Federal Tax Refunds During Bankruptcy
You can receive tax refunds while in bankruptcy. However, refunds may be subject to delay, to turnover requests by the Chapter 7 Trustee, or used to pay down your tax debts. If you believe your refund has been delayed, turned over, or offset against your tax debts you can check on its status by going to our Wheres My Refund tool or by contacting the IRS Centralized Insolvency Operations Unit at 1-800-973-0424. The unit is available Monday through Friday from 7:00 a.m. to 10:00 p.m. eastern time.
Myth: You Get To Keep Your Stuff
One of the most popular reasons for filing for Chapter 13 is to keep oneâs assets like a home or a car. âChapter 13 is generally a âkeep your stuffâ chapter,â says Bert Benham, a Memphis bankruptcy attorney.
The reality, however, is that because roughly two-thirds of Chapter 13 cases fail, most of the time Chapter 13 does not help you keep your property. Desperate Chapter 13 filers can spend years and multiple bankruptcy cases trying to save a car from repossession.
Take this story of a Memphis resident, interviewed by Pro Publica, who filed for Chapter 13 four times in the past 7 years to hold on to her car:
The first time, she lost her job a year and a half after filing, and her case was dismissed after she fell behind. She immediately filed again to keep the car for job interviews, using unemployment benefits to make the payments until she couldnât. She then filed a third time.
Finally in 2014, after her third dismissal, she got a new part-time job paying $11 an hour and filed again. She still has two years of payments to go and will have spent most of her 30âs trying to hold on to her car. âIf Iâd known,â she said, âI just would have let my car go.â
Considering how few Chapter 13 cases result in discharge, how much you are willing to pay for the slim chance of protecting your property in Chapter 13?
Consider Your Nonexempt Assets
It is important to determine if you have nonexempt assets before you file. During the bankruptcy the trustee may take this property to pay off your debt. The assets and property you could lose may be worth more than the debt you can eliminate through bankruptcy, which is why its important for you to get legal advice before you file.
If all of your assets and income are exempt, then you may not want to file bankruptcy because they would be protected from your creditors.
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I Only Want To File Against Some Of My Debts Can I Continue Paying Others
Yes, you can continue to pay debts, even after a Chapter 7 bankruptcy filing. If the debt has collateral, then you can formally agree to be bound to that particular contract in what is called a Reaffirmation Agreement. If there is no collateral for the debt then you can continue to pay the debt on a voluntary basis. In either case, however, you must list and disclose in your bankruptcy papersall your debts, even the debts you intend to continue to pay.
The Chapter 7 Means Test
If your income is more than the average for your household size in Florida, you will need to fill out a second form to see if after deducting certain IRS allowable and some actual expenses you are eligible to file for Chapter 7 bankruptcy.
If your current monthly income is more than the average, then the means test applies a more complicated formula to see if you are allowed to file for Chapter 7 bankruptcy.
This formula starts with your current monthly income and then deducts some expenses that are allowed. If this calculation shows that you would have money left over each month after expenses, then you might not be allowed to file for Chapter 7 bankruptcy.
Being precluded from filing a Chapter 7, however, does not mean that you will be prohibited from filing a different type of bankruptcy.
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Are There Benefits To Filing Bankruptcy With My Spouse
Exempt property is the property you do not have to forfeit when filing for Chapter 7 bankruptcy. A joint filing may entitle the couple to double the amount of some exemptions. For instance, Florida bankruptcy exemptions for a motor vehicle are only $1,000 in an individual bankruptcy case. However, when filing jointly, the exemption doubles to $2,000. Additionally, the personal property exemption of $1,000 increases to $2,000 when filed jointly. See In Re Hawkins. It is important to note the remaining exemptions will remain the same and not increase by filing a joint petition. Therefore, a couple filing for bankruptcy in Florida may be able to claim more exemptions by filing separate, individual petitions.
The number of state and federal exemptions you are eligible for may significantly impact whether or not to file jointly. Depending on the circumstances of your case, all of your property may be exempt from bankruptcy. On the other hand, if you file for a Chapter 7 bankruptcy and your property does not qualify for an exemption, the Florida bankruptcy judge may rule that the debtors non-exempt assets must be liquidated.
What You Must Avoid Before Filing Chapter 7 Bankruptcy
Theres some protocol to follow in the months before filing for bankruptcy. Failing to follow these instructions could undermine your efforts. Heres what not to do in the run-up to filing Chapter 7.
Dont Pay Creditors Sounds weird, right? Hear us out. To the extent you can, continue to make routine payments. But any large or unusual payments could be viewed as preferential transfers. That means one creditor has benefited unfairly over others.
No New Debt A new creditor could claim you took out a loan or ran up the balance on a credit card without intending to pay it back. Legally, thats fraud and it will not be forgiven.
No Unusual Transactions Dont stray from the routine. Dont transfer titles of cars or homes. Dont buy luxury goods. Dont transfer your business or remove your name from it. Each of these activities can be classified as fraud.
