Eliminating Tax Debts in Chapter 7 Bankruptcy

 

Bankruptcy can wipe out your Tax Debt. Contrary to what you may have heard, bankruptcy can provide relief from the IRS.

Conditions for Discharging Tax Debt

• The Tax Debt must be a federal or state income tax
• The Tax Debt must be three years old or older
• You must have filed a valid tax return
• The Tax Debt was assessed more than 240 days ago; and there was no fraud in connection with the tax return

Does Your Tax Debt Qualify for Discharge?

An easy-to-use online tool that reveals when you can file bankruptcy to discharge tax debts is www.taxdischargedeterminator.com.

Solve Your Tax Problems

Bankruptcy can change the playing field when the IRS is being unreasonable. It’s free to chat with me about your options – you can call or text me at 215.551.7109, or drop me a line.

The Power of the Automatic Stay: You can finally sleep at night.

 

• Has your phone been ringing off the hook with calls from creditors?
• Are you looking out the window to make sure your car hasn’t been repossessed?

The Automatic Stay

The mere act of filing bankruptcy can bring all of that to a screeching halt.  Creditors and bill collectors MUST cease collection activities the moment they find out you have filed bankruptcy.

What does the automatic stay prohibit?

The automatic stay prohibits:

• Sheriff Sales
• Foreclosures
• Evictions
• Wage and bank garnishments
• Repossessions
• Collection calls

It’s free to chat with me about your options – you can call or text me at 215.551.7109.

Keeping A Car In Bankruptcy

You can keep your car despite filing for bankruptcy. Everyone who files for bankruptcy can use the bankruptcy exemptions to protect their car.

What Are Bankruptcy Exemptions?

Bankruptcy exemptions are laws that protect your property in bankruptcy. Filing for bankruptcy doesn’t mean you have to give up your car. You can combine the wild card exemption and the motor vehicle exemption to protect almost $20,000 of equity in your vehicle. 

The Wild Card Exemption

The most important exemption is the “wild card,” as it can be applied to any property. You can use the wild card exemption ($15,425) to protect your car.

The Motor Vehicle Exemption

You can also use the motor vehicle exemption ($4,450) to protect your car. By simply stacking these two exemptions together, you can protect almost $20,000 of equity in your car when you file bankruptcy.

The Bottom Line

Your car is protected. 99% of clients erase their debt and keep their car.  It’s free to chat with me about your options – you can call or text me at 215.551.7109.

Keeping A Car In Bankruptcy

 

You can keep your car despite filing for bankruptcy. Everyone who files for bankruptcy can use the bankruptcy exemptions to protect their car.

What Are Bankruptcy Exemptions?

Bankruptcy exemptions are laws that protect your property in bankruptcy. Filing for bankruptcy doesn’t mean you have to give up your car. You can combine the wild card exemption and the motor vehicle exemption to protect almost $20,000 of equity in your vehicle. 

The Wild Card Exemption

The most important exemption is the “wild card,” as it can be applied to any property. You can use the wild card exemption ($15,425) to protect your car.

The Motor Vehicle Exemption

You can also use the motor vehicle exemption ($4,450) to protect your car. By simply stacking these two exemptions together, you can protect almost $20,000 of equity in your car when you file bankruptcy.

The Bottom Line

Your car is protected. 99% of clients erase their debt and keep their car.  It’s free to chat with me about your options – you can call or text me at 215.551.7109.

PREDATORY MORTGAGES WITH BALLOON PAYMENTS

PREDATORY MORTGAGES WITH BALLOON PAYMENTS

 

A balloon payment is one very large payment you make at the end of the mortgage loan – typically $10,000 to $30,000. Predatory lenders like balloon payments because they can tell you that your monthly payment is low. Many times these balloon payments are “hidden” in the contract and often catch borrowers by surprise as the balloon balance is owed in full – immediately. Failure to pay it results in foreclosure.

What to do if you can’t afford your balloon mortgage payment

If you can’t afford the lump sum payment, you have three options to consider:

• Ask for an extension: Lenders may provide borrowers more time to pay back the balloon payment, so it’s worth requesting an extension.

• Refinance your mortgage: You may be able to refinance your mortgage.

• File Chapter 13 bankruptcy: In a Chapter 13, you can repay the balloon payment over 5 years and protect your home from any threatened foreclosure.

Example: $30,000 Balloon Payment

If your mortgage accelerated, leaving a $30,000 balloon payment due immediately, you can file a Chapter 13 bankruptcy to stop any threatened foreclosure and propose to pay that $30,000 balloon over 60 months with interest.

