Tag: Chapter 13 Bankruptcy

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Despite bankruptcy getting rid of the majority of your debts, you are still required to file a federal tax return with IRS. With chapter 13 bankruptcy, individuals and small business owners can repay their creditors through a repayment plan. However, before filing for bankruptcy, all tax returns for the past 4 years must have been filed before the 341 meetings. Additionally, all current and applicable local, state and federal taxes due either during or after bankruptcy should also be filed. If you fail to pay current taxes or file tax returns, Dallas based bankruptcy law firm Recovery Law Group say, your bankruptcy case will be dismissed.

Any debts canceled as a result of bankruptcy should not be included while filing tax returns. Any loss of property as a result of canceled debt should be included in tax returns. Since trust accounts are not taxable any interest in them should not be included while filing your taxes. You might receive tax refunds during the bankruptcy process; however, they can be used to pay your tax debts. On completion of your chapter 13 bankruptcy repayment plan, some federal tax debt might be discharged. Experienced bankruptcy lawyers can help you with differentiating which debts can be discharged. You can consult with bankruptcy attorneys at 888-297-6023 to discuss your case.

Moreover, income from social security, any repartitions for war crimes or terrorist acts are not included as monthly income. Your monthly income, so calculated, is then compared with state median income for a household of similar size. In case the monthly income is higher, means test is used to check whether you can pay debts after allowable deductions.

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People who are struggling with huge amounts of debts often choose bankruptcy to get rid of them. Chapter 7 bankruptcy is preferred as most of the times you get away without losing any property and all your debts are discharged. However, those who fail to qualify for chapter 7 file for chapter 13 bankruptcy. in this chapter, Dallas based bankruptcy law firm Recovery Law Group lawyers say, debt reorganization takes place and you pay your creditors through a repayment plan. There are pros and cons associated with this chapter of bankruptcy.

Benefits of Chapter 13

• Bankruptcy is removed from the credit report after 7 years, unlike chapter 7 where it stays for 10 years.
• You can protect even non-exempt property in this bankruptcy chapter.
• Unlike chapter 7, there is no means test parameter for eligibility.
• The repayment plan is for 3-5 years duration. Since you pay the debts over a large period of time, you can reduce the payments considerably.
• Since you had made payments to your creditors, lenders favor people who had filed for chapter 13 bankruptcy compared to chapter 7 bankruptcy.
• Compared to chapter 7 filers, re-establishing credit is easier for chapter 13 bankruptcy filers (12-36 months).

An experienced bankruptcy lawyer can help determine whether the benefits are enough to opt for this chapter. You can seek consultation by calling 888-297-6023.

Shortcomings of Chapter 13

• The negative impact of chapter 13 bankruptcy will impact your credit report for seven years.
• While chapter 7 bankruptcy gets a discharge within 3-6 months, chapter 13 takes 3-5 years to get a discharge.
• All of your disposable income is used to pay your creditors through a repayment plan. This will leave no scope for vacation or recreation for as long as the repayment plan continues.
• Income tax for the previous four years needs to be filed in this case.
• Future employment chances might be affected due to bankruptcy as often credit checks are conducted by employers.

After discussing the pros and cons of Chapter 13 with experienced bankruptcy attorneys, you can decide the best course of action to get rid of your debts.

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Suppose, you have a five-year repayment plan under Chapter 13 bankruptcy which you’re unable to keep up to due to lack of money. In order to make up for the shortage, you’ve not been paying your property taxes. Your mortgage company agrees to make changes to your loan, but that will shot up your house payment. Do you think your bankruptcy trustee will decrease your Chapter 13 monthly plan payment by the amount equal to the increase in your mortgage payment? The answer is no, unless under exceptional circumstances.

When you apply for Chapter 13 bankruptcy, the trustee makes your monthly budget of normal living expenses. This budget includes all the necessary expenses which you are bound to make every month. The bankruptcy trustee deducts this budget from your monthly income, and your bankruptcy monthly payment is then decided based on the leftover amount of money.

