When Should I File For Bankruptcy? -'Tis The Season

Many individuals who are facing mounting consumer debt issues may begin to wonder: "When should I file for bankruptcy?" When it comes to filing for bankruptcy, as with many other legal proceedings, timing is a major factor and should be considered when deciding when is the right time to file for bankruptcy. Many debtors may substantially benefit from filing a bankruptcy petition in December rather than in January or other ensuing months. First, many employers give their employees annual bonus checks at the end of the calendar year to coincide with the holidays. The bonus money becomes part of an individual's income and is factored into the Means Test calculation if the debtor files in January. This may cause the debtor's average income amount, for the purposes of the test, to exceed the allowable amount thus disqualifying him from filing for Chapter 7 bankruptcy. Therefore, it would be beneficial for a debtor to file after he receives a bonus check, but before the income is used as part of the Means Test calculation. Next, if a debtor owes federal taxes and expects a tax refund, he can avoid a federal tax offset if he files before December 31st . The Bankruptcy Code permits a creditor to decrease the refund amount that is owed to a creditor by the amount that a debtor owes to that creditor. Stated differently, if the IRS owes a debtor a tax refund and the debtor owes the IRS a tax debt for a previous year, the IRS can keep that debtor's tax refund and use it to satisfy his tax debt, even with the automatic stay that bankruptcy provides to debtors. Although, there are some rules that the Bankruptcy Code includes, one being the "mutuality of the debts." As expressed in the court case, In re Meyer Med. Physicians Group, Ltd., 385 F.3d 1039, 1041 (7th Cir. 2004), most courts find that mutuality requires that: 1) the debts are held by the same parties; 2) in the same capacity; and 3) the off-setting debts are both either pre-petition or post-petition. A debtor's tax debt is a pre-petition obligation owed by the debtor to the IRS. If the debtor files for bankruptcy in December rather than in January, the income tax refund is a post-petition debt owed by the IRS to the debtor - as a refund for tax year 2013 is not owed by the IRS until after December 31, 2013. The Bankruptcy Code does not allow the IRS to take and apply your post-petition income tax refund to offset a pre-petition tax debt because there is no mutuality of the debts. If you are having trouble dealing with your consumer debt and are wondering when it would be the right time to file for bankruptcy it is imperative that you seek the advice of experienced legal counsel to advise you about the timing of your bankruptcy filing. For more information regarding when you should file for bankruptcy, Chapter 7 bankruptcy, Chapter 13 bankruptcy, foreclosure or any other consumer debt issues in New Jersey visit TheNJBankruptcyAttorney.com. This blog is for informational purposes only and not intended to replace the advice of an attorney

Dionne Warwick Seeks IRS Relief Through Chapter 7 Filing

Singer Dionne Warwick's affiliation with the Psychic Friends Network provided her with no known warning of her future bankruptcy or the need to cut back on her spending. Dionne Warwick filed a Chapter 7 bankruptcy petition in March 2013 stating her income and expenses to be equal at $21,000 per month and leaving her with nothing to pay outstanding debts. Dionne Warwick's stated expenses may have been substantial but, based on her outstanding unpaid tax burden of approximately $10,000,000 they were not substantially deductible. Dionne Warwick owes $7,000,000 to the Internal Revenue Service which accumulated from 1991 to 1999. There is a potential dispute as to the portion of this debt attributable to penalties and interest. IRS debts are dischargeable in the event the debtor meets all of the following criteria: 1) the taxes are only income taxes; 2) the debtor properly filed all returns; 3) the debtor did not attempt to evade payment of the taxes; 4) the debt is at least 3 years old; and 5) the debt was assessed at least 240 days before the debtor files the bankruptcy petition or was not yet assessed. Representatives for Dionne Warwick say she filed all returns and paid the debt leaving only interest and penalties to make up the $10,000,000 outstanding debt. If this is true, because of the age of the delinquent taxes, Dionne Warwick will likely find herself free of this substantial debt she has carried since 1999. If you have been carrying the burden of IRS or other substantial debt, you can also obtain relief through bankruptcy. If you are considering bankruptcy you should consult with an experienced bankruptcy attorney immediately in order to protect your rights. For more information regarding foreclosure, bankruptcy or other consumer debt 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. Our law firm is a debt relief agency and helps people file for bankruptcy relief.

Chapter 13 Plan Disturbed for Want of Service

In a Chapter 13 bankruptcy, the bankruptcy court granted a debtor's unopposed motion ordering the IRS to release a levy and return the debtor's funds. The IRS was also ordered to pay the debtor's attorney fees, costs and actual damages. The United States sought to vacate the order and allow the IRS to retain the levy and debtor's funds based on the court's lack of jurisdiction over the United States and its agencies. The United States argument was grounded in the debtor's failure to provide proper notice of the debtor's motion to the clerk for the U.S. attorney for the district of New Jersey or the attorney general in Washington, D.C. Under Federal Rule of Bankruptcy Procedure 7004. Bankr. R. 7004(4) includes, in pertinent part, that service "upon the United States is effected by mailing a copy of the summons and complaint to the civil process clerk at the office of the United States attorney for the district in which the action is brought and by mailing a copy of the summons and complaint to the Attorney General of the United States at Washington, District of Columbia…" Although the premise behind bankruptcy discharges and confirmation of plans is the provision of a clean slate and a fresh start for the debtor without the need to worry about prior creditors returning, debts may not discharged if the debtor was not properly noticed of the bankruptcy. Under Federal Rule of Bankruptcy Procedure 9024, Federal Rule of Civil Procedure 60(b)(4) operates to allow relief from a judgment or order for failure to properly notice the creditor in a Chapter 13 bankruptcy. If you are considering bankruptcy you should consult with an experienced bankruptcy attorney immediately in order to protect your rights. For more information regarding foreclosure, bankruptcy or other consumer debt 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. Our law firm is a debt relief agency and helps people file for bankruptcy relief.

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.