The Bottom Line

Only a Chapter 13 bankruptcy can modify the terms of the matured mortgage affording you the option of repaying a balloon payment in 5 years, and preventing any threatened foreclosure.  It’s free to chat with me about your options – you can call or text me at 215.551.7109.

 

PHANTOM INCOME – HIDDEN DANGER OF CREDIT CARD SETTLEMENT

You thought your money problems were solved when you settled your credit card debt with the help of that debt consolidation company, but you're in for a ghostly surprise.  The taxman comes trick-or-treating at your door, looking to tax you on that settlement.

Cancellation of Debt 

When you borrow money and the lender later settles the debt, you have to include the cancelled debt amount as income on your tax return. We call this phantom income as you never actually receive it but the IRS nevertheless taxes you on this phantom income as if you did receive it as income. In the eyes of the IRS, all the money saved in the credit card settlement is treated as reportable income for tax purposes.

$50,000 Credit Card Debt

Let’s say you have a $50,000 credit card debt, and you settle the debt for $25,000. The IRS will add that debt reduction of $25,000 to your tax return as income. You’ll be paying a lot more in taxes that year.

Mandatory Tax Reporting Requirements

Every lender is required to report the settled debts/cancelled debts in excess of $600 on IRS Form 1099-C, Cancellation of Debt. The IRS will be cross-checking your tax return with the credit card company's 1099-C to make sure you report the phantom income. You can expect IRS tax penalties and interest if you forget to report this phantom income voluntarily.

Bankruptcy Is Exempt from IRS Cancellation of Debt Rules

There is no phantom income in bankruptcy. The IRS rules don’t apply. 

 It’s free to chat with me about your options – you can call or text me at 215.551.7109.

TOP 4 MYTHS ABOUT BANKRUPTCY

 

There is a lot of false information on the internet about bankruptcy. The truth is that creditors have plenty of motivation to keep you scared of filing or confused into paralysis.  Here are the top 4 myths about bankruptcy that simply aren’t true.

#1 – If I file bankruptcy, it means I’m a failure at life.

NO WAY. The vast majority of bankruptcy filings result from unpredictable life circumstances like losing a job, getting sick or injured, or divorcing.  Bankruptcy is built into our nation’s law to protect you from having your life ruined by debts you can’t pay.

#2 – If I file bankruptcy, I won’t get credit for at least ten years.

WRONG. You’ll start receiving credit card, and car loan offers during a Chapter 7 bankruptcy. I advise clients to obtain a new credit card once they receive their discharge order. You can also borrow money in the middle of a Chapter 13 case, and I have helped countless people purchase cars, even houses, in the middle of Chapter 13 bankruptcy.

#3 – I want to file, but my spouse doesn’t. Therefore, I can’t.

FALSE. You can file individually or together as a married couple. Your spouse does not need to file with you. It’s not required.

#4 – If I file bankruptcy, I’ll lose everything I own!

INCORRECT. Over 99% of Chapter 7 bankruptcy cases filed by individuals are classified as “no asset” cases, in which the debtor ends up keeping everything they own. You can even keep $1.5 million in an IRA and file bankruptcy.

The Bottom Line

There is a lot of false information on the internet. Call an experienced bankruptcy attorney with your questions. It’s free to chat with me about your options – you can call or text me at 215.551.7109.

Can I Lower My Car Payment in Chapter 7 Bankruptcy?

 

You can lower your car payment in Chapter 7 bankruptcy by redeeming your car loan. 

What Is “Redemption” In Chapter 7 Bankruptcy?

Redemption is a tool available only in a Chapter 7 bankruptcy. It allows you to keep your car by paying fair market value to the creditor, not the amount you actually owe.

How Does Redemption Work?

When you redeem your vehicle, you pay an amount equal to its fair market value. This is often much lower than the amount that remains on your loan. The way this works is as follows: You owe $25,000 on your car, but its fair market value is only $10,000. In Chapter 7 bankruptcy, you can “redeem” your car by paying the lender $10,000 and including the remaining $15,000 balance in the bankruptcy discharge.

722 Redemption Funding

But, you say, “I’m going bankrupt! Where will I get that kind of money to redeem my car?” You can pay the redemption amount by using a company like 722 Redemption Funding, which will pay the redemption amount to your old lender and extend a new loan to you for that amount. I have seen clients cut their car loans in half by working with 722 Redemption.

Experience Matters

That’s where an experienced bankruptcy attorney comes in. I can take a look at your complete financial picture and make a recommendation. It’s free to chat with me about your options – you can call or text me at 215.551.7109 or drop me a line.

DIVORCE & BANKRUPTCY: WHICH COMES FIRST?

