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How Can Bankruptcy Help Me?

WHAT IS BANKRUPTCY?

Bankruptcy is a legal procedure giving debtors federal protection from creditors.  Under the bankruptcy code you can protect certain assets, get relief from most debts and enjoy a fresh financial start!

HOW CAN BANKRUPTCY HELP YOU AND YOUR FAMILY?

Filing bankruptcy can wipe out credit card debt and other unsecured debts. Once filed, no creditor can collect on those debts.

Bankruptcy can stop creditor harassment.

Bankruptcy can stop repossession of your car and  foreclosure of your home. You may still keep your home even if a foreclosure has already been filed.

Medical debt is discharged through bankruptcy. Overall, medical bills are the main reason in the U.S. for bankruptcy. Hospitals and ER services cannot refuse you service in the future because of your bankruptcy.

 

WHICH BANKRUPTCY OPTION BEST FITS MY SITUATION?

The most common filings for bankruptcy are Chapter 7 and Chapter 13. Chapter 7 will wipe out all your unsecured debt (credit cards, medical debts, utilities, etc.). In most situations, you can keep your house and vehicle in Chapter 7, as long as your current on payments. Chapter 7 is a straight bankruptcy. Chapter 7 bankruptcy will stop all collection proceedings including phone calls, mailings, garnishments and court proceedings. Most bankruptcy filings in the U.S. are Chapter 7.

Chapter 13 is a repayment plan and is sometimes referred to as a wage earner plan. You must have a reliable source of income. Chapter 13 will stop a foreclosure of a home and/or repossession of vehicles. It is designed to help you catch up on your home and/or vehicle payments if you are behind. You will repay 1% to 100% of your unsecured debt, depending on your individual situation. This will last a minimum of three years and maximum of five years. During this time it will be up to the creditors to file claim in order to be paid during your case.

WHAT DEBTS WILL A BANKRUPTCY NOT ERASE?

Most of your debts can be discharged in a bankruptcy. Some kinds of debt can never be discharged. Call and set up a free consultation if some of the following items are part of your debt picture.

Student Loans – Most student loan debt is not dischargeable. In some situations a debtor can discharge student loan debt if they can prove the debt causes an extreme hardship. This is usually an uphill battle but possible.

Taxes – Some income tax debt can be discharged in bankruptcy, but this varies. Make an appointment to discuss your individual situation.

Alimony and Child Support – Back payments (arrearages), current child support and alimony are non-dischargeable .

Fines and Penalties – Most fines that are imposed by a court and most penalties that are assessed by a government agency are non-dischargeable.

WHAT HAPPENS AFTER BANKRUPTCY?

You can improve your credit after the discharge (or completion) of your case. Through bankruptcy people gain the opportunity to rebuild their credit that without the fling would be much more difficult.

FREE CONSULTATION

Contact Keegan & Company Attorneys at 513-752-3900 to schedule a free consultation with an experienced attorney. Choose one of out convenient offices both with free parking: Eastgate and Middletown, Ohio.

IRS TAX DEBT & BANKRUPTCY

There is a common misconception that income taxes are never dischargeable in bankruptcy. The truth is you can discharge federal, state, and local income taxes in Chapter 7, Chapter 13, and Chapter 11. Penalties and interest are also dischargeable. Determining which back taxes are dischargeable can be complex. However, it is possible to discharge significant income tax debt in bankruptcy if your tax debt fits within the following rules:

The 3 Year, 2 Year, and 240 Day Rules

The Bankruptcy code sets out specific time periods that determine if you can discharge your taxes, often called the 3-year, 2-year, and 240-day rules. Under these rules, you can discharge taxes that came due 3 years before filing for bankruptcy, as long as it has been at least 2 years since you filed the tax forms and 240 days since the taxes were assessed. These rules are complex and often misunderstood. You should meet with one of our attorneys to go over your tax records.

1. The 3-Year Rule. This rule states that to discharge your back income taxes, they must become due at least three years before you file for bankruptcy. Bankruptcy Code §507(a)(8)(A)(i). Typically, your federal and most state income taxes become due on or around April 15th of each year. In most cases, it is simply a matter of adding three years to this due date to determine the earliest date you can file for bankruptcy and still discharge your taxes.

Example: Joe’s 2022 federal income taxes are due on April 15, 2023. If Joe owes taxes for that year and wants to discharge them, the earliest he can file for bankruptcy is April 15, 2026 (April 15, 2023, plus 3 years).

Regardless of the initial due date, if you file for and receive an extension of time in which to file your taxes, the due date falls on the day the extension expires.

2. The 2-Year Rule. Under the 2-year rule, your income tax returns must have been filed at least two years before filing your bankruptcy petition. This requirement allows you to discharge your taxes, even if you filed your tax forms late, as long as you file them at least two years before filing for bankruptcy, §523(a)(1)(b)(ii).

Example: Jill’s income taxes were due on April 15, 2023. Jill did not get an extension. However, she did submit her tax forms late on June 1, 2023.  If Jill wants to discharge her 2023 taxes, she cannot file for bankruptcy until two years from the date she filed her taxes AND more than three years from the date the taxes were due.

What if you did not file? If you did not file an income tax return in a given tax year, any taxes assessed by the IRS for that year are not dischargeable. §523(a)(1)(b)(i). We sometimes see clients whose taxes would have been dischargeable, if only they had filed their tax forms. If your tax debt is significant, we may advise you to file your tax forms and wait to file bankruptcy.

Quick Point: If the IRS files a return on your behalf, it is not considered a filed return for the purposes of this rule. You must still file a tax form for that year.

