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Chapter 7 Bankruptcy: The Tax Considerations

Believe it or not, filing for bankruptcy under Chapter 7, liquidating most of your assets, and starting over is not the end of the story.  Chapter 7 is unique because a separate estate is created using your non-exempt assets (see Chapter 7 posts for more information).  The assets within this separate estate can derive their own income, create their own costs, and they are taxable.

Who Prepares Taxes for a Bankruptcy Estate?

Your non-exempt assets are placed in the care of a trustee.  This trustee is court-appointed and is responsible for preparing the Federal and State taxes of the bankruptcy estate and calculating tax due.  If the trustee does this incorrectly or misses any deadlines, the bankruptcy estate is responsible for paying any fees or interest incurred.  In addition, any tax return owed to the debtor that was not received before filing for bankruptcy can be intercepted by the trustee to fund the estate.

 

Who Prepares Taxes for You During the Bankruptcy Process? 

After filing for Chapter 7 bankruptcy, you are still responsible for filing your personal tax return.  However, there is an election afforded to you as the debtor which allows you to create two “short tax years”.  The first taxable “short year” closes the day before the bankruptcy case starts.  The second taxable “short year” starts on the day the bankruptcy case begins and ends on the last day of the normal taxable year.  If you do not elect to separate the year, the bankruptcy will not affect your tax filing which means you will not receive the tax benefits of filing for bankruptcy.

 

Do Not Forget to File Your Personal Taxes After Filing for Bankruptcy

According to Publication 908 on irs.gov, if you do not file your personal return after filing for bankruptcy, your case might be dismissed by the bankruptcy court.  If you did not file and you were notified that you must file, you have 90 days to do so or your bankruptcy case will be dismissed.

 

The tax implications of filing for bankruptcy are enormously complex and it is often important to retain the services of an attorney who understands these issues.  Dsouza and Strachan Lawgroup Group of Plantation, Florida has the experts you need.  Elias Dsouza has been helping people through the bankruptcy process for over 15 years.

A Guide to Personal Bankruptcy Under Chapter 7 (Part Two)

At this point, we know that not everyone is eligible to file for bankruptcy under Chapter 7, we know you must complete credit counselling before you file, you must take the means test, and you must have less than $100 of income after the calculation (generally).  There are exempt assets (things that do not have to be liquified by law) and non-exempt assets (things that are usually liquified during the Chapter 7 process).   Did you know that exempt assets vary from state to state?

Assets considered exempt under Florida law:

  • Annuity contract proceeds excluding lottery winnings.
  • Death benefits paid to a certain person and not an estate.
  • Damages paid to an employee for working in a hazardous environment.
  • Property of a business partnership.
  • Pensions for most first responders, state employees, and teachers.

This list is not comprehensive and these assets are considered exempt in addition to the assets protected under federal law (see previous post).


Does Filing Under Chapter 7 Have Tax Implications?

In short, yes.  The IRS does offer a comprehensive guide on this subject and we will be covering this topic later this week.

 

Do You Need an Attorney to File Chapter 7 Bankruptcy?

It is legal to file for personal bankruptcy without an attorney in the state of Florida.  Instructions can be found here.  However, it is a complex process and it could be very beneficial to retain the services of an attorney because they have an understanding of the law, they can explain what debts can be discharged and what assets can be exempt, and they can explain the tax consequences of filing for bankruptcy under Chapter 7.

If you are considering filing for bankruptcy under Chapter 7, consider Dsouza and Strachan Lawgroup Group.  With more than 15 years navigating this incredibly complex topic, Elias Dsouza is ready to help you get a fresh start.

A Guide to Personal Bankruptcy Under Chapter 7 (Part One)

There are any number of reasons you can end up considering bankruptcy under Chapter 7.  Now, you need to understand what it really is.  First, you should understand that bankruptcy can mean a new beginning.  The stress of dodging phone calls from creditors and the anxiety of checking the mail can come to an end.  Second, you should understand what Chapter 7 bankruptcy in Florida is and what it is not.

Are You Eligible for Chapter 7 Bankruptcy?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes pre-bankruptcy credit counseling mandatory within the 180 days preceding the filing of bankruptcy.  This can usually be accomplished in 60 to 90 minutes with an accredited debt councilor.  It is usually around $50, but it can be free of cost if you tell the councilor you cannot afford to pay.

This Act also implemented the means test.   If you use the calculation and your remaining income is less than $100, you are generally eligible to file for bankruptcy under Chapter 7.

 

What is Chapter 7 Personal Bankruptcy?

