Archive for December, 2012

Keep a Tax Refund After Filing Chapter 13 Bankruptcy

Tuesday, December 18th, 2012

article from Bankruptcy Law Network

Dana Wilkinson just wrote here at Bankruptcy Law Network of the two-fold analysis that Chapter 13 bankruptcy law performs on a tax refund. The first analysis is the “equity” test. It looks at the expected refund as an asset, prorated as of the filing date, and whether it can be protected (“exempted”) under applicable bankruptcy law. The unprotected amount of the tax refund must be paid to the trustee, although one gets to pay this in small monthly amounts over the length of the case.

The second analysis is the “income” test. A Chapter 13 debtor, whose income is under the median for her household size, must pay to the trustee the surplus after paying for reasonable living expenses. A large tax refund received every year has the appearance of a surplus. Many Chapter 13 trustees expect it.

This is wrong. We all know it’s wrong. You know it’s wrong. It’s wrong because that tax refund is never saved. Of course it’s not saved. It’s needed for busted furnaces and broken water heaters and worn out transmissions and such. Those tax refunds are always spent.


The trick is to be certain that both the refund and its spending both appear on the income and expense schedules I and J. It’s easy to do. Divide the expected tax refund by 12 and that’s the monthly amount to put on Schedule I – Income. Then take a breath, quiet yourself down, and think about where it is likely to go. Put your best-effort estimated amounts in the best-effort expected expense categories. Might your car need a transmission or engine seals or tires or any one of those many things that go wrong with older cars? (This is a 3-5 year Chapter 13 duration, after all.) How old is your furnace, or water heater, or roof, or exterior paint? Things always go wrong, even if we cannot predict the particular thing that will break down or when.

I used to point out to my clients that a refund meant they lost the savings account interest that this money could earn. I never succeeded in changing anyone’s mind,because when income is tight we need to force ourselves into saving the money for future needs. That is the important lesson here. It is not, it never was, that the tax refunds were put away for long term savings. That money is needed for the big ticket repair items that otherwise is never affordable. My clients were smarter than me.

Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg and the Tampa Bay area.

If you would like more information on our practice, please consult our website at:

www.bankruptcyfortampa.com
or call (727) 254-1704.

Should I Tell My Bankruptcy Attorney Everything?

Monday, December 10th, 2012
article by Kurt O’Keefe, Attorney at Law\
Bankruptcy Law Network

The Huffington Post recently highlighted a story: “12 Things You Should Never Lie About,” some of which do not belong in a family blog, however, #11 is:

11. Anything you say to your lawyer. Be upfront with your attorney the way you should be with your doctor. Any lawyer you hire is working to protect your financial interests and/or keep you out of legal hot water. He or she can’t do that if you haven’t disclosed all relevant information.

I don’t know why people conceal things from their bankruptcy attorney. I only know that they do.

Maybe, they want someone to like them, and figure out if they leave out some ugly details, at least the bankruptcy lawyer am will be their friend. The concealed facts, more often than not, are already known to the other side, be it the prosecutor, the bankruptcy trustee, the creditor lawyer, whoever.

Nothing like being in a poker game when the other side, like a creditor or the bankruptcy trustee, knows our cards, which you do not even know.

Think about it!

Bankruptcy attorney-client conversations are protected by privilege.

Most people conceal something because they are trying to get away with something. But, you do not know bankruptcy law, that is why you are talking to a bankruptcy attorney.

If I know about something, I can plan around it, account for it, more often than not in bankruptcy court, I can legally and ethically accomplish the goals of the client, and keep the bankruptcy trustee happy. Or at least not a problem on your bankruptcy case.

People are always giving away property, usually to a relative, before the file bankruptcy.

COME ON

If that worked, Bill Gates could give all his Microsoft stock to his cousin and file bankruptcy.

“Oh, don’t worry about my cars, I switched the title over to my sister last month.” Right. Now you created a problem for your sister, who can be sued by the bankruptcy trustee to get the property back.

Most likely, if it stays in your name, it is exempt under bankruptcy law.

So, yes, ALWAYS tell the truth to your bankruptcy attorney.

Carolyn Secor is a Clearwater bankruptcy attorney and Clearwater foreclosure attorney serving Palm Harbor, New Port Richey, Oldsmar, Tarpon Springs, Seminole, St. Petersburg and the Tampa Bay area.

If you would like more information on our practice, please consult our website at:

www.bankruptcyfortampa.com
or call (727) 254-1704.