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September 15, 2010

I Owe the IRS Taxes… Can I make payments? What if I’m in Bankruptcy?

Filed under: Bankruptcy,Chapter 7 Bankruptcy,Taxes — Barry @ 8:08 am

Your problem is not unusual. Whether you call it an installment agreement, payment agreement, payment option or a payment plan, the idea is the same — you make payments on the taxes you owe. While that may sound like a good idea, you can save money by paying the full amount you owe as quickly as possible to reduce the interest and penalties you will be charged. Those who cannot clear up their tax debts immediately may find that an installment agreement allows for a reasonable payment option. Installment agreements allow the taxpayer to make smaller, more manageable payments while still paying the tax in full.
Under normal circumstances, (i.e., you are not in bankruptcy) you will need to determine whether you owe more than $25,000 including taxes, penalty and interest. If you owe less than that amount you Online Payment Agreement (OPA) or call the number on the bill or notice (have the bill or notice available, along with the social security number). A fill-in Request for Installment Agreement, Form 9465 (PDF), is also available online and can be mailed to the address on the bill.
If you owe more than $25,000 you will need to file a Collection Information Statement, Form 433F with the IRS. If you are in this situation you may wish to speak to a professional.
If you are in bankruptcy you need to communicate with the IRS. You should not file the Form 9465, but should contact the IRS at 1-800-829-1040 to obtain the phone number for your local bankruptcy insolvency unit. You may also want to consider filing an Offer in Compromise. (More on offers in compromise will be covered in another post.) Again, if you are in bankruptcy and cannot pay your taxes, you need to communicate with the IRS or have your attorney do this for you.

June 24, 2010

Consumer FDCPA Lawsuits up againt Creditors

Filed under: Bankruptcy,Credit,Credit Reports,Creditor,Debts,FDCPA — Barry @ 7:43 am

It is estimated that 541 different collection agencies and creditors have been named in over 500 consumer statute lawsuits filed nationwide in the first half of June.   These numbers were pulled from data from U.S. District Court complaint dockets.   More consumers are fighting back as credit gets tighter and collection agencies especially buyers of junk debt get more even more aggressive.

March 7, 2010

Everything I tell my Bankruptcy Attorney is Privileged, Right? 1

Filed under: Bankruptcy — Barry @ 7:09 am

The question of Attorney-Client Privilege is often asked by prospective clients thinking about filing bankruptcy.

There are several exceptions to privilege.  One of these is where the information is to be disclosed in a public document such as a bankruptcy petition.   In bankruptcy there is little privilege and perhaps even worse, little case law about what constitutes waiver of the attorney-client privilege.   An interesting article was recently published about a 2010 North  Carolina Bankruptcy Court decision, that further cut back on attorney-client privilege.

Luckily, this case is not binding on bankruptcy courts in California. You need to clarify with your bankruptcy attorney what will and will not be priviledged.

Usually, priviledged matters are matters which are not intended to be released for public consumption. The problem is that virtually anything you bring to your bankruptcy attorney, if it will end up in your bankruptcy petition is ultimately public. What does this mean for the average client? If you tell your bankruptcy attorney that you murdered your mother… this will in all liklihood be priviledged. But it will in all likelihood not be priviledged if you tell your bankruptcy attorney that you have $10,000 in an offshore bank account that you don’t want to disclose in your petition. Sure your attorney may not disclose this resulting in a crime for both the client and attorney. The best thing is to be honest and know the limits of where attorney-client priviledge begins and ends.

March 4, 2010

Can I discharge Personal Income Taxes in a Chapter 7 Bankruptcy?

Filed under: Bankruptcy — Barry @ 4:29 pm

In general, Personal Income Taxes1 may be discharged in Chapter 7 bankruptcy, IF, you meet five (5) requirements.

  1. The tax you seek to discharge must be from a tax year over three years old.  For instance, discharge your 2007, income taxes, they were due on or before April 15, 2008.  Therefore you cannot discharge your 2007 tax liability until after April 15, 2011.
  2. The tax return must have been filed more than two years before the bankruptcy.  If you filed your tax returns on October 15, 2008, you cannot discharge them in a Chapter 7 bankruptcy before October 16, 2010.
  3. The tax you seek to discharge must have been assessed for more than 240 days prior to filing for Chapter 7. You must add on top of this any period of time that an offer in compromise was pending, plus 30 days.  This means that if you wanted to file  bankruptcy on March 15, 2010, the tax must have been assessed on or before July 18, 2009.
    1. If the tax was assessed on June 30, 2009, but you filed an offer in compromise on July 1, 2009 and the taxing authority did not get back to you until October 1, 2009, you must wait until at least June 28, 2010 to file and get a chapter 7 discharge.
  4. The tax returns filed must not have been fraudulent.
  5. The purpose of not filing must not have been “a willfull attempt to evade or defeat the tax.”2

If you meet all five of these requirements you may get a discharge in Chapter 7.  If any one of the 5 requirements is not met, you may use either Chapter 13, or Chapter 11 to get a discharge.

1 The term Personal Income Taxes, does not include, corporate income taxes, employment taxes, sales taxes and other taxes that are not of a personal nature.

2 Morgan D. King, Esq. King’s Discharging Taxes under the Reform Act of 2005 (c) 2009

February 16, 2010

Do I need to list all my debts on my bankruptcy?

Clients and prospective clients  aways ask whether they need to list all their debts in their bankruptcy.  The simple answer is YES; you must list all your debts.  You must list all debts whether they are secured or unsecured.

Just because you have listed all your debts does not mean that you cannot reaffirm them, or decide (outside of bankruptcy) to pay them in part or in full at any time, either before or after receiving your discharge.  However, this gives you flexibility in determining which if any debt you are going to repay.

Often a client will ask whether they cannot list a credit card with the intent to keep it.  Frankly, the issuer will close most credit cards within days of their becoming aware of your filing.  Remember, the Credit Reporting Agencies (Experian, Equifax, and TransUnion) scan the bankruptcy filing system in live time and report the filings to their clients (most of your creditors).  Most of the time, a credit issuer will cancel your account whether or not you owe them anything.

Since you cannot assure which creditors will find out about your filing, you should always include them in your list of creditors.

One caveat, failing to disclose a creditor can:

  1. Prevent your discharge to that creditor (in certain circumstances), or
  2. Prevent you receiving any discharge at all… Failing to list every creditor may constitute perjury or committing fraud on the Bankruptcy Court, which would deny you of any discharge.
  3. The best policy is to list every debt, including what you owe to your mother, your brother, Aunt Sally, or Uncle Sam.  If the Court discharges a debt, you may still decide to pay that creditor later.Please note that deciding to pay a creditor, i.e., your Aunt Sally before you file is also a problem and may allow the bankruptcy court to order your Aunt Sally to pay the money back to the court. (There are different time limits for different creditors; this will be covered in a later post.)

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