All the property taxes are originally included in the budget for normal monthly living expenses. In such a case, you cannot request for a reduction in Chapter 13 bankruptcy payments. Reduction in monthly payments of Chapter 13 bankruptcy is possible only if you prove some necessary expense like supporting a family member, which was not originally included in your normal monthly budget. Otherwise, the trustee will tell the court that you’ve spent your tax money for matters, which it was not intended for, and so the lender doesn’t deserve to be penalized.

Thus, it’s better to avoid approaching a fiscal cliff by consulting competent attorneys like https://www.staging.recoverylawgroup.com/. You can also contact them on 888-297-6203 and get more information on ways to get a reduction in Chapter 13 bankruptcy monthly plan payments.

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Imagine, you have not paid the rent to your landlord since past few months, and now your landlord wants to evict you from his property. When the landlord handed you the eviction notice, you offered to pay the late rent (you just got it from a friend who owed it to you), but he asked you to pay an extra $900 to cover the lawyer’s fee, too. According to you, the lawyer didn’t do any work, so you refused to pay that extra amount. Now, in order to stop the landlord from going ahead with the eviction trial, you’ve filed for a Chapter 13 bankruptcy. Will that stop your eviction?

Going ahead with a Chapter 13 bankruptcy, in this case, can force reinstatement of the defaulted lease, but the disadvantage is that you’ll have to pay the complete amount which you owe to the landlord, along with his and your court costs.

Another drawback of filing for Chapter 13 bankruptcy can be that you won’t be allowed to represent yourself in the court. There are less than 1% chances of getting a Chapter 13 bankruptcy approved without an attorney, even if a bankruptcy petition preparer gives you self-help services. Thus, it will be important for you to hire an attorney for yourself which can be really expensive, as most of the bankruptcy lawyers charge around $4,000 for a Chapter 13 bankruptcy case.

The best way to come out of such a situation will be to make peace with the landlord outside the bankruptcy court. It will be comparatively easier for you to convince the landlord, as he’ll be aware that it’ll be almost impossible for him to get any money from you after the eviction. Also, the landlord will also lose added money in the search for a new tenant.

Is It Possible to Discharge a Previously Discharged Chapter 7 Bankruptcy Debt in Chapter 13 Bankruptcy?

Yes, you can discharge your debt in a Chapter 13 bankruptcy, only if you file for it more than four years after the date, on which you had previously filed for a Chapter 7 bankruptcy for the same debt. In case you filed for Chapter 13 bankruptcy in less than four years, you won’t be able to get a discharge. However, you can file for Chapter 13 bankruptcy for the same debt, if you want to, and make payments for it under a repayment plan.

Landing in such a type of situation can be extremely dangerous and thus, it’s necessary to take legal advice from competent attorneys, which you can easily find at https://www.staging.recoverylawgroup.com/. You can also contact them at 888-297-6203.

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Despite what you have read or heard, bankruptcy might not always be the best way to get rid of debts, say, lawyers of Dallas based bankruptcy law firm https://www.staging.recoverylawgroup.com/. Though there are numerous instances when Chapter 13 bankruptcy plan has worked for the greater good of the debtor, there are some instances when filing for Chapter 13 bankruptcy might not be the best move. For instance, a client who is already five years into debt consolidation pays $400 per month with a remaining balance of $3,500. His home is worth $300,000 while he owes $325,000 on his 1st mortgage while $58,000 on his 2nd mortgage. He is current on his second mortgage which has a monthly payment of $600. Since the client makes $100,000 per year and lives frugally, filing for chapter 13 bankruptcy would not be the best way to get rid of debts.

