Tax Debt and Chapter 7

Tax debt, Tax liens, and Chapter 7 bankruptcy

In a chapter 7 filing, most of the debtor’s personal obligation to pay their debts will be discharged.  Several of the debts that are generally non-dischargeable are domestic support obligations, fines, restitution, student loans, and taxes.  Along with other aspects, the relief of tax debt using the bankruptcy code is a widely misunderstood process.  There is a misconception that most taxes can be eliminated in bankruptcy, which is often not the case.

Although it is a general rule taxes are considered non-dischargeable, certain taxes may be discharged if they meet all of the qualifying conditions:

A)  They are income taxes.  Taxes such as payroll or unemployment taxes will never be discharged;

B)  The taxes were filed timely and at least 2 years prior to the bankruptcy;

C)  The taxes were not filed with fraudulent intent or willful evasion.  For example, taxes with a fraudulent social security number or filed with information in a willful attempt to evade paying taxes are never dischargeable;

D)  The IRS tax assessment was at least 240 days prior to the bankruptcy filing; and

E)  There has been no offer in compromise related to the tax debt.

If the tax debt meets all the above criteria, it may qualify for discharge in a chapter 7.  However, if any of tax debt has an associated IRS tax lien, the lien could survive the bankruptcy.  In other words, your personal liability to pay the debt will be discharged but a lien against your property, including real estate, personal property, and financial assets, will protect the IRS’ interest in the amount owed.  With several exceptions, IRC section 6502(a) (1) establishes a statute of limitation collection period of 10 years on a tax lien.  The tax lien is only applicable to the assets you had at the time the lien was filed.

If a tax lien survives your dischargeable tax debt, there are still options.  Several of these options include an offer in compromise, discharge of the property which allows you to sell property free of the lien, lien subordination which doesn’t remove the lien but modifies its priority and can be useful in getting a loan or mortgage, or you can let the statute of limitation run if there is little to no equity, value, or IRS interest.

Have tax debt? We can help. Our free consultations allow you access to the best legal advice we can offer to help guide you to your best choice. We want you to make the most informed and educated decision on debt relief and feel confident in that decision, whether it is bankruptcy or an alternative to bankruptcy.  Contact us where an experienced bankruptcy lawyer can help start your way to a fresh start.

Call Attorney Kurt G. Larsen at 312-909-1128 or email us today.

Business Owners And Personal Bankruptcy

A number of businesses are funded by lines of credit or personal assets supplied by the business owners. These are used to fund both startup costs as well as the daily operational expenses of the business. However when faced with financial losses and no means to pay off these huge debts, bankruptcy is often seen as way out. For business owners who have used both personal as well as business credit, it is open difficult to decide whether to file for personal bankruptcy or business bankruptcy. Setting simple goals will ease the process and help in restructuring or removing debt.

The first step in the process is obtaining credit reports for your business as well as your personal credit report. There are a wide variety of services that will assist you in obtaining these credit reports. To obtain your business credit reports you can use Dun and Bradstreet or Experian. Personal credit reports can be obtained from Equifax.

Secondly, create two lists. On the first list, write down all your business debts as well as business assets. On the second list you will do the same thing but this time list only personal debts and personal assets. Ensure that all business debts are associated with your business tax ID number, if you can’t do that, then it has to be listed as a personal debt.  Also circle which business debts, if any, were personally guaranteed by you as an individual.

The third step is meeting with a bankruptcy advisor to discuss your options. Ensure that you carry both lists with you to the meeting as well as both your personal and business credit reports. If you are a party to any lawsuits, a pending divorce, or other legal proceedings, then make sure the bankruptcy professional is aware of this as well.

Your discussions with a bankruptcy professional will advise you as to your best option based upon your particular circumstances. You will be considering all of the various bankruptcy options, along with any alternatives to bankruptcy. The most popular personal bankruptcy options are chapter 7 and chapter 13 filings. Popular business bankruptcy options include Chapter 7 and Chapter 11.  It is important that you discuss these options fully with your bankruptcy professional to assist in making the choice that is right for you, right for your business, the best route out of your predicament, and allow you to see the light at the end of the tunnel.