Be Truthful and Complete You are required, while filing for bankruptcy, to provide full and complete information. You must disclose any debt, assets, accounts or other financial information.
It is important not to destroy any financial documents or records related to the filer’s debt, Sinha says. The court will look at a filer’s recent financial transactions to determine if they were made with the intent to fraudulently avoid paying their debts.
Adds Solomon, People use many wrong tricks to hide their assets before filing for bankruptcy, but they don’t know all these tricks can be caught easily by the trustee.
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Help My Income Exceeded The Chapter 7 Means Test Allowable In Florida
If your median income is above the state median income, you may need to look at part 2 of the means test or at an alternative.
The Means Test is a two-part test, so it is not a simple pass-fail test. If you fail the first section, you can pass the second section and still qualify under Chapter 7.
You can learn more about passing the Chapter 7 means test when income exceeds the median.
Student Loan Program Forms
Debtors seeking to participate in the recently created Student Loan Program must use the Official Student Loans Forms below:
- Verification of Qualification to Act as Mediator LF-50
- Attorney-Represented Debtors Notice of Participation in Student Loan Program SLP-LF-01
- Self-Represented Debtors Verified Motion for Referral to Student Loan ProgramSLP-LF-02
- Order Granting Self-Represented Debtors Verified Motion for Referral to Student Loan Program SLP-LF-03
- Debtors Notice of Income-Driven Repayment Plan SLP-LF-04
- Debtors Motion to Separately Classify Federal Student Loan and Income-Driven Repayment Plan SLP-LF-05
- Order Granting Debtors Motion to Separately Classify Federal Student Loan and Income-Driven Repayment Plan SLP-LF-06
- Debtors Verified Certification of Payment and Recertification of Income SLP-LF-07
- Notice of Income-Driven Repayment Plan Change SLP-LF-08
- Debtors Notice of Selection of Private Student Loan Mediator SLP-LF-09
- Notice of Clerks Designation of Private Student Loan Mediator SLP-LF-10
- Final Report of Private Student Loan Mediator SLP-LF-11
- Debtors Ex Parte Motion to Approve Mediation Agreement with Private Student Loan Lender SLP-LF-12
- Order Granting Debtors Ex Parte Motion to Approve Mediation Agreement with Private Student Loan Lender SLP-LF-13
- Debtors Motion to Separately Classify Private Student Loan SLP-LF-14
- Order Granting Debtors Motion to Separately Classify Private Student Loan SLP-LF-15
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How Much Does Chapter 7 Bankruptcy Cost
If you are considering filing for Chapter 7 bankruptcy, you should be aware of the costs involved. The two main costs are court fees and attorneys fees. There is a $338 court filing fee, and this fee is the same throughout the United States.
If you cant pay the fee, you can request a fee waiver from the court. To qualify for a waiver, your income must be less than 150% of the federal poverty guidelines.
You can also make a down payment on the filing fee and pay the rest in installments. However, if you miss a payment, the court can dismiss your case without a refund. Unless you have to file quickly, we recommend having the full amount before filing to prevent late payment.
In the Southern District of Florida, the average chapter 7 bankruptcy attorneys fee is $1500. At Stiberman Law our chapter 7 bankruptcy attorneys fees range from $900 to $1500 to file. We offer convenient payment plans in the event you cannot afford the full fee.
When Filing For Chapter 7 Bankruptcy May Not Be A Good Idea
If any of the following apply to you, Chapter 7 may not be good for you:
- You are facing foreclosure and dont want to lose your home.
- You have non-exempt assets that you want to keep.
- You have the means to pay all or a portion of your debts.
- You are expecting an inheritance or proceeds from a lawsuit
- You have committed fraud or tricked someone into giving you credit.
- You have recently transferred property.
- You are seeking to discharge your child support, alimony obligations, or other non-dischargeable debts.
Your bankruptcy attorney can recommend the best course of action, discuss if chapter 7 is advisable, or recommend alternatives to chapter 7 including filing chapter 13 bankruptcy.
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The Means Test For Chapter 7
To be eligible to file Chapter 7 bankruptcy, you must pass the means test. The means-test requires borrowers to earn below a specified income. The income is based on the median income of similar household sizes. The median income is determined by the U.S. Census and is updated frequently.
The test is designed to weed out those who need bankruptcy from those who dont. It was developed to keep people from abusing Chapter 7 bankruptcy. You only have to pass the means test for Chapter 7 bankruptcy. Borrowers seeking relief under Chapter 13 will not be required to pass the means test. Additionally, the means test may not be applied in your case if you are a disabled veteran. Also, you may be exempt if your debt is primarily business-related debts, as opposed to consumer debts.
Free Consultation With A Fort Lauderdale Chapter 7 Bankruptcy Lawyer
Obtaining Chapter 7 discharge is your chance to have a fresh financial start. Make sure you are starting on the right foot since courts can lawfully deny you this critical opportunity.