 Filing for bankruptcy before a divorce simplifies the issues regarding debt and property division and lowers your divorce costs as a result. It’s a WIN/WIN to walk away with $0.00 debt.

Tenancy By The Entirety

A tenancy by the entirety is a type of real estate ownership reserved exclusively for married couples. There is no dollar limit $$$$$ on the amount of real estate equity protected.

Asset Protection – Unlimited Equity Protection

A tenancy by the entirety protects an unlimited amount of equity in real estate owned by married couples. For example, a married couple with real estate valued at $1,000,000 with a $300,000 mortgage can protect $700,000 in real estate equity.

How Much Is Exempt?

A tenancy by the entirety protects this married couples $700,000 in real estate equity.  However, there is actually no limit on the amount of real estate equity protection in Pennsylvania.

Impact on Bankruptcy

This married couple can erase $200,000 in credit cards by filing bankruptcy and protect their $700,000 in real estate equity so long as the credit cards are in their individual names. Creditors of only one spouse cannot acquire an interest in property owned by tenancy by the entirety.

Divorce Destroys Tenancy By The Entirety

Divorce terminates the tenancy by the entirety protection and this newly divorced couple would be required to repay $200,000 in credit cards in full.

Bankruptcy Before Divorce

The best financial decision married couples on the verge of divorce can make is to file bankruptcy right away to erase $200,000 in credit cards, and split the $700,000 in real estate equity between themselves. Erasing the debt and protecting their equity is the best decision for their children and themselves.

The Bottom Line

Cooperation benefits both spouses on the verge of divorce. It’s much better to walk away with $0.00 debt, and split $700,000 in real estate equity. That’s a Win/Win. It’s free to chat with me about your options – you can call or text me at 215.551.7109

The Alphabet of Debts

 

Chapter 7 bankruptcy erases MOST if not ALL of your debt in as little as 90 days.

Which Debts Will Chapter 7 Bankruptcy Discharge?

Auto accident claims

Back rent & Business debts

Credit card debt

Deficiency balances after a repossession

Family and friend personal loans

Gambling debts

HOA fees & Hospital debt

Individual loans

Judgments

Keno debts

Leases and contracts

Medical debt

Notes -  House & car promissory notes

Old tax penalties and unpaid taxes

Payday loans

Questionable debts – it’s best to list the kitchen sink to ensure you get a fresh start

Retail store cards

Social Security overpayments

Tax debt older than 3 years where the tax payor filed all returns

Utility bills & Unsecured lines of credit

Vehicle repossessions

Wawa debts

Yuletide debts

Zombie debts 

An experienced bankruptcy attorney can guide you through the process and make sure your rights are protected. It’s free to chat with me about your options – you can call or text me at 215.551.7109, or drop me a line.

IRA Bankruptcy Protection - $1,512,350

Your IRA Retirement Account is Protected

Fortunately, virtually all ERISA-qualified retirement accounts and pension plan funds are excluded from bankruptcy.  The 2005 amendments to the US Bankruptcy Code permit a debtor to protect a $1,512,350 in his/her IRA. 

Fully-Protected Retirement Accounts

Congress amended the US Bankruptcy Code in 2005 to protect an unlimited amount in any retirement fund that is exempt from taxation (think 401k, 403b, Keoghs, Profit-Sharing Plans, and Defined-Benefit Plans).

Withdrawn Retirement Funds Lose Protection

Any money taken out of a retirement account loses its protection.  Worse, those withdrawn funds will be considered as income and figured into your Chapter 7 means test qualification.

The Bottom Line

You can use the bankruptcy exemptions (522(d)(12) to protect over a million dollars in your retirement account. Park It. Don’t spend it. File bankruptcy and erase your debt.  An experienced bankruptcy attorney can guide you through the process and make sure your rights are protected. It’s free to chat with me about your options – you can call or text me at 215.551.7109, or drop me a line.

Chapter 7 bankruptcy can give you a Fresh Start – freeing yourself from the heavy burden you’re carrying in as little as 90 days.

Thousands of clients have told me they immediately feel the weight lifted from their shoulders as soon as we press the “File Now” button in our bankruptcy software.

The mere act of filing bankruptcy immediately results in a court order prohibiting your creditors from continuing any collection actions against you.

>Late night calls from creditors stopped
>Lawsuits stopped
>Debt collection letters stopped

Creditors MUST cease collection activities the moment they find out you have filed for bankruptcy.

The US Bankruptcy laws are designed to get you off the ropes so you can fight another day.

An experienced bankruptcy attorney can guide you through the process and make sure your rights are protected. It’s free to chat with me about your options – you can call or text me at 215.551.7109, or drop me a line.