Most Back Taxes And Customs
This generally includes income taxes, Social Security taxes and penalties you owe, or unpaid withholding tax for your employees.
Although most back taxes cannot be discharged in bankruptcy, you may be able to have taxes discharged if they are for a return due 3 or more years ago and you meet certain other qualifications.
If you owe significant back taxes you cannot pay in a reasonable period of time, you may want to ask a tax attorney or other professional about an Offer in Compromise, or OIC, or other alternatives.
When Will I Get My Discharge
We discuss the timeline in the Chapter 7 bankruptcy process, but generally, you will receive the discharge order about 3-4 months after you file your bankruptcy petition in most cases. The deadline to object to the discharge is 60 days after your first scheduled 341 meeting of creditors. After that deadline expires, the court will normally issue the discharge order in a day or two.
Can Bankruptcy Discharge Be Denied
A court can deny a discharge in Chapter 7 for a number of reasons, including, among others, the debtors failure to provide tax documents that have been requested, destruction or concealment of books or records, violation of a court order, or an earlier discharge in an earlier case that began within eight years before the date the second petition was filed, and failure to complete a course on personal financial management. In addition, a creditor, trustee in the case, or U.S. trustee may file an objection to the debtors discharge.
A discharge may also be denied in Chapter 13 if the debtor doesnt complete a course on personal financial management or if theyve gotten a prior discharge in another Chapter 13 case within two years before the filing of the second case, with a few exceptions. A court may even revoke a discharge under certain circumstances, such as allegations that the debtor obtained the discharge fraudulently or fails to provide documents or information requested in an audit of the case.
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When Does The Discharge Occur
The timing of the discharge varies, depending on the chapter under which the case is filed. In a Chapter 7 case, the discharge typically occurs about four months after the date the bankruptcy petition is filed. In a Chapter 13 case, the discharge occurs after the three to five year repayment plan.
In a Chapter 13 case, the court generally grants the discharge as soon as practicable after the debtor completes all payments under the plan. Since a chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing.
Chapter 7 Vs Chapter 13
Chapter 7 and Chapter 13 are the two most common types of personal bankruptcy.
In a Chapter 7 bankruptcy, a trustee appointed by the bankruptcy court will liquidate many of your assets and use the proceeds to pay your creditors some portion of what you owe them. Certain assets are exempt from liquidation. Those typically include part of the equity in your home and automobile, clothing, any tools you need for your work, pensions, and Social Security benefits.
Your nonexempt assets that can be sold off by the trustee include property , a second car or truck, recreational vehicles, boats, collections or other valuable items, and bank and investment accounts.
In Chapter 7, your debts are typically discharged about four months after you file your bankruptcy petition, according to the Administrative Office of the U.S. Courts.
In a Chapter 13 bankruptcy, by contrast, you commit to repaying an agreed-upon portion of your debts over a period of three to five years. As long as you meet the terms of the agreement, you are allowed to keep your otherwise-nonexempt assets. At the end of the period, your remaining debts are discharged.
In general, people with fewer financial resources choose Chapter 7. In fact, to be eligible for Chapter 7, you must submit to a means test, proving that you would be unable to repay your debts. Otherwise, the court may determine that Chapter 13 is your only option.
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Which Debts Are Not Discharged In Bankruptcy
Debts discharged in bankruptcy vary from case to case and chapter to chapter of the bankruptcy code. According to chapter 11 of the bankruptcy code, where a business hopes to become profitable after a reorganization plan, the approved debts to be paid by the debtor in the reorganization plan become non-dischargeable debts. Meanwhile, unapproved debts become dischargeable debts.
According to chapter 13 bankruptcy, an individual debtor or a small business owner, like a proprietorship business, needs to repay all debts in monthly installments within a period of three to five years. However, some debts like court fees and homeowners association fees can be discharged.
Chapter 7 of the bankruptcy code states common dischargeable debts. These are debts from credit cards, unpaid taxes, bad checks, utility bills, court judgments, lease, and others. Debts that cannot be discharged are debts to government agencies, recent taxes, federal tax liens, and debts that debtors successfully challenge.
