Deductions That Spell Trouble For Small Business Owner Seeking Chapter 7 Bankruptcy

In a Chapter 7 Bankruptcy matter, the IRS may challenge the amount of taxes due when a debtor seeks to eliminate IRS debt through the bankruptcy. The IRS is likely to challenge certain deductions taken by the debtor against small business income. The first hurdle in an IRS challenge to small business expenses is proof that the purchases you are seeking to deduct were actually made according to IRC Section 274. Two areas the IRS will question, even though allowable with appropriate documentation are gifts and wages to a spouse, child or other relative they claim to employ. In the case of such wages, the business owner must issue W-2’s or 1099’s for the wages paid or included as business expenses. A business owner is also prohibited from deducting wages paid to herself. Credit card interest is allowable only if the card is limited solely to use for business charges. If it is determined the credit was utilized for household or personal items of the business owner, the interest on the cards will not be deductible. Some deductions you absolutely may not take are dues for social, athletic, vacation and lunch clubs, charitable contributions, donations to political causes, penalties and fines to government agencies, personal expenses for yourself, family or home or repairs that add value to your business property or extend the life of the property. Some deductions are allowable but the IRS may still require proof that the expenses are legitimate in order to eliminate IRS debt through Chapter 7 bankruptcy. Allowable deductions include business travel, use of your car for business, business meals and entertainment, education pertaining to your trade, tools and supplies. If you are considering Chapter 7 Bankruptcy and have substantial IRS debt, you should seek experienced legal counsel immediately in order to fully protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Eliminating IRS Debt Through Chapter 7 Bankruptcy

Many times a debtor will have a substantial income which results in a tax liability to the IRS, even though their income is still not enough to satisfy the repayment of their debts. When filing a Chapter 7 Bankruptcy it is critical that all the debtor’s debts are discharged or they will be in a very difficult position after bankruptcy. It is possible to eliminate all delinquent taxes in a Chapter 7 Bankruptcy. In order to eliminate the debts you must meet certain criteria including: 1) The tax liability must be at least 3 years old to be eliminated. 2) You must have filed your returns. If you filed for extensions it may make you unable to eliminate the delinquent taxes. 3) The IRS has not filed an assessment against you in the last 240 days. In spite of the above, if you tried to hide from the IRS, you may face a challenge to the discharge. The IRS is very patient, unless you try to avoid them. If this happens, you may still obtain a Chapter 7 Bankruptcy but the substantial IRS debt may remain as a burden you will have to repay. If you are considering Chapter 7 Bankruptcy and have substantial IRS debt, you should seek experienced legal counsel immediately in order to fully protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Bankruptcy Offers Protection From Harassing Creditors

It is very easy for a person who faces some misfortune to fall behind on their debts whether they have lost their job, have gone through a divorce, became seriously ill or injured, or have fallen on hard times for any number of reasons. Despite a person’s change in circumstances, their debt is fixed and creditors can be merciless in their attempts to have their clients repay them. Receiving constant phone calls, letters in the mail, and court notices from creditors can become oppressive and put a serious strain on person’s life. If an individual does not have enough money to satisfy all his creditors and is stuck beneath crushing debt, bankruptcy is an option which can provide relief from harassing creditors and can offer them a fresh start to regain control of their life. One way filing for bankruptcy can provide much needed relief for a person being harassed by creditors is through what is known as the “automatic stay” provision. This bankruptcy provision prevents creditors from taking any collection actions against a person who has filed for bankruptcy while their bankruptcy matter is pending. This provides someone who has filed for bankruptcy much needed peace of mind and relief while they begin the process of getting back on their feet. If you are considering filing for bankruptcy you will be addressing many issues concerning how to resolve your debt with creditors and should consult with an experienced bankruptcy attorney immediately in order to protect your rights. For more information regarding obtaining relief from harassing creditors or other bankruptcy, consumer debt or foreclosure matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for information purposes only and in no way is intended to replace the advice of an attorney regarding your specific matter.

