SIX MISTAKES TO AVOID BEFORE FILING BANKRUPTCY

THE FORCE-PLACED INSURANCE SCAM
June 1, 2016
ARE FEDERAL INCOME TAXES DISCHARGEABLE IN BANKRUPTCY? Yes, federal income taxes are dischargeable in bankruptcy, but only under the following conditions: • Your federal income taxes must have been due at least three years before you file bankruptcy. As a general rule, taxes are due on April 15th of the year after the year they were earned. In other words, your 2012 taxes were due on April 15, 2013. If, however, you had filed for an extension, your taxes would have been due on October 15, 2013. • You must have filed the tax return at least two years before you file bankruptcy. • The IRS must have assessed the taxes at least 240 days before you file bankruptcy. • Your taxes must be true and accurate to the best of your knowledge. If you filed a fraudulent tax return or otherwise willfully attempted to evade paying taxes, your taxes are not going to be discharged in bankruptcy. • You must have filed the taxes yourself. If the IRS files taxes on your behalf, chances are you will be unable to discharge those taxes in bankruptcy. There are exceptions to this rule, but the exceptions are rare. Even if you satisfy all of the above conditions, certain circumstances stop the time periods from running. You should consult an attorney for a complete analysis of your tax liability before you file bankruptcy.
June 23, 2016

SIX MISTAKES TO AVOID BEFORE FILING BANKRUPTCY

 

1. DON’T RUN UP YOUR CREDIT CARDS
Once you have decided to file bankruptcy, stop using your credit cards. If you charge more than $650.00 in luxury goods or services on any single credit card within the 90 days before you file bankruptcy, the court may order you to pay off those charges after you file. The Court may also order you to pay back cash advances that total more than $925.00 if you take those advances during the 70 days prior to filing.

2. DON’T REPAY FAMILY MEMBERS
If you pay a family member more than $600.00 during the year before you file bankruptcy, the bankruptcy trustee will be able to sue that family member for that amount of money. The more money you give your family member, the more likely it is that the trustee will sue. The Trustee will, after taking a commission, distribute the the money equally among your creditors.

3. DON’T WITHDRAW MONEY FROM YOUR RETIREMENT ACCOUNT
As a general rule, your retirement accounts are protected from your creditors’ claims. When you file bankruptcy you can usually keep all the money that you have in your retirement account up to a million dollars. You will lose that protection however if you withdraw money from your account. You may have to give the Trustee whatever money you have remaining from the withdrawal for distribution to your creditors.

4. DON’T TRANSFER PROPERTY OUT OF YOUR NAME
A bankruptcy trustee can undo transfers of real estate or personal property made within four years of the day you file bankruptcy if you transferred the property with the intent to hinder, delay, or defraud your creditors. The trustee can also undo transfers if you did not receive a fair price for the property. Do not transfer real estate or personal property without first consulting a bankruptcy attorney.

5. DON’T MORTGAGE YOUR HOME TO PAY OFF DEBT
Do not borrow money against your real estate in an effort to reduce your debt without first seeking the advice of a bankruptcy attorney. In the State of Washington you can file bankruptcy and keep your home so long the home’s equity does not exceed $125,000.00. A bankruptcy attorney will compare the financial impact of eliminating your debt in bankruptcy to the impact of taking on a second mortgage. In most cases, there is less risk of losing a home by eliminating your debt than there is in taking on a second mortgage that you may be unable to pay.

6. DON’T HIDE ANYTHING FROM YOUR ATTORNEY
An attorney will give you advice based upon the information you disclose to your attorney. Your attorney is there to protect your interests. If you do not answer your attorney’s questions truthfully, you could lose assets, be denied a bankruptcy discharge, or even go to prison.

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