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Bankruptcy Will Discharge Most Unsecured Debt
Bankruptcy is particularly good at dealing with unsecured debt, which is debt that is not secured by a lien on property. The following unsecured debt can be discharged:-credit card debt
Most credit card debt can be eliminated in bankruptcy. There are, however, some exceptions. If a credit card is a secured credit card, or if the credit card agreement gives the bank a lien on your other accounts with the bank, the bank may be able to apply any money on which it holds a lien to satisfy the lien. Another exception is for debts for luxury goods incurred on a single credit card within 90 before bankruptcy, and totaling more than $725 . Yet another exceptions is if there was fraud involved in obtaining the credit card or making charges on it, which is not common.-medical bills
Medical bills are almost always dischargeable. Potential exceptions are where the debtor granted the medical provider a lien, or where there is fraud involved, but these are very uncommon.-personal loans
Personal loans work like credit cards, and are discharged in bankruptcy. The same general exceptions apply to personal loans as do to credit cards.-payday loans
Payday loans are generally unsecured, and are discharged in bankruptcy. Payday loans are loans guaranteed only by a post-dated check provided to the lender. If the lender also takes a registration or title to the debtors vehicle, then it is probably a secured loan and may not be discharged.-taxes
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Debt Relief Alternatives To Bankruptcy
Bankruptcy has serious consequences. A Chapter 7 bankruptcy will remain on your for 10 years, and a Chapter 13 will remain for seven years. That can make it more expensive or even impossible to borrow money in the future, such as for a mortgage or car loan, or to obtain a credit card. It can also affect your insurance rates.
So itâs worth exploring other types of debt relief before filing for bankruptcy. Debt relief typically involves negotiating with your creditors to make your debts more manageable, such as reducing the interest rates, canceling some portion of the debt, or giving you longer to repay. Debt relief often works to the creditorâs advantage, too, as they are likely to get more money out of the arrangement than if you were to declare bankruptcy.
You can negotiate on your own or hire a reputable debt relief company to help you. As with , there are scam artists who pose as debt relief experts, so be sure to check out any company that youâre considering. Investopedia publishes a regularly updated list of the best debt relief companies.
Grounds For Denial Of Chapter 7 Discharge
In Chapter 7 cases, the debtor doesn’t have an absolute right to a discharge. In order to receive a discharge, debtors must fulfill the requirements of bankruptcy law.
If the debtor fails to follow the rules or doesn’t provide mandatory information, a creditor, the bankruptcy trustee, or the U.S. trustee can object to the entire Chapter 7 discharge. For instance, the court can deny a Chapter 7 discharge if you:
- do not provide requested tax documents
- don’t complete a course on personal financial management
- transfer or hide property in order to defraud or hinder your creditors
- destroy or hide books or records
- commit perjury or other fraudulent acts in connection with your bankruptcy case
- cannot account for lost assets
- violate a court order, or
- previously filed a bankruptcy case and were granted a discharge, within certain time frames, depending on the type of bankruptcy filed.
If successful, the debtor will remain responsible for all obligations.
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Lets Start By Discussing Your Debt Load And Lifestyle Choices
A frank conversation with a bankruptcy law attorney should help you determine whether Chapter 7 bankruptcy is right for you, and which debts of yours will be taken care of if you file. Questions about tax debt tend to be too complex and fact-specific to be able to make generalizations about on a website such as this. Talking to a lawyer can help you avoid critical mistakes.
Chapter 7 Bankruptcy At Jack Berman Law
If you or someone you know needs to file for chapter 7 bankruptcy inLivonia, MI,Shelby Township, MI,Sterling Heights, MI, or the surrounding areas, our skilled bankruptcy attorney Jack Berman has the skill and experience that you need. With more than 50 years of combined bankruptcy experience, our legal team has the expertise to handle all your debt-restructuring needs. As a credited bankruptcy attorney, Jack Berman can help you solve financial issues such as home foreclosure, cancel unsecured debts, and teach you how to stop wage garnishment. Contact us online or call us at 734-367-0600 for a free initial consultation with Mr. Berman today!
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Disadvantages Of A Bankruptcy Discharge
Your bankruptcy protection doesn’t extend to joint account holders or cosigners on any of your debt obligations. Your personal liability for the debt is removed when you receive your bankruptcy discharge, but your cosigner remains on the hook for the entire balance of the debt. Creditors can still collect fromor even suecosigners and joint account holders for discharged debts.
You can voluntarily make payments on a debt to ensure that it’s paid in full.
Your bankruptcy discharge will additional appear on your and affect your credit score for seven years after you file for Chapter 13 protection, and for 10 years from the date you file for Chapter 7 bankruptcy.
Accounts associated with your bankruptcy might be deleted from your credit report if the date of delinquency preceded your bankruptcy filing.
Debt That Cannot Be Discharged By A Chapter 7 Bankruptcy Action
When you make the decision to file for bankruptcy, you should be aware that there are some debts that cannot be discharged, and you will ultimately be responsible for paying those debts after your bankruptcy proceedings have come to an end. Non-dischargeable debts must be considered when you plan to tackle your debt-head on. It may turn out that one form of debt-management is better than another given the possibility that you will still have remaining debts following bankruptcy.
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Get A Handle On Your Debts By Speaking With A Bankruptcy Attorney
Bankruptcy will help you get rid of credit card debt, medical bills, and creditor harassment. Even the most well-executed bankruptcy filing will leave you with certain debts in many cases, including student loans and child support obligations.
A lawyer can help explain the scope of how much discharged debt you will have. They will explain categories of debts and which ones may not be discharged in a Chapter 7 filing. Your attorney will also provide you with suggestions for how to best manage these debts. Contact a local bankruptcy attorney today.