Bankruptcy Filer and Spouse: Liability of Joint Debts

When filing for bankruptcy, a debtor must resolve any issues relating to marital debts and assets, especially if a divorce is being contemplated or already has been finalized. Even if a debtor receives a discharge of his debts in bankruptcy court, the debtor’s spouse may still be liable for jointly incurred debts. For instance, how a jointly held credit card in both the debtor and his spouse’s name is to be paid off could become a serious issue. If the debtor files for bankruptcy and he receives a discharge for the credit card debt he incurred with his co-debtor spouse, this would likely only relieve him of the obligation he owes to the credit card company. Since the liability a debtor owes to most credit card companies is “joint and severable”, the co-debtor spouse will be left owing all of the debt to the credit card company. This may not be the case if the parties have been divorced prior to the debtor filing for bankruptcy. Generally, when a married couple divorces a property settlement is entered before a court and it outlines how the marital debts are to be paid off by the respective parties. This has the same affect as a judgment being entered against the debtor by any other creditor and could make an otherwise dischargeable debt non-dischargeable. If the property settlement is silent on the matter, resolving how the debt is to be paid off could be very difficult. If you are considering filing for bankruptcy you will be addressing many issues concerning the dischargeablity of your debts and should consult with an experienced bankruptcy attorney immediately in order to protect your rights. If you are considering bankruptcy or divorce you should seek experienced legal counsel immediately in order to fully protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Charging Debt Purchaser With Consumer Fraud Requires Obvious Fraud By Initial Creditor

A consumer charged American Honda Finance Corp. with violations of the NJ Consumer Fraud Act, NJ Truth in Consumer Contract, Warranty and Notice Act and the Federal Truth in Lending Act when the consumer failed to make payments and Honda attempted to enforce the debt. Honda purchased the debt from and was not the originator of the loan. When the consumer made application for the loan, she was charged a “credit inquiry fee” and, when the suit was filed by Honda, claimed the “credit inquiry fee” was improperly excluded from the finance charge as an “application fee.” The consumer’s claim was that the inclusion of the “credit inquiry fee” incorrectly in the total amount financed instead of the finance charges increased her costs of borrowing money and was fraudulent. The court held that, as the manner in which the fee was charged when the consumer made application was not obvious to subsequent purchasers of the debt. Therefore, Honda, as a subsequent purchaser, could not be charged with violations of the NJ Consumer Fraud Act, NJ Truth in Consumer Contract, Warranty and Notice Act and the Federal Truth in Lending Act on the basis of the fee. If you believe a creditor violated your rights under the Consumer Fraud Act, you should seek experienced legal counsel immediately in order to fully protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Sales Tax and Bankruptcy

Retail sales tax is not dischargeable in bankruptcy. Excise taxes under 11 United States Code Section 507(a)(8)(E) enjoy priority status and are non-dischargeable unless over 3 years from the filing of the bankruptcy petition. Trust fund taxes under 11 U.S.C. Section 507(a)(8)(C) are never subject to discharge in bankruptcy, no matter how old the tax debt. As a tax which is required to be withheld, retail sales taxes may be considered trust fund taxes. As a tax on the "manufacture, sale, or use of goods," Black's Law Dictionary 646 (9th ed. 2009), retail sales tax is an excise tax. The Legislature created ambiguous language, however, the court, in Dep't of Revenue v. Hayslett/Judy Oil, Inc., 426 F3.d 899, 904-905 (7th Cir. 2005), held that a tax collected on behalf of another was a trust fund tax. When collecting sales tax, a proprietor is aware the tax is to be held until paid to the government. Therefore, retain sales tax is trust fund tax and non-dischargeable in bankruptcy no matter how long the time it has been owing. In re Calabrese, No. 11-3793 (3rd Cir. 2012) sets forth the premise that, although a debtor may obtain a discharge from his debts, it is unjust for him to retain the money of another for his own benefit through the declaration of bankruptcy. As sales tax is truly a tax on the consumer rather than the seller of goods, the seller of goods never truly has title to the funds collected as sales tax. If you are considering bankruptcy you should seek experienced legal counsel immediately in order to fully protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Is Your Lawyer Protecting You By Filing An Involuntary Chapter 7 Petition Against a Debtor?