Before making any decisions, reach out to an experienced Fort Lauderdale Bankruptcy Lawyer for advice today. Call Miceli Law, P.A. for a free consultation at .
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Bankruptcy Process For Individuals
The case is usually filed in the district where the borrower lives for individuals. For instance, if you reside in Tampa, you may file the case in the U.S. Middle District of Florida. The residence will be based on the most recent 180 days before filing the case. If there have been multiple residences within the past 180 days, the filing should be where you spent the most time.
How Chapter 7 Works
A Chapter 7 case begins with you, the debtor, filing a petition with the bankruptcy court serving the area where you live. In addition to the petition, you also must file with the court: schedules of assets and liabilities a schedule of current monthly income and expenditures a statement of financial affairs and a schedule of executory contracts and unexpired leases. Individual debtors with primarily consumer debts must file a certificate of credit counseling.
A husband and wife may file a joint petition or individual petitions. Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors.
After the petition is filed, usually no more than 40 days afterward, the trustee will hold a meeting of creditors. During this meeting, the trustee puts you under oath, and both the trustee and your creditors may ask questions . If a husband and wife have filed a joint petition, they both must attend the creditors meeting and answer questions. Although referred to as a meeting of creditors, it is quite rare for a debtors creditors to attend. For most consumers, this will be the only meeting or court appearance that they will need to make during their bankruptcy.
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Eligibility For Bankruptcy In Florida
Not everyone is eligible for Chapter 7 Bankruptcy relief.
The two main criteria you need to satisfy are:
- Household income below Floridas median income if your debt is not mostly business debt
- You cannot have received a Chapter 7 discharge in the past 8 years or a Chapter 13 discharge in the past 6 years
If your debt is mostly non-business debt and your household income exceeds Floridas median income, you may still qualify for Chapter 7 relief if you pass the means test. You pass the means test if your monthly disposable income as defined in the test is not enough to pay 25% of your unsecured debts. If you dont pass the means test, you may still qualify for relief in Chapter 13.
A Chapter 13 Bankruptcy In Florida
For those who make above the income limit for Chapter 7, debt relief can still come through a filing a Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in Florida case allows you to restructure your debts into an affordable monthly plan. By restructuring debts, many people can afford to keep their homes and vehicles under Chapter 13.
Chapter 13 stops foreclosures, repossessions, and potentially stops Florida wage garnishments. Chapter 13 bankruptcy also allows you to pay back mortgage payments, past-due car payments, and tax debt over three to five years through a bankruptcy plan. In addition, Florida may also allow you to reduce unpaid child support and alimony. However, you must resume your normal domestic support payments to remain in Chapter 13.
In a Chapter 13 plan, some debtors can lower their car loan payments and erase second mortgages, if they meet certain requirements.
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Choose A Bankruptcy Attorney
A bankruptcy attorney will help you to understand the process of filing for bankruptcy, which type of bankruptcy is best for your situation, and will work to get the best possible outcome for your case. A bankruptcy attorney will also be knowledgeable about federal and local rules to ensure you comply will all requirements and avoid unnecessary pitfalls or the possible loss of property.
They can also help to protect your interests if your creditors try to take advantage of you. Although there may be costs or fees when hiring a bankruptcy attorney, they can also be worth the investment. Many attorneys offer payment plans and affordable solutions.
A good attorney will guide you through the process and make sure that everything goes as smoothly as possible. They will also help you to understand your options and make smart decisions.
Does Filing Bankruptcy Mean I Am Cheating Out My Creditors
Bankruptcy does not change your moral obligation to repay your debts it only changes your creditors’ abilities to use the legal process to force you to pay them. If you feel obligated to pay your debts, the law welcomes you to voluntarily pay your debts even after bankruptcy has forgiven them. And, if you pay a little bit towards a debt that has been legally forgiven in bankruptcy, that will not re-ignite the old debt, it remains extinguished. You would be free to pay any of your old creditors, in whatever order you wanted, however much you wanted, and when you wanted to do so.
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Documents Needed For Chapter 7 And Chapter 13
You will need access to information to complete the bankruptcy forms necessary to initiate the bankruptcy proceeding. Additionally, the bankruptcy trustee will require documents to verify your petition was correct. Therefore, before filing bankruptcy, you should compile the following information:
- A list of all your creditors, the nature of the debt, the amount owed to each, and their mailing addresses.
- Your source of income, how often you are paid, and how much you are paid. Additionally, the same income information will be required for your spouse. Your spouses information is needed even if your spouse is not filing bankruptcy with you. This is necessary for the court, the trustee, and your creditors to determine your household financial situation.
- A list of all your property .
- A detailed list of your monthly living expenses includes food, shelter, clothing, transportation, taxes, medicine, etc. These expenses must be reasonable and necessary for family maintenance.