Just Chantelle's Blog

FreshStart 102: Bankruptcy???

Welcome to fresh Start Monday again. This week its about Bankruptcy….

If you are considering filing bankruptcy, think again. Consult a financial advisor immediately!! Bankruptcy should be your last resort. There are many programs out here to help with the burden of bills overtaking you. If you are thinking of bankruptcy to clear your credit, this is not the best option. You can write to your debtors for another option or try to use a Credit restore process like our sis Roxchelle offers. The U.S. implemented Hardship Relief programs across all of the state. Google for info in your state.

From the U.S. Courts

Chapter 7 Eligibility

To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. 11 U.S.C. §§ 101(41), 109(b). Subject to the means test described above for individual debtors, relief is available under chapter 7 irrespective of the amount of the debtor’s debts or whether the debtor is solvent or insolvent. An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor’s willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. 11 U.S.C. § 727(a)(1). Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

“You can wipe out or discharge tax debt by filing Chapter 7 bankruptcy only if all of the following conditions are met:

1. The debt is federal or state income tax debt. Other taxes, such as fraud penalties or payroll taxes, cannot be eliminated through bankruptcy. In other words, the debt needs to be a regular tax payment that you owed either the State of Wisconsin or the federal government.

2.You did not willfully evade paying your taxes or file a fraudulent return. Bankruptcy will not help in these circumstances. Your actions need to have been lawful.

Your tax debt is at least three years old. The original tax return must have been due at least three years prior in order to effectively file for bankruptcy. So if you were to file for bankruptcy in April 2020, for instance, this would apply to your 2017 taxes that were due April 15, 2018.

3. You filed a tax return at least two years before filing for bankruptcy. To eliminate a tax debt, a return for that debt must have been filed. Generally, if your extensions expired and you filed late, you have not filed a true return and will not be able to eliminate the tax debt.

4. The tax debt must have been assessed by the IRS 240 or more days before you file for bankruptcy, or must not have been assessed yet. This is called the “240 day rule.” If the IRS suspended collection efforts due to a compromise or previous filing, this deadline may be extended.” (https://www.burrlawoffice.com/tax-debt-bankruptcy/)