Recently the chairman of a large firm's bankruptcy division filed an Involuntary Chapter 7 petition against a debtor on behalf of 4 creditor clients. When the case was ultimately heard by the U.S. Bankruptcy Judge Novalyn Winfield dismissed the Chapter 7 petition finding the Debtor had been paying their debts with certain exceptions for which they expressed reasons. As a result of hardships caused them by the bankruptcy petition, the debtor sought compensatory and punative damages as well as legal fees and costs resulting from the creditors' bad faith filing. Prior to the judge deciding the matter of damages and costs, settlement was reached between the debtors and creditors resulting in $4.45 million in costs to the creditors as a result of the failed suit. Although there is evidence the attorney filing on behalf of the creditors may not have undertaken due diligence in investigating the financial condition of the debtors, the firm he is umployed by maintains that the creditors are simply unhappy with their results and do not wish to pay their legal fee, which was described by the firm which filed the petition as being in "the significant six figures." If you are attempting to pursue a debtor, facing foreclosure, considering bankruptcy or filing an involuntary Chapter 7 petition against a debtor, you should seek experienced legal counsel who will act in your best interests in order to protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

N.J.S. 2A:16-49.1 Permits A Debtor To Cancel Liens Against Real Property

Bankruptcy relieves a debtor from debts but does not cancel liens against property of the debtor. In the event a debtor wishes to cancel a creditor's lien against real property the debtor may avail themselves of New Jersey Statute 2A:16-49.1 in certain situations. The debt must be a dischargeable debt to qualify and, if the creditor has levied on the property prior to the bankruptcy filing, the lien will not be dischargeable. If the lien is dischargeable, N.J.A. 2A:16-49.1 permits the debtor to cancel the lien in the event the creditor does not levy within one year of their receipt of notice of the bankruptcy. However, in the event the debtor fails to list the creditor on the bankruptcy petition, unless there is proof the creditor received notice of the bankruptcy, the debtor may not cancel the debt until one year after the creditor receives actual notice. If you are facing foreclosure, considering bankruptcy or an appeal in a bankruptcy matter, you should seek experienced legal counsel immediately in order to protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Rooker-Feldman Provides For Preservation of Favorable State Court Decision

In a proceeding to determine whether the debtors are subject to creditors' proof of claim stemming from a foreclosure action the debtors took the position that creditor, a bank, was not the actual holder of the note. The debtors also argued that the prior creditors were not proper holders of the note. The creditors opposing motion challenged the exercise of jurisdiction by the court on the grounds that hearing the matter would violate the Rooker-Feldman doctrine by altering the state court's ruling in the foreclosure. The Rooker-Feldman doctrine provides that the only court with authority to review a state court's final judgment is the United States Supreme Court. A state's district court is not authorized to review a decision of the state court. Because the bankruptcy court is a lower federal court, the bankruptcy court may not reconsider a state court judgment. This means a party with a favorable state court judgment can challenge the review of the judgment by a bankruptcy court in order to retain the favorable status. If you are facing foreclosure, considering bankruptcy or an appeal in a bankruptcy matter, you should seek experienced legal counsel immediately in order to protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Consumer Must Plead Violations of Consumer Fraud Act with Particularity

Consumer fraud claims require particularized pleadings by consumer in order to survive dismissal in court. A consumer who believes they have been defrauded must present true allegations meeting the statutory criteria. A statement by the defendant must have been false. The defendant had to know the statement was false. The false information must have been intended to or had the effect of inducing the consumer. The false information had to be material, meaning significant enough to affect the consumer's decision to buy. In the event the consumer fails to include in the pleadings violation of the specific provisions of the Consumer Fraud Act (CFA) the consumer's case will fail. If you are facing foreclosure, considering bankruptcy or an appeal in a bankruptcy matter, you should seek experienced legal counsel immediately in order to protect your rights. For more information on consumer fraud, foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Debtor's Transfer of Property to Wife is Fraudulent as Prepetition Planning

A debtor's transfer of his interest in real property to his wife in advance of filing bankruptcy is fraudulent when made with the intent to delay, hinder or defraud creditors. In a process termed "bankruptcy planning" debtors seek ways to maximize exemptions and assets in a bankruptcy. Although there are certain limited exemptions for both real and personal property, overreaching is fraudulent. A debtor may use cash on hand to pay debts that will not be discharged such as child support, spousal support, taxes or secured debt rather than paying unsecured creditors whose claims are likely to be discharged in the bankruptcy. Debtors may convert some non-exempt assets into exempt assets. However, a debtor may not take loans for the purpose of purchasing exempt property, increase unsecured debt in advance of filing or transfer assets to a spouse or other insiders for inadequate consideration. When such transfers are made the court will infer an intent to delay, hinder or defraud creditors. If you are considering bankruptcy you should seek experienced legal counsel immediately in order to fully protect your rights, avoid dismissal of your petition and understand how the bankruptcy laws can help you. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Debtor Must List Creditor On Bankruptcy Petition To Cancel Judgment

