminate Medical Debt

Does Bankruptcy Remove Debts From Credit Report?

Healthcare can be an essential and also astronomically expensive cost. There are many people across the United States that are put into uncomfortable financial situations as a result of seeking critical medical attention. Debt can further complicate problems associated with a persons health and often place patients in the difficult position of dealing with debt long after they have managed an illness.

If you are struggling to address medical debts you may want to consider turning to chapter 13 bankruptcy relief.

It is estimated that 25% of Americans between 25 to 54 are carrying unpaid medical bills currently. As interest accrues steadily on past due medical bills, delaying payments can lead to costs only continuing to creep up. Even with the utilization of benefits, paying back medical bills can take decades for certain patients and it can often feel impossible.

Chapter 13 bankruptcy can be an alternative that can help some individuals to craft a repayment plan for repaying their medical debt. Typical repayment plans on medical debt last between 3 to 5 years and at the end of this debt repayment period, debts will be completely discharged. This may certainly vary however depending on the amount of debt that one may be facing.

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How Bankruptcy Helps Your Debt Issues

The entire goal of claiming personal bankruptcy is to get debt relief when your debt reaches a point where you will never pay it off on your own.

The good news is bankruptcy eliminates almost all unsecured debts, including credit card debts, lines of credit, payday loans, bank loans, installment loans, and tax debts.

However, doesnt wipe clean all your debts. What happens when you apply for bankruptcy in Canada depends on the types of debt you have.

Saving Your Credit Score Is Only One Reason

An end to collection hell: Nosals study found that once people fell seriously behind on their debt with at least one account 120 days overdue, for example their financial troubles tended to get worse. Balances in collections and the percentage of people with court judgments grew.

By contrast, people who file for bankruptcy benefit from its automatic stay, which halts almost all collection efforts, including lawsuits and wage garnishment. If the underlying debt is erased, the lawsuits and garnishment end.

Freedom from certain debts: Chapter 7 bankruptcy wipes out many kinds of debt, including:

  • Civil judgments .

  • Past-due rent.

  • Business debts.

  • Some older tax debts.

Some debts, including child support and recent tax debt, cant be erased in bankruptcy. Student loan debt can be, but its very rare. But if your most troublesome debt cant be discharged, erasing other debts could give you the room you need to repay what remains.

Better access to credit: It can be difficult to get credit right after a bankruptcy. But Nosals study shows people who have completed bankruptcy are more likely to be granted new credit lines within 18 months than are people who fell 120 days or more overdue at the same time but didnt file.

Your credit limits after bankruptcy are likely to be low, however, and your access to credit like your credit scores wont recover completely until a Chapter 7 bankruptcy drops off your credit reports after 10 years.

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Qualifying For Chapter 7 Bankruptcy In Minnesota

Older income taxes are dischargeable in bankruptcy, right? So who qualifies for the simpler, faster, and cheaper chapter 7 bankruptcy? In Minnesota, there are income limits for Chapter 7.

If your income is too high for Chapter 7, you may be eligible for a different type of bankruptcy called Chapter 13. Tax debt is handled differently in this type of bankruptcy. Chapter 13 bankruptcy discharges the same taxes as chapter 7, but also requires you to set up a 3 to 5-year payment plan for the taxes that were not discharged in the bankruptcy.

What Is The Downside Of Filing For Bankruptcy

Long Island Chapter 7 Bankruptcy Lawyer

Home » Frequently Asked Questions » What Is the Downside of Filing For Bankruptcy?

Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. The fact that you sought and received bankruptcy protection will remain on your credit record for as long as 10 years. Additional factors regarding what is the downside of filing for bankruptcy can include:

  • Filing for bankruptcy can negatively impact your immediate financial future.
  • Obtaining credit after filing for bankruptcy could mean increased interest rates.
  • Obtaining credit after filing for bankruptcy might require security deposits.

Filing for bankruptcy can give you the opportunity to start over and create a new financial reality for you and your family. It can also come with many downsides that you should be aware of in order to make a fully informed decision.

