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A few years ago I had a client who needed to file for bankruptcy. He was a talented musician who’d had a few good years but when tastes in music shifted he was left behind.
Now he was working an entry level job at 56 years old just to make ends meet. And he was deep in debt to the government for unpaid income taxes.
The IRS and the state taxing authorities were coming after him, threatening wage garnishment. His income was barely enough to get through each month, and he was scared.
His problems were magnified by the fact that he’d never filed tax returns for the years in question. All the tax debts were assessed by the IRS based on their own calculations – not his.
In order to get him through bankruptcy, he needed to get his tax returns filed.
Disclosing Your Income and Tax Information
The Statement of Financial Affairs for Individuals Filing for Bankruptcy, one of the documents you’ll need to complete in order to file for bankruptcy, asks for your income over the past two years. That means you’re going to need to get your hands on that information, and tax returns are typically the fastest place to look. You can get that information without a completed tax return, but the information is more difficult to get together.
Beyond that, you’re required by law to list all of your property – and that includes any tax refunds you may be owed. If you haven’t filed your returns then you don’t know whether the government owes you money (lots of my clients thought they owed money for taxes only to find out they were wrong), and if you don’t list the refund then you lose the right to claim it after your bankruptcy case is over.
Income Tax Returns In Chapter 13 Bankruptcy
The problem of unfiled taxes in terms of filing bankruptcy, however, hits you square in the face if you’re filing Chapter 13.
Under the U.S. Bankruptcy Code (11 USC 1308) you’re required to have tax returns filed for all taxable periods ending during the 4-year period ending on the date of the filing of your bankruptcy case – and you’ve got until the day before your meeting of creditors to get it done.
Depending on where you file for bankruptcy, your local rules may also require that you provide copies of tax returns to the trustee assigned to your case. Without those filed returns, the trustee may have a bone to pick with you – and that will ultimately go to the judge.
So if you’re behind the times in terms of filing your taxes, and don’t have everything lined up you’re going to run into some severe problems when filing bankruptcy under Chapter 13.
Income Tax Returns In Chapter 7 Bankruptcy
If you’re filing Chapter 7 bankruptcy then you may have problems if you haven’t filed your tax return for the past year.
Under the U.S. Bankruptcy Code (11 USC 521(e)) you’ve got until 7 days prior to the meeting of creditors to provide the case trustee with a copy of your most recent tax return.  If you’ve been diligent about your obligations this should be a snap, but if you’re sending along a 5 year old return yet showing current income then under 11 USC 521(f) it’s a different story.
You may be required to file with the court copies of your tax returns that are past due; you may also be required to file them with the court on a going-forward basis for some period of time.
All in all, those unfiled taxes are going to cause no small amount of headache for you.
Unfiled Income Tax Returns Could Mean No Discharge
On a larger scale, when you don’t file your tax returns prior to filing bankruptcy there’s going to be an issue with respect to how those debts are handled in the case.  Not only won’t unfiled tax debts be discharged in a Chapter 7, they won’t be paid out in a Chapter 13.
It’s a better idea to file your returns before walking into bankruptcy court so that your lawyer can help you deal with those potential obligations now rather than having them loom larger later.
File Your Returns for Maximum Protection in Bankruptcy
My client ended up filing 13 years worth of tax returns before we filed his bankruptcy case. Thankfully, he didn’t owe any money for many of those years and had a nice refund check on tap for the most recent two years. That refund offset much of what the IRS said he owed, and he was able to handle the remaining balance with a modest payment plan.
Had he not filed his returns then we wouldn’t have been able to list the refunds, which would have cut off his right to receive the money. His overall tax debt would have been higher, and he would have been unable to pay it off given his financial situation. That would have cost him thousands of dollars in additional tax liabilities, as well as financial headaches that would continue for years after his bankruptcy case was over.
The trustee may have asked the bankruptcy court to throw his case out of court due to a failure to provide his tax returns, which would have put his case in jeopardy. Though we may have won the argument against the trustee, it would have cost my client more money in legal fees, to say nothing of the anxiety surrounding an argument in court.
In the end, filing the tax returns was the better solution. If you’re in a similar position, it’s a good idea for you to follow my client’s lead – file your returns before walking through the doors of the bankruptcy court.
The post Why You Should Always File Your Tax Returns Before Bankruptcy appeared first on Shaev & Fleischman P.C..

Ford Credit Has the Right to Pick Up You Car When you File Bankruptcy, Even If You Are Current. Actually, under the 2005 bankruptcy reform, any car finance company can pick up your car when you file bankruptcy.  But Ford Motor Credit is the only national lender that does that.  (A few states have laws […]The post Keeping Your Car Financed with Ford Motor Credit by Robert Weed appeared first on Robert Weed.

When considering a Walworth County bankruptcy filing, cost is top of mind. When you have a pile of bills, adding another one onto the heap doesn’t make you feel much better. One of the most common questions I am asked is, “How Much Does a Walworth County Chapter 7 Bankruptcy Cost?”
 