The defining characteristic of Chapter 7 bankruptcy is the liquidation of assets.  A trustee will be assigned to collect all non-exempt assets and sell them.  The proceeds of the sales will be distributed to creditors.  Non-exempt assets (can be taken and sold) include (but are not limited to):

  • Collectibles such as sports memorabilia, stamps, coins, etc.
  • Family heirlooms.
  • Any cash or investments you may have.
  • A second car.
  • A second home.

Assets considered exempt (generally not taken and sold) are:

  • Motor vehicles.
  • Necessary clothing, household items, furnishings and appliances.
  • Jewelry (up to a defined value).
  • Public benefits such as welfare, social security, unemployment, etc.
  • Pensions
  • Damages awarded for injury.

 

Check back for Part Two as we cover what assets may be considered exempt specifically in Florida and more topics related to bankruptcy under Chapter 7.

If you have read enough and you are considering filing for bankruptcy under Chapter 7, consider Dsouza and Strachan Lawgroup Group.  With more than 15 years guiding people through some of the most difficult times in their lives, Dsouza and Strachan Lawgroup group is prepared to get you the fresh start you deserve.

Are You a Victim of Predatory Debt Collection Practices?

Most people who have unresolved debt have received mail, phone calls or even at-home visits from debt collectors.  While it always feels intrusive, did you know that these debt collections practices may actually be illegal?  The Fair Debt Collection Practices Act (FDCPA) was enacted in 1978 to protect consumers from abusive and/or deceptive actions taken by debt collectors.  According to the National Association of Consumer Advocates some of these practices include:

  • Calling you before 8:00 am or after 9:00 pm.
  • Giving other parties such as employers or family members information regarding your debt.
  • Calling you at work without your permission.
  • Cursing at you or threatening to garnish your social security payments.

In 2018, the average amount of credit card debt per person in Florida is $8,444.  Some of this money lands in collections.  It is important to understand that it is legal for a debt collector to try to collect a debt and often times they are perfectly reasonable, but they cannot attempt collection by any means they deem necessary.  If a debt collector is threatening to have you arrested, calling you repeatedly in an attempt to annoy you into paying the debt, threatening physical harm, or if they have notified you in writing that they are suing you, know that you have options.


What are your options?

If you believe a debt collector is using illegal methods to collect your debt, you can:

  • Contact the Federal Trade Commission and file a complaint.
  • File a lawsuit against the debt collector.

If you are considering filing a lawsuit against the debt collector, you may want to consider legal representation that specializes in debt negotiation and abusive debt collection practices.  Dsouza and Strachan Lawgroup Group of Plantation, Florida does just that.  Guiding citizens of Broward County through credit card debt negotiation, bankruptcy, foreclosure (and more) is what they have been doing for over 15 years.

Three Thing To Know About Chapter 13 Bankruptcy Cases

Chapter 13 bankruptcy is a form of bankruptcy that requires the debtor to enter into a plan of debt repayment. It is similar to debt consolidation, but has the backing of Court approval, so your lenders do not have a choice about whether to participate in your proposal. When a Chapter 13 case is filed, a repayment plan is proposed and eventually approved by the Court. The debtor then makes a monthly payment to the bankruptcy trustee and the trustee disburses payments to the lenders.

In order to better prepare yourself for what lies ahead when you file a Chapter 13 bankruptcy it is a good idea to go into it with some background about how Chapter 13 cases work. Three things to know about Chapter 13 bankruptcy cases that will help you understand your case more include:

  • A percentage of your unsecured debt will be repaid over the life of your Chapter 13 Plan. The percent you have to repay will depend on how much disposable income you have after paying monthly secured debts.
  • You are permitted to pay the value of some pieces of collateral instead of the balance due, most notably your car. You can also pay your car note at a lower interest rate than what the purchase contract provides. This combination results in a lower overall car payment, paid through your bankruptcy.
  • A Chapter 13 Plan takes between three and five years to complete, meaning you making monthly payments to the trustee for that time period, and once all plan payments are made you receive a discharge of debts.

It might sound undesirable to remain in a bankruptcy for a few years, but during that time your lenders are not allowed to call you. This gives you the freedom you need to get back to your life and takes the stress of not being able to pay monthly bills off of you. The relief that comes with being able to pay bills without fielding collection calls is enormous. When Chapter 7 is not an option, you can get this relief by filing a Chapter 13. The same rules regarding the automatic stay and discharge of debts apply, so you still get all the benefits of the bankruptcy laws.

For help with your questions about Chapter 13 bankruptcy cases, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that help get you back on your feet.