In addition to these credit issues, certain bankruptcy filings will leave you with nondischargeable debt that must still be paid back. Nondischargeable debt can include property debt, tax debt, student loans, spousal support, child support, and criminal debt. While some bankruptcy chapters will allow you to manage many of these nondischargeable debts more readily, they will not be dismissed or discharged.

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What Bankruptcy Can Do

Bankruptcy allows people struggling with debt to wipe out certain obligations and get a fresh start. The two primary bankruptcy types filedChapter 7 and Chapter 13 bankruptcyeach offer different benefits and, in some cases, treat debt and property differently, too. You’ll choose the chapter that’s right for you depending on your income, property, and goals.

Here are some of the things you can expect regardless of whether you file for Chapter 7 or 13.

The Truth About Bankruptcy

If youre reading this, youre probably thinking about bankruptcy. The world may tell you this route is a fresh start . . . or a horrible ending. But whats the truth about bankruptcy?

In simple terms, bankruptcy is a legal process a person can go through to clear some of the debts theyre unable to pay.

If youre so overwhelmed by debt that bankruptcy feels like your only option, know these three things: 1) There is hopeand you will be okay. 2) There are other optionsand you should try every single one before jumping into bankruptcy. 3) Bankruptcy does not define you and will not be the end.

Keep these three things in mind as you read through the rest of this article and learn the truth about bankruptcy, including a breakdown on these specific topics:

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Advantages Of Filing Chapter 7 Bankruptcy

Next, weâll answer the question âWhat are the advantages of filing bankruptcy?â in relation to Chapter 7.

Protection from Creditors

When your case is filed with the bankruptcy court, it creates whatâs called an automatic stay. By law, this stops creditors from:

  • collecting payments

You Can Keep âExemptâ Property

The law protects âexempt propertyâ, such as your house, from your creditors.

This means that you may be able to keep your house as long as you continue to make the required monthly payments.

Settling Tax Debt With A Consumer Proposal

Should I File Bankruptcy or Pay Off Debt?

Is it possible to negotiate or settle their tax debt with CRA through a credit counsellor, debt management plan or your own? The answer is no. As a general rule, the Canada Revenue Agency will not accept less than the full amount owing. If you owe back taxes, and do not want to file for bankruptcy you still have a few options:

  • CRA has something called the Fairness Commission where you may apply to have interest and penalties reduced. They cannot, however, reduce the tax payable and they only reduce the interest and penalties if you have a compelling reason why the debt wasnt paid.
  • It is possible to object to a tax assessment and if you are unsuccessful in your objection you can file an Appeal with the Tax Court of Canada. This is a very expensive option, requires a tax lawyer and involves making an argument about the application of tax laws to your particular case. If successful the debt is reversed if unsuccessful you will owe the debt, interest, penalties plus the legal bills.
  • Your better alternative may be to file a consumer proposal. A is the only federal government or debt settlement program where you can settle your tax debt for less than you owe.

If you owe significant back tax debt it is probably because something went wrong. What you need is a way to clear away the debt. In these cases bankruptcy or a consumer proposal are the solutions most often used as they are relatively inexpensive and they clear away all of your unsecured debt, including your tax debt.

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Do My Debts Qualify For Bankruptcy

Not all debts qualify for bankruptcy. Debts that cant be wiped out are child support, alimony, some types of taxes, debts to government agencies, debts for personal injury caused by driving while intoxicated and any court fines or penalties.

Debts that can be wiped out in Chapter 7 bankruptcy include credit card debt, medical bills, personal loans, lawsuit judgments and obligations from leases or contracts. Chapter 13 bankruptcy wipes out those debts, plus debts from a divorce , debts for loans from a retirement plan. Technically, student loans can be discharged if you prove undue hardship, however, this is often a difficult task.

There are some people who are considered judgment proof because everything they have is exempt under state law. People that are judgment proof may not need to file bankruptcy because creditors cant touch their assets if their source of income is from social security, pension plans, 401 retirement savings, disability benefits, veterans benefits, alimony or support payments.


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