Though bankruptcy will get rid of your 2nd mortgage and turn it into an unsecured claim, you will have to put all your disposable income into the Chapter 13 repayment plan for a period of 60 months. Currently, the client is paying $1,000 ($400 for consolidation debt and $600 for 2nd mortgage); thus Chapter 13 repayment plan will involve a sum of at least $1,000 per month. Since the debtor is living within their means, they might even up the disposable income. Over the duration of the repayment plan, they will end up clearing their debts in full including the 2nd mortgage. Thus, the advantage of opting for a Chapter 13 bankruptcy is that you end up repaying all your debts without paying any more interest. When it comes to the disadvantages of opting for Chapter 13 bankruptcy, in this case, there are quite a few. Filing for bankruptcy will include:

• Attorney fees ($4,000) for a basic chapter 13 case
• Attorney’s fees to strip off the lien ($1,500)
• Court filing fees $281
• $200 for real estate appraisal
• Bankruptcy trustee’s fees $6,000
• Compulsory credit counseling fees $25

I.e. you will end up paying nearly $12,000 for filing Chapter 13 bankruptcy case. This will eliminate any savings you would have made on getting rid of the interest on your debts. Additionally, entering Chapter 13 bankruptcy will put you 5 years behind on getting on a path to credit recovery. Since the debtor was already in a debt consolidation plan for 5 years, this would mean getting 10 years behind. In this situation, working on the consolidation program to get rid of your debts will be the best way. Once that is removed, you can get rid of the 2nd mortgage. To get excellent consulting advice, you can speak with experienced bankruptcy attorneys at 888-297-6023.

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According to the ruling of the Fourth Circuit, people who file for Chapter 13 bankruptcy do not need to include social security as part of their disposable income. This is a huge relief say lawyers of Dallas based bankruptcy law firm Recovery Law Group as the social security income can be saved and you might have surplus income after paying expenses and all planned payments as part of the repayment plan.

Most states are undecided with respect to the inclusion of social security in your disposable income during a Chapter 13 bankruptcy. Despite bankruptcy code stating that social security should not be included for disposable income calculation, many bankruptcy courts dismiss the Chapter 13 repayment plan for not including social security income as being proposed in ‘bad faith’.

The fourth Circuit’s decision is a welcome breath of relief for residents of Maryland, North and South Carolina, Virginia and West Virginia. The court ruling is in accordance with the bankruptcy code’s exclusion of social security income. With this decision, they have joined the Fifth, Sixth, Eighth and Tenth circuits.

The landmark decision makes it optional for people to include their social security income in their Chapter 13 repayment plan. However, you need to discuss this with your lawyer. In case you haven’t hired one, you can call 888-297-6023 to discuss your case.

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According to a ruling of Ninth Circuit Court of Appeals, Chapter 13 bankruptcy filers who have above-median income compared to people of that state and have no disposable income to pay unsecured creditors cannot opt for a 3-year repayment plan. They will be in bankruptcy for the entire 5 years duration. Chapter 13 bankruptcy lasts for 3-5 years depending on your household income. As per Los Angeles based bankruptcy law firm Recovery Law Group lawyers, people with income below state median remain in bankruptcy for 3 years while those with above median income have bankruptcy plan of 5 years.

However, there are certain exceptions to the rule; like a below-median person can opt for a longer plan and an above-median person can opt for a smaller one if then can pay off all unsecured debt before the five years. Another exception which is seen in some circuits is that above-median debtors can opt for a 3-year plan if their disposable income is negative or zero.

In a chapter 13 bankruptcy, all disposable income is used to repay your debts over a period of 3-5 years. The disposable income is calculated by deducting all essential expenses from your monthly income. Even with a high income, the essential expenses might cause your disposable income to be zero or negative. Many courts had allowed above-median chapter 13 debtors without any disposable income to file for a 3-year repayment plan. This allowed the debtor to get out without spending another 2 years in bankruptcy.

However, the Ninth Circuit has joined other circuits in changing the rules for high-income debtors. With changes in their ruling, the Ninth Circuit joins Sixth, Eighth and Eleventh Circuits on the issue. Above median income people who are filing for Chapter 13 bankruptcy in Arizona, Idaho, California, Montana, Nevada, Hawaii, Oregano or Washington should be prepared for their bankruptcy to continue for 5 years. To know more about bankruptcy, you can call bankruptcy lawyers at 888-297-6023and get details regarding repayment plan and bankruptcy discharge.