A Step By Step Guide To Chapter 7 Bankruptcy

Bankruptcy comes in two forms for most debtors, Chapter 7 and Chapter 13. Chapter 7 is the preferred type of case to file because it allows a debtor to get rid of all of their unsecured debt. And, in most cases, it is having too much unsecured debt that puts people in the position to need the relief bankruptcy can provide. But before you decide to file a case and count on being able to file a Chapter 7, there are some points of interest to learn.

In order to qualify for a Chapter 7 bankruptcy you have to submit your income and debt information for review. The amount of secured debts you have will be compared to the amount of income you bring in, and if your income shows no ability to repay any of your unsecured debts after making secured debt payments each month, you will be allowed to file a Chapter 7. Here are some of the key components of Chapter 7 cases:

  • All unsecured debt is eliminated, in full. That means you no longer have to pay credit cards, signature loans, and medical bills.
  • Debts for things you want to keep, like your house and car, have to be repaid if you do not want the lender to ask for permission to repossess the item. In most instances the continued payments are made pursuant to a reaffirmation agreement, and that means the debt will still be due after your case is over. If you miss a payment, you can be sued for the debt.
  • The timeline to complete a Chapter 7 bankruptcy is around 3 to 6 months. This relatively short timeframe is an incentive for most people, as they prefer not to be involved in a bankruptcy proceeding for too long.

Getting out of debt, at least unsecured debt, by filing a Chapter 7 helps thousands of people each year. If you have more debts than you have income, come in and talk to us about your bankruptcy options. We will take a look at the numbers and let you know what type of case you can file and how it will help you become more financially secure.

For answers to your questions about debt, contact us at  www.DsouzaLegalGroup.com.

Understanding Bankruptcy In Four Simple Steps

The first step to understanding the benefits of taking certain actions is to understand the action itself. When you are looking for ways to cut down on expenses and get out of debt it is beneficial to have a grasp of how different debt repayment plans can eliminate your debt load. There are several schools of thought on how to get out of debt, from the snowball method to the APR and quick elimination methods; there is bound to be a strategy that works for you. The snowball method of debt elimination provides for focusing on one debt at a time and once it is paid off using the monthly payment for that debt to add to the monthly payment for the next debt. In this way, the payment snowballs and gains momentum as debts are paid. The APR method dictates repayment of the highest rate debt first, and then moving to the next highest rate loan. With the quick elimination method, debtors pay off what they can quickly and then concentrate on the next fastest debt. This gives people a sense of accomplishment and helps them stay on track.

Another popular way to get out of debt is to file for bankruptcy. But the idea scares a lot of people off and too many people are failing to take advantage of all bankruptcy has to offer. To help combat this problem, it is helpful to understand how bankruptcy works before dismissing it as a debt relief option. Here are four simple steps to understanding bankruptcy:

  • Filing a case: filing a case starts with getting your debts gathered and talking to an attorney about what you owe, and what you make. An attorney will go over the numbers with you and prepare your case for filing. All you have to do is provide the data and review the case for accuracy before it is filed.
  • The automatic stay: the automatic stay is in place the instant you file, and it prohibits lenders from contacting you about their debt. This is the single biggest benefit reported by most people who file for bankruptcy, because it gets creditors off their back and relieves the stress that goes along with being harassed by lenders.
  • The 341 hearing: this is the only hearing most people have to go to when they file a bankruptcy case and it is very informal. There is no judge present, and your attorney will be there to make sure you understand any questions you are asked.
  • The discharge: this is the goal of every case, and it is the official entry by the Court that your debts are no longer due. A discharged debt cannot be collected on later, and you will not be asked to make payments on debts that have been discharged.

Bankruptcy also provides a chance to start over, without overwhelming debt.  Let us help you today.

For more information about how bankruptcy can help you, contact us today at www.DsouzaLegalGroup.com. We will go over the facts of your case and let you you’re your next step.

How To Get Out Of Debt When You Don’t Make A Large Salary

Getting out of debt sounds easier if you make enough money to pay your bills each month and have plenty left over for paying down account balances and loans. But if you are stretched too thin already, getting out of debt can sound like an insurmountable task and you might be tempted to ignore warning signs of financial distress. It might not be easy, but even people who make less are able to pay off debt and stay out of debt. The key is to have a good plan, and stick to that plan.

