Bankruptcy: My spouse doesn’t want to file, is that okay? Yes.

bankruptcy-my-spouse-doesnt-want-to-file-is-that-okay-yes

NFS is Living in the Home: Under this scenario, when the means test is completed, we must use both spouses’ income.  This doesn’t mean the NFS is actual a part of the case. We will not disclose to the court the NFS’s SSN or in most cases, even their name.  We simply have to disclose to the court what the income & expenses are for both.

NFS is NOT Living in the Home: Under this scenario, when completing the means test, we only include the your income. We will disclose to the court that you are married, but we will have to file a statement that your NFS is not living in the household with you.

To qualify for a Chapter 7 Bankruptcy, you must past the “means test.”

To determine whether one passes the means test, and therefore qualifies for a Chapter 7, their household income must first be calculated. To calculate, you must take the previous 6 full months household gross income, and divide by 6 to average. (Do I have to include my spouse’s income if they are not filing?) For example, if you were to file November 16th, you would add up your household’s income for May through October, then divide by 6. If you were to file December 2nd, you would add up your household’s income for June through November, then divide by 6.

** We are able to handle all cases remotely and telephonically, so even if you are home quarantined, we can still represent you fully throughout the bankruptcy process **This is some text!

In this most turbulent of times, we are here for you, even if you are unable to come to us.

If you are struggling because of COVID-19, or because of any other financial issue, please give us a call today at (616) 920-0555. We are here for you.

Offer In Compromise – Doubt as to Collectibility

There are three types of Offer In Compromise (OIC). The most commonly utilized OIC is the “Offer In Compromise, Doubt as to Collectibility,” or OIC-DATC. This OIC is geared towards those individuals who are unable to pay their current tax obligation and wish to settle for a payment that is less than the amount they actually owe.

For OIC-DATC, taxpayers will need to:
— File Offer in Compromise
— Attach financial statements
— Submit supporting documentation to prove the value of their assets, liabilities, and monthly income and living expenses.

Once submitted, the exact time it takes for the entire process varies from case to case, but we see on average it takes somewhere between  4 weeks to 8 months, all depending on who gets assigned as the examiner and the complexity of the situation.

Offer In Compromise – Effective Tax Administration

Offer In Compromise – Effective Tax Administration is reserved for taxpayers who can pay the tax they owe, but it would cause (1) undue economic hardship, or (2) there are other public policy or equity grounds

1) Undue economic hardship

Economic hardship is a consideration for clients who have the ability to pay their tax debt in full, but doing so would place them in severe economic hardship.

2) Public policy or equity grounds

Public policy and equity offers are for situations when “collection in full would undermine public confidence that the tax laws are being administered in a fair and equitable manner.

Offer In Compromise – Doubt as to Liability

The Pro is that this is more straightforward and less negotiation is needed.  The Con is that this is only available when the taxpayers can provide proof as to why the validity of the tax obligation should be questioned.

Give us a call at (616) 920-0555, or use the email form below, for information on our Offer In Compromise service.

Unfortunately no, criminal restitution cannot be discharged in bankruptcy. However, the automatic stay will prevent any creditor or court from forcing a payment while your bankruptcy is pending. This could last up to 5 years.

The Automatic Stay protects clients from any collection efforts, while his bankruptcy case is still pending. 11 U.S.C. § 362(a)(1) of the Bankruptcy Code protects the Debtor/Defendant from any attempt ‘to recover a claim against the debtor that arose before the commencement of the case under this title.”  11 U.S.C. § 362(b) then goes on to list any exceptions to this rule, none of which apply in the present circumstances.

The closest exception comes under 11 U.S.C. § 362(b)(1) which states the stay does not operate as a stay against “the commencement or continuation of a criminal action or proceeding.”  However, In re: Storozhenko, 458 BR 905 (ED Michigan), states “criminal restitution must be deemed to be relief that is civil in nature, not criminal, for the purpose of 11 U.S.C. § 362(b)(1) exception to the automatic stay.  In re: Storozhenko goes on to say “at most, the federal statute would, temporarily (i.e. only until the automatic stay terminates under 11U.S.C. §362(c)), prevent the state court from complying with the state statute that mandates restitution as a condition for probation.

Westlaw’s Keynote #3 for In re: Storozhenko goes on the summarize the case by saying “bankruptcy court’s action did not prevent state court from placing debtor on probation, assuming that state court had determined that probation was appropriate, but merely prevented it from ordering restitution payable to state court receiver as a condition