Call Attorney Kurt G. Larsen at 312-909-1128 or email us today.



What Property You Can Keep in Illinois

Most people realize that bankruptcy does not force you to give up everything. But what exactly can you keep?  You might be able to keep your house and your auto, but it depends on the equity.  In Illinois, with a “homestead exemption” you can protect your house, and are allowed to keep up to $15,000 of equity in the property (this doubles for a couple).   In terms of your car, you are allowed to protect up to $2,400 of the vehicles value.  In many instances, it is also possible to keep paying on an existing car loan after the bankruptcy proceedings.

In Illinois, there are also entitlements and other payments made to you that are excluded from the proceedings and you get to keep these.  This includes money you are receiving from a workers’ compensation claim, any disability payments, unemployment, social security, veterans’ benefits, retirement plans, life insurance as well as personal injury and wrongful death settlement/verdict money.  You are also allowed to keep any other miscellaneous personal property up to $4,000  in value with the “wildcard exemption”.


Concerned about Filing Bankruptcy?

Many hard working and honest people have concerns about filing bankruptcy because they feel like they are not living up to their obligations.  The reality is that “life happens”; people get sick, they lose their jobs, and these events can make it impossible for a person to pay their debts.   Because of the financial turmoil of these times, well over a million people (1,538,033) filed for bankruptcy protection in the year 2010.   You are not alone, famous people include:

  • Toni Braxton (Singer)
  • Walt Disney (Movies and Theme Parks)
  • Henry Ford (Automobiles)
  • Larry King (Talk Show)
  • Willie Nelson (Singer)
  • Tom Petty (Singer)
  • Burt Reynolds (Actor)
  • Lawrence Taylor (Football Star)
  • Donald Trump (Real Estate)

Our government recognized the importance of setting up a system that permitted those saddled by overwhelming debt to rebuild their lives.

Get a fresh start

The U.S. Bankruptcy Code is the legal process for people no longer able to pay their bills to eliminate their debt and start over.

Begin the process of fully removing your debt and having a fresh start to your financial future.

Please call me now, Kurt G. Larsen – at 708-409-7725

60 Minutes Highlights Foreclosure Fraud

60 Minutes Highlights Fraudulent Documents Created by Lenders

The April 3, 2011 installment of “60 Minutes” featured a lengthy and sensational segment on foreclosure fraud.  We all know the back story.  Millions of mortgages were packaged and monetized by Wall Street and became distressed securities.  In the process, many banks did not take stock of the growing paper trail, so when they started to enforce their rights they turned to some highly unscrupulous methods for “recreating” documents – forging instruments – for purposes of throwing people out of their homes.

If you are involved or contemplating foreclosure, take a very careful look at the documents your lender has sent you, or plans to provide to the court.

There is a chance that these documents could have been recreated in a paper mill and contain possible forgeries.  While a bank might eventually be able to take possession if you are behind in your payments, a careful examination of the documents might give you grounds for a suit and buy you some time.

So, if you believe you might be in a position to get back on track financially in the near future, this is something that is worth looking into.


Foreclosure Fraud Close to Home

Judge Moshe Jacobius has recently moved to temporarily stay some 1,700 mortgage foreclosure cases in Cook County after Fisher & Shapiro, L.L.C., one of a few foreclosure plaintiff’s firm in Chicago, admitted to altering affidavits. They also added fees and other costs incurred AFTER the signing of the affidavit.  The original source is the Tribune and UPI picked up this sensational story March 26.

The cases were filed over the past three years.  Fisher & Shapiro was ordered to vacate all judgments of foreclosure and judicial sales that had occurred. While homeowners won’t be granted the properties “free and clear”, Chicago-area residents affected now have a little breathing room.  For anyone fighting a foreclosure, this is recent proof that it always pays to look carefully at the documents that are being used against you with a competent attorney.