3. The 240-Day Rule. Taxes must be assessed at least 240 days before you file for bankruptcy under this rule or not assessed at all. As a practical matter, the date of assessment is typically on or near the date you filed your income tax form (assuming the IRS and you agree on the amount of taxes owed). However, if you file a correction, or a change results from an IRS audit, the assessment date may be substantially later. §507 (a)(8)(A)(ii).

If you are in a dispute with the IRS regarding how much you owe and plan to file for bankruptcy, you should inform your bankruptcy lawyer of the dispute. A tax dispute can impact the assessment date.

Quick Note: If  back taxes are an issue, it may be necessary to order an IRS “account transcript” (sometimes called a “literal transcript”) for the tax years in question. The account transcript typically includes the assessment date. Note that this is not the same as a “tax return transcript”. You can order an account transcript from the IRS over the phone or online, or by using IRS Form 4506T.

Other actions can add additional time to some or all of the 3-2-240 time requirements, including (a) making an offer in compromise, (b) having filed for bankruptcy previously, or (3) obtaining a taxpayer assistance order. §507(a)(8)(A)(i). However, simply entering into a payment arrangement with the IRS does not toll the statute of limitations.

Other Issues

Tax Evasion and Fraud. If a taxpayer willfully evades taxes or commits tax fraud, the taxes involved are not dischargeable. §523(a)(1)(C). However, the Bankruptcy Code means deliberate tax evasion, not an honest mistake.

Penalties and Interest. Penalties and interest assessed by a taxing authority are dischargeable, along with the taxes. In other words, if the taxes are dischargeable, the penalties and interest attached to them are dischargeable as well.

Tax Liens. Discharging income taxes in bankruptcy does not remove a tax lien. You can certainly file for bankruptcy with a tax lien, and the underlying debt will be discharged, if you meet the requirements of the 3-2-240 rules. However, the lien against property you acquired before bankruptcy still stands. Discuss the implications of this with one of our attorneys.

MORE INFORMATION

The tax rules are complicated and the above discussion is not legal advice. We will need to spend some time with you and your tax records before we give you legal advice.

At Keegan & Company Attorneys we offer a free consultation with a knowledgeable attorney to discuss your individual situation. Call 513-752-3900 to schedule your free consultation at our office.

Is Personal Bankruptcy Filing Made Public?

Are you considering filing for bankruptcy protection, but concerned neighbors may read about it in the paper or on the internet? Bankruptcy filings are public record but the fact that you filed is not something that is easily obtained by the general public.  There is a public access system known as PACER which contains information regarding all federal court filings in the United States.  To gain access to that system you must register and pay per page for each document you obtain. Pacer is more or less used for bankruptcy professionals, lenders, and others who have direct need to look up prior bankruptcy cases in detail.

The fact that you filed bankruptcy will appear on a credit report for up to 10 years.  Therefore, if you apply for a job, rent an apartment, or apply for credit, those obtaining your credit report with your consent will become aware of your bankruptcy filing. Additionally, in certain applications there may be questions concerning whether or not you have ever filed a bankruptcy before.

For the most part, the fact that you filed for personal bankruptcy will be known by just you and the others you inform.  When you file for either Chapter 7 or Chapter 13 bankruptcy, you are required to list all of the people to whom you owe money.  If you owe a family member or a friend or anyone else, that person’s name and address must be listed on your petition.

BENEFITS

What kind of relief are you obtaining?  Are you saving your home from foreclosure?  Are you stopping a wage garnishment that’s taking 25% of your pay?  Are you getting a drivers license that is currently suspended due to reinstatement fees?  Are you unable to make ends meet because of your debt commitments?  The psychological relief our clients receive from riding themselves of debt is usually great.

MORE INFORMATION

Since 1992, Keegan & Company Attorneys has helped thousands of people protect their assets and gain freedom from overwhelming debt. Call 513-752-3900 to schedule a free consultation with an experienced attorney. We have 2 convenient locations: Eastgate, Ohio and Middletown, Ohio. We offer fair fees, expert advise, and flexible appointment times.

Bankruptcy and Vehicles

A major concern when thinking of  bankruptcy is the potential loss of your vehicle.  The best solution depends on many factors such as the value of your car and the status of your loan.

You own your car free and clear

There are certain exemptions that can allow you to keep your car.

You are current on your vehicle

If your intention is to keep your vehicle, continue making your payments during the bankruptcy. You will need to sign a reaffirmation agreement where you re-sign on your vehicle loan. This reaffirmation agreement makes the debt you owe on your vehicle non-discharged in bankruptcy.

You are upside down on your vehicle

Do you owe more than you vehicle is worth.? You could be in this situation for several reasons, usually because you traded in a previous vehicle that had a loan balance. This also happens as vehicles depreciate. One benefit of bankruptcy is access to a special program that allows you to re-finance your vehicle for what it is currently worth. This “redemption” program may not be suitable for everyone.

You are behind on your vehicle payments

If you are behind on your payments and want to file Chapter 7 and keep your vehicle you will need to get current. Creditors will allow a reaffirmation agreement if you are current. If you are behind on your vehicle and want to keep it but do not have the funds to get current on your payments, then Chapter 13 may help you. Under Chapter 13 bankruptcy you can catch up and pay off your vehicle over 3-5 years.

Repossession

If the vehicle is repossessed and sold at auction you may have a “deficiency balance”. This is the amount owed after the amount received for your car at auction. This unsecured debt can be discharged through bankruptcy.

WE CAN HELP

Every situation is unique. Call us at Keegan & Company Attorneys, 513-752-3900, and schedule a free consultation at one of our convenient offices. Our free consultation with an experienced attorney will allow plenty of time to discuss your individual circumstance.