at Shenwick & Associates, many of our clients have concerns about tax
debts. However, our bankruptcy practice is over 20 years old, and in our
experience, tax debts are more easily resolved than student loan debts.
In order to discharge taxes in bankruptcy, the taxpayer must show that:
Other options outside of bankruptcy also exist for resolving tax debts:
Tax cases and their resolution are challenging, even for experienced practitioners. For advice on how to deal with your tax debts, please contact Jim Shenwick.
Tuesday, November 22, 2016
Thursday, October 27, 2016
Here at Shenwick & Associates, the debtors that we represent (we represent creditors, too) are primarily looking to get their debts discharged in bankruptcy. However, what most debtors don't know is that besides getting rid of unsecured and secured debt, some liens or judgments secured by property can be eliminated by making a motion under § 522(f) of the Bankruptcy Code, which permits a debtor to wipe out the interest that a creditor has in property if the debtor's interest in the property would be exempt but for the existence of the creditor's lien or interest.
The most common types of liens that can be avoided under § 522(f) are judicial liens (a lien created when someone obtains a judgment against you and attaches the judgment against your property), but not including liens that secure a domestic support obligation); and nonpossessory, nonpurchase-money security interests. To qualify as a nonpossessory, nonpurchase-money security interest: (1) you (not the creditor) still possess the collateral; and (2) you used property you already owned as collateral for the loan, not money that you borrowed.
A lien is considered to impair an exemption to the extent that the sum of: (i) the lien; (ii) all other liens on the property; and (iii) the amount of the exemption that the debtor could claim if there were no liens on the property, exceeds the value that the debtor's interest in the property would have in the absence of any liens.
By way of example, let's assume that a house owned by a husband and wife has an appraised value of $500,000. The house is subject to a $200,000 mortgage. The husband and wife file for chapter 7 bankruptcy and have a combined $300,000 homestead exemption under New York State law. Prior to their bankruptcy filing, a judgment creditor records a $75,000 judgment against the house. The debtors may commence a motion under § 522(f) of the Bankruptcy Code to avoid or eliminate the $75,000 judgment docketed against the house.
To discuss whether lien avoidance as part of a bankruptcy filing would be a beneficial strategy for your debt issues, please contact Jim Shenwick.
Thursday, September 29, 2016
Here at Shenwick & Associates, we've written extensively about the "means test," which is a complex calculation that debtors must pass to qualify for relief under chapter 7 of the Bankruptcy Code if they're over the median income for their state and household size.
Since the means test was implemented as a result of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, we've filed hundreds of Chapter 7 cases, and usually manage to vault potential debtors over the hurdle of the means test. Here are a few of our tips and strategies on how to pass the means test:
- Determine if a majority of a debtor's debt is non–consumer/business debt. If it is, they are exempt from the means test.
- Make sure that all of your expenses are listed:
- Taxes are deductible from the means test–includes FICA, Social Security, federal, state and local income taxes. These can add up for most debtors, and has made the margin of difference between passing and failing in many cases.
- Involuntary deductions from wages, such as mandatory retirement plans, union dues, uniform costs, and work shoes, but not voluntary 401(k) contributions or loan repayments.
- Term life insurance, health insurance and disability insurance.
- Payments on secured claims (for mortgage, car loans, etc.) coming due in the 60 months following filing, as long as the debtor is keeping the collateral.
- Continuing charitable contributions, up to 15% of gross income.
- Child care expenses for babysitting, nursery school, daycare and preschool.
- Out of pocket health care expenses, to the extent they exceed the national standards amount of $54/month per household member under 65 and $130/month per household member 65 or over.
- Add other members to the household to increase household size. Bring the kids back home!
- If possible, reduce your income and your spouse's income for six months (the lookback period for the means test).
- Make sure your expenses from a business or rental property are fully listed to minimize your net income. In one case, a client who was providing independent transportation services failed to listed his expenses. Once we listed those and deducted them from his gross income, he passed the means test.
- If you have a spouse, make sure that you're deducting any part of your spouse's income not used for the household expenses of you or your dependents (i.e. for your spouse's tax debts or support of people other than you or your dependents).