Getting out of debt when your budget is tight takes not only planning, but also a bit of sacrifice. The good news is that the sacrifice is short term, but the effects of living debt free last a lifetime. Some tips for getting out of debt when you don’t make a large salary are:

  • Refinance your debt by taking out one loan to pay off all of your debts, with an overall lower interest rate and repayment term.
  • Eliminate unnecessary spending and put that money towards debt, or to an account reserved for emergencies.
  • Take a part time job, temporarily, to make some extra cash to pay on your obligations.
  • Shop around for lower insurance rates, lower interest rates, and lower cell and utility services.

Another option is to modify your mortgage, which will give you a lower interest rate and lower house payment. The money you save can be used to pay off low balance credit cards or signature loans, and then to tackle larger debts. If your circumstances do not allow you to do any of these things, you can also talk to an attorney about filing for bankruptcy to ease your financial burden. Bankruptcy will help get your finances in order and give you a clean slate to start fresh. Eliminating debts relieves the pressure that goes along with owing more than you make, and gives you a fresh perspective on how to budget for the future. When you no longer have to worry about making ends meet you can start planning for long term financial goals and put a plan in place to reach those goals.

For help eliminating debt and information about how bankruptcy can help you get out of debt, contact us at www.DsouzaLegalGroup.com.

Does Shopping Around For Mortgage Rates Really Lower My Payment?

When it comes to making a major purchase it is always a good idea to shop around. Whether you are looking at getting a new car, taking a vacation, or buying a house the amount of money you pay is probably a major part of your decision making process. This is where negotiation and shopping around helps save you money. Car dealers often compete for buyers’ dollars by offering financing incentives and other sales, and travel sites can be a good place to compare hotel and flight packages. When it comes to a house, you already know it is common to go back and forth with the seller on a reasonable price, but did you also know you might be able to get a lower payment simply by how you pick your lender?

Shopping around for an interest rate for your mortgage can get you a lower payment, if you are able to find a lender who offers a low rate. Most times rates are lower if:

  • You have a good credit score, with minimal debt and a record of on time payments.
  • Agree to set up automatic electronic payments.
  • Get a loan from a local bank or credit union rather than a large lending institution. Locally owned banks and credit unions typically have more flexibility than larger banks and if you are member you may enjoy perks not offered by traditional lenders.

Once you have checked your options, go with a lender that offers the best rate for your loan. Other factors that might play into your decision include the repayment term length, whether you can prepay the loan without penalty, and the date on which your payments are due each month. Getting the best rate and repayment schedule will allow you to make your house payments on time, but even with the best planning it is possible to fall behind. If you have taken a financial hit and need help getting your finances back in order, consider filing for bankruptcy. Bankruptcy will eliminate some of your debts, or at least reduce them so you can pay what remains. There are two types of bankruptcies, and the type of case you are eligible to file depends on your personal financial situation. Your secured debt to income ratio will be examined, and depending on how much disposable income you have each month you will be placed in either a Chapter 7 or a Chapter 13.

For more information about bankruptcy, contact us at www.DsouzaLegalGroup.com. We will help you make choices about your money that are right for you, and that will give you the financial freedom you deserve.

 

 

Four Things To Know About Mortgage Modifications

A mortgage modification is a way for homeowners to lower their house payment, and free up disposable income each month. The way it works is that the current home loan lender rewrites the loan, lowering the interest rate and giving you a lower payment. But the process can be complicated, and many homeowners become frustrated along the way and allow their lender to delay or stop the process short of doing a full modification. These possibilities make it critical to seek help when trying to modify your mortgage, so you are not taken advantage of and so that you can get to the end result you envisioned when starting to go through the procedure.

Four things to know about how mortgage modifications work and what you can expect when filling out an application are:

  • Your lender will ask for proof of income, and proof of financial hardship. Be prepared to provide these documents and also be prepared to keep copies and track delivery of what you have sent to your lender. It is always a good idea to send things by certified or overnight mail so you have proof of delivery.
  • Tracking delivery of documents you send your lender becomes necessary because many lenders ask for resubmission of things that have been previously provided. When you are able to prove delivery, you will be able to avoid spinning your wheels.
  • Temporary modifications are common, which require you to make a set number of payments under the proposed modification before the lender will make a final modification. The reasoning behind a trial modification period is so the lender is provided assurances you are capable of making the new payment.
  • Having an attorney present your application and negotiate on your behalf may get you faster results, and allow you to avoid the run around.

If a mortgage modification does not offer you the relief you need, you should also give filing bankruptcy a thought. Bankruptcy will either eliminate or reduce your debts, including both secured and unsecured obligations. So, if you need more relief than can be obtained by lowering our house payment, bankruptcy will give you that relief.

For more information about how to get out of debt by modifying your mortgage, filing bankruptcy, or a combination, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.