Archive for July, 2013

Does Filing Bankruptcy Help You Pay Taxes?

Tuesday, July 16th, 2013
article by admin

What do YOU owe Uncle Sam?

One of the things that most people think they know about bankruptcy is that bankruptcy won’t get you out of paying taxes.  Like most things most people think they know about bankruptcy, that’s not entirely true.  While there are some taxes that are never wiped out in bankruptcy, most people don’t owe those types of taxes.  Most people owe income taxes, which can sometimes be discharged in bankruptcy.  In addition to the discharge of some taxes, bankruptcy can also offer options to getting taxes paid.

If you have owed income taxes for a while, go see a bankruptcy lawyer about whether those taxes could be discharged.  The timing issues are very specific and it’s a finicky issue to figure out, but its worth looking into.  There are all kinds of ways that a bankruptcy can help if some or all of the taxes are dis-chargeable.  The taxes might be completely discharged in a Chapter 7 case, if you otherwise qualify for Chapter 7, or you might be able to discharge part of the taxes and reduce your balance to something you can handle.  Or it might be possible to reduce your liability and pay the balance in a Chapter 13 payment plan.

If you have a tax lien that you need to resolve, a Chapter 13 payment plan may give you an affordable way to pay that off.  A Chapter 7 generally won’t resolve a tax lien, but in a Chapter 13 case you may be able to value the property (or the equity in property) that the tax lien attaches to, and pay that over the life of a Chapter 13 plan.

Bankruptcy can also help if you are carrying so much other debt (like credit cards or finance companies) that you can’t afford to pay your taxes.  The solution to your tax problem may be as simple as discharging other debt so that you can afford to pay your taxes, especially if you have been balancing your budget by reducing your tax withholding, or not paying your estimated taxes.

It is important to note that bankruptcy is not always the best answer.  You may have legitimate defenses to the tax liability itself, or you may be better off reducing your tax liability by presenting an offer in compromise.  Every situation is different, and the intersection of tax and bankruptcy law is one of those places where you really need an expert.

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.

A 13 bankruptcy repayment plan does not necessarily mean that you must repay your debts in full.

Tuesday, July 2nd, 2013
article by admin

Don’t be scared off by a chapter 13 bankruptcy payment plan.

It does not mean you have to pay everyone back in full with interest. After all, if you could afford to pay everyone back, you would not be thinking about filing a bankruptcy. It may mean you pay NOTHING to your general creditors, the ones without priority status or collateral. So, just how much do you have to pay back in chapter 13?

The formula is simple, You must pay the higher of these four tests to your unsecured claims:

  1. Administrative claims: Administrative claims include the filing fee, trustees fee, and attorneys fees for your lawyer. Pay 100
  2. Priority claims: Priority claims include back child support and alimony and most federal and state taxes. Pay 100%
  3. Best efforts tests:  Best interest of creditors test. Your creditors must receive as much as they would receive if you filed a chapter 7 bankruptcy. This includes your equity in non-exempt property and the money the trustee can recover for payments you made preferring certain creditors and improper transfers of property minus the cost of liquidation and the trustee fees and expenses. Often, the result of this test is zero.
  4. Best interest of creditors test:
    Best interest of creditors test. Your creditors must receive as much as they would receive if you filed a chapter 7 bankruptcy. This includes your equity in non-exempt property and the money the trustee can recover for payments you made preferring certain creditors and improper transfers of property minus the cost of liquidation and the trustee fees and expenses. Often, the result of this test is zero.

Optional plan provisions:

You also may pay a home mortgage arrearage, a car lender or other secured claims in your chapter 13 plan to keep your property. You may also pay co-signed debts or special classes of creditors.

Your plan payment must be feasible. The math must work. Plan funding must be practical and affordable. That means you have to pay in enough money to pay what you must pay to unsecured creditors and you have to pay in enough money to pay the creditors you may pay.

Chapter 13 may be less than 100% repayment:

Your bankruptcy attorney knows the rules for getting a chapter 13 plan approved in your locale. Do not let the myth that chapter 13 means paying back all your debts stop you from considering chapter 13. It is not true.

Chapter 13 can be an powerful tool to manage and resolve your financial problems. You may be surprised to find out that your chapter 13 payment may be affordable and dramatically less that your payments were before bankruptcy. Your attorney can analyze your situation and tell you exactly how much you have to pay in chapter 13.

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.