How Bankruptcy Affects Your Credit Score
Bankruptcy is a last-resort option for debt, and one of the main reasons for that is the devastating effect it will have on your . Not only will you lose 100, 150 or even 200 points , the bankruptcy will stay on your credit report for 10 years for a chapter 7 filing and seven years for a chapter 13.
And while your score will likely recover before those years are up, the notation on your credit file will be there for lenders, landlords, insurance agents and employers to see for all of that time. This means you may find it harder to qualify for new loans at good rates, you might lose out on a new place to live and you could see your insurance rates go up.
You also might lose out on a promotion at work or a new job opportunity. I knew a young lady who refused to get serious with a young man until they had exchanged credit reports. Explaining a bankruptcy could have had a chilling effect on a fragile new relationship.
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How Long After Filing Will The Creditors Stop Calling
As soon as a creditor or bill collector becomes aware of a filing for bankruptcy protection, it must immediately stop all collection efforts. After you file the bankruptcy petition, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes about one week or less.
In some cases, you or your attorney should contact the creditor immediately upon filing the bankruptcy petition, especially if a law suit is pending. If a creditor continues to try to collect, the court can take action against them.
Read the Law: 11 U.S.C. § 362
Although Many Debts Can Be Discharged In Chapter 7 Bankruptcy Not All Debts Qualify Learn About Nondischargeable Debts
Updated By Cara O’Neill, Attorney
Although most Chapter 7 bankruptcy filers will be able to get rid of qualifying debt, such as credit card balances, medical bills, and personal loans, some debts are nondischargeable. They aren’t erased in Chapter 7 bankruptcy. Here’s what you can expect in Chapter 7 bankruptcy.
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Can I Discharge A Court Judgment In A Bankruptcy
Bankruptcy is an efficient and quick way for Florida residents to wipe out most unsecured debt, like credit card debt or medical debt. But what about court judgments? If you lose a lawsuit, the court will enter judgment against you, which tells you how much money you need to pay to the person who sued you. Generally, you can discharge a court judgment, but there are exceptions.
No Discharge of Unpaid Child or Spousal Support
You might owe thousands of dollars in unpaid child support or alimony, and a judge can enter a judgment against you for your unpaid amounts . Unfortunately, these debts are not dischargeable, so any court judgment based on these debts is likewise not dischargeable. Instead, work on finding ways to save money or, if you have recently lost your job, contact a family law attorney for help modifying your child support or spousal support orders.
No Discharge for Fraud
The government does not want to reward dishonest behavior, so it prohibits you from discharging a court judgment based on fraud. For example, you cannot discharge a court judgment for a lawsuit based on the following:
- You lied to obtain credit, goods or services
- You stole money while serving in a position of trust, such as while serving as a court-appointed guardian
No Discharge for Debts Owed to the Government
The government wants its money, so you cannot use bankruptcy to eliminate certain debts to the government such as:
No Discharge for Judgments for Willful or Malicious Acts
Chapter 7 Bankruptcy Frequently Asked Questions
Written by: HFM
If you have questions about how Chapter 7 bankruptcy works in San Diego, you are not alone. The attorneys at Higgs Fletcher & Mack have put together this list of frequently asked questions to help guide you through the entire process.
What is Chapter 7 Bankruptcy
The three primary bankruptcy Chapters are Chapter 7, Chapter 11 and Chapter 13. Chapter 13 is an individual consumer reorganization that requires payment to creditors through a payment plan over a three to five year period. Chapter 11 is a larger scale reorganization for business that also requires payment to creditors through a payment plan. Unlike Chapter 13 and 11, Chapter 7 is a liquidation proceeding whereby Debtors that qualify liquidate there non-exempt assets in exchange for a discharge of most types of debt.
Who Qualifies for Chapter 7 Bankruptcy Discharge
A Chapter 7 discharge is a court order that excuses a debtor from having to pay most types of debt. A Chapter 7 discharge is only for qualifying individuals who no longer have the ability to pay their bills and are in need of a fresh start.
Can Businesses Discharge their Debt with Chapter 7
How does Chapter 7 Bankruptcy in San Diego Work
Bankruptcy under Chapter 7 for individuals and businesses alike starts with the filing of a bankruptcy petition with the court. The debtor must also file the required paperwork including:
- schedules of assets and liabilities
- monthly income
- monthly expenses
- a statement of financial affairs
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May The Debtor Pay A Discharged Debt After The Bankruptcy Case Has Been Concluded
A debtor who has received a discharge may voluntarily repay any discharged debt. A debtor may repay a discharged debt even though it can no longer be legally enforced. Sometimes a debtor agrees to repay a debt because it is owed to a family member or because it represents an obligation to an individual for whom the debtor’s reputation is important, such as a family doctor.