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.