Calculating the Cost of a Walworth County Chapter 7 Bankruptcy
The cost of your Walworth County Chapter 7 bankruptcy is going to depend on the circumstances surrounding your case. The only way I could provide a real, and accurate, answer to this question is for you to schedule a free bankruptcy consultation with me. During the thorough, and free, bankruptcy consultation, I would hear the details surrounding your case, provide you with options, and quote you a fee. It is possible you may have other options available to you besides bankruptcy.
The promise I can provide is that the cost of a Walworth County Chapter 7 bankruptcy will cost less than the amount you’re paying monthly to try and catch up on bills. If bankruptcy is the best decision, we can talk about discontinuing payment on some of your bills and using that money toward your Walworth County Chapter 7 bankruptcy cost. This is because, once your bankruptcy is filed, ALL collections must immediately stop. If your bills are going to be discharged through bankruptcy in the near future, there is no reason to keep paying on them. Again, use that money toward your bankruptcy fees.
 
Do You Offer Payment Plans for a Walworth County Chapter 7 Bankruptcy Filing?
Yes! Wynn at Law, LLC makes the cost of a Walworth County Chapter 7 Bankruptcy affordable by offering payment plans. Our Walworth County bankruptcy office offers a $125 a month payment plan. If needed, we can also customize a payment plan just for you.
 
Schedule a Free Walworth County Chapter 7 Bankruptcy Consultation
Wynn at Law, LLC is here to assist you with your financial problems by offering free bankruptcy consultations. It costs you absolutely nothing to step into our bankruptcy office and receive a thorough review of your financial circumstances. Don’t waste another minute smothered in debt you cannot overcome. Schedule a free bankruptcy consultation today. You can reach our Walworth County Chapter 7 bankruptcy attorney by phone at 262-725-0175 or by email via our website’s contact page. Wynn at Law, LLC has bankruptcy offices located in Lake Geneva, Delavan, Salem, and Muskego, Wisconsin.
 
Find out if you qualify for bankruptcy.
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*The content and material on this web page is for informational purposes only and does not constitute legal advice.
 

Does Chapter 13 law allow a debtor to purchase a new vehicle while in Chapter 13 and to finance this car or truck purchase?This was the issue I faced recently while representing a client whose car was totaled in an accident. My client was in the middle of his Chapter 13 case, having paid into his plan for three years, with two years left to go.Now, with no car to drive to work, my client was spending $20 per day on a rental car and needed to purchase a replacement. Here’s how we dealt with this problem.First, my client had to find a replacement vehicle and a lender who would agree to finance a loan despite my client’s status as debtor in an active Chapter 13. Believe it or not, this task was not a problem – my client found a two year old vehicle in the $25,000 range and his dealership was able to arrange financing.My client did have funds for a down payment – insurance had issued a property damage payment of around $7,000 which he wanted to use as a down payment.Not surprising the terms of the finance contract were not great – it provided for a 72 month payoff and a monthly payment of $325 per month.Motion to Incur New DebtBefore my client could sign anything, however, we needed to get permission from the judge since the bankruptcy law requires Chapter 13 debtors to file a Motion to Incur Debt prior to entering any loan contract. The finance company also required a signed order from the judge authorizing the deal.I prepared and filed this Motion to Incur Debt, setting out all the details of the proposed deal. Motions like this in Bankruptcy Court need to be served (mailed to) all creditors and the trustee. In this case, the hearing on our motion was scheduled for almost a month later.This month delay in gaining approval for the “outside loan” was a problem because used car dealers are not going to remove a vehicle from inventory on the hope and expectation that a judge will bless the deal and that the buyer will remain interested.Motion for Expedited HearingSo, my next step was to file a Motion for Expedited hearing. This would allow us to get before the judge in less than a week. I spoke with the judge’s calendar clerk and she advised me to “serve” all parties using email and/or fax, which I did.Three days later my client and I appeared before the judge to present our motion. The trustee had no objections to the deal but the judge had questions about the type of car my client wanted to purchase. My client had negotiated a deal for a used Mercedes SUV in the $25,000 range. The judge noted that she considered vehicles made by Mercedes or BMW to be “luxury” vehicle and thus not appropriate for a Chapter 13 debtor. The judge agreed to authorize a finance deal but only for a non-luxury vehicle.The judge’s order, which I drafted, provided that the debtor is “directed to enter into a purchase contract for a non-luxury vehicle.” The signed order appeared on the clerk of court’s website a day later and my client had what he needed to shop for a vehicle.AnalysisSo, what are the take-aways from this case?First, there are car finance deals out there for debtors currently in bankruptcy or newly discharged. You will pay a higher interest rate but lenders will loan the money.Second, if you are in the middle of a Chapter 13 case, you need to arrange a deal before filing anything with the court. Bankruptcy judges do not like to deal in hypothetical situations – you need to have a proposed deal on the table for the judge to analyze.Third, you and your lawyer cannot control what the judge will do. In my experience, judges are not going to leave you high and dry when it comes to something as essential as daily transportation, but you should not expect the judge to rubber stamp your motion to incur new debt. The judge’s concern about the type of vehicle is not surprising. Bankruptcy judges expect Chapter 13 (and Chapter 7) debtors to reduce their standard of living and eliminate all non-essentials.Finally, our experience in this case show that we can get creative when we need to make things happen quickly in a bankruptcy case. Until now, I have never served anyone by email or fax but given the low likelihood that anyone would object to this motion, we were able to use these non-traditional means of service. I doubt that I would be able to use fax or email service if I was modifying the debtor’s plan to reduce payments to all creditors.I hope this case study of the “new loan while in Chapter 13 bankruptcy” was helpful to you. If you have any questions about Chapter 13 or Chapter 7 or about any debt issues, please contact my office.The post How to Qualify for a Car Loan While in Chapter 13 appeared first on theBKBlog.