If the debtor fails to list a creditor on the bankruptcy petition, the creditor's judgment may not be extinguished unless there is proof the creditor had notice for at least one year and failed to act. The notice requirement permits creditors the opportunity to protect their interests and is a requirement of N.J.S.A. 2A:16-49.1. The statute is designed to prevent judgments discharged by bankruptcy from remaining clouding title. In the event the judgment is a lien on real property the issue of whether the judgment was actually dischargeable in bankruptcy. Dischargeability is affected by the timing of the creditor's levying on the property. In the event a creditor has levied on real property pre-petition, the judgment survives the bankruptcy and is not cancellable. It is critical to remember, the debtor is released through bankruptcy as to personal liability but the debtor's real property is not. Debtors, therefore, may utilize this statutory remedy after waiting one year form their discharge in bankruptcy. However, unless the creditor had notice and failed to avail itself of the right to levy the debtor may not utilize the statutory provision permitting cancellation of the judgment. If you are considering bankruptcy you should seek experienced legal counsel immediately in order to fully protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Lenders Should Avail themselves of Insulation From Liability

Lenders, whether private or public, making repossession would be well advised to petition the court for a rent receiver in the event the lender seeks to re-enter and possess the property prior to foreclosure sale. A lender seeking to obtain rental income from a property, or simple protect the property from further disrepair through occupancy, becomes a mortgagee in possession and subject to full liability in the event a lawsuit arises as a result anyone suffering damages through the use, occupancy or permission to enter the property. A court appointed rent receiver acts as agent on behalf of the lender without subjecting the lender to liability for personal injury victims, building code violations and the like. The rent receiver is also insulated from personal liability and only subject to suit in their capacity as rent receiver. The extent of damages obtainable from either the lender or rent receiver is the sum available to the rent receiver, or lender, through collection of rental income or other income received from operation of the property. If you are foreclosing on a property or facing foreclosure, you should seek experienced legal counsel immediately in order to protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Overhaul to Student Loan Collections Considered

Congress will review the idea of implementing the system used in England for collection of student loans. The current system in the United States often involves debt collection agencies hounding the unemployed without offering mention of available payment deferral programs. The system Congress is pondering will be the use of automatic withdrawals from borrower's paychecks based on their earnings. The withholding would operate like tax withholding or the withholding of child support and alimony by employers when directed by court order. The withholding amount would be at a maximum of 15% of borrower's disposable income after an allowance for living expenses. Proponents hope this will begin to decrease the $1 trillion student loan debt outstanding and eliminate the use of private debt collectors which add hefty fees to the loan balances leaving those responsible for student loan repayment in deeper debt. If you are behind in student loans or other debt you should seek experienced legal counsel immediately in order to protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Retirement Plans Exempt in Bankruptcy

Annuities and other qualified retirement plans are exempt in bankruptcy in order to permit debtor the opportunity to be self-supporting upon retirement rather than relying on government programs for support. The key component to keeping the asset is whether the plan is a qualified retirement plan. A bankruptcy trustee may object to exemptions but only upon providing sufficient evidence rebutting the presumption of validity of the exemption. Section 522(d)(10)(E) of the U.S. Bankruptcy Code sets forth the requirements for the plan as follows: (1) debtor's right to receive payment is on account of age, and (2) the amount to be exempted is reasonably necessary for the debtor's support. If these requirements are met, there is a presumption of validity and the debtor will be able to retain the asset. If you are considering bankruptcy, you should consult an experienced attorney immediately in order to protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.

Bankruptcy Stay Has Limited Term

Although bankruptcy entitles the filer to an automatic stay, the term of the stay is limited. In the event a debtor's case is dismissed by the bankruptcy court the automatic stay is lifted and the property is once again subject to foreclosure. In the event an appeal of the denial is filed, the stay may be extended during the term of the appeal but only in the event the debtor can demonstrate a likelihood of success on appeal. If you are facing foreclosure, considering bankruptcy or an appeal in a bankruptcy matter, you should seek experienced legal counsel immediately in order to protect your rights. For more information on foreclosure, bankruptcy or other consumer debt related matters in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and in no way intended to replace the advice of an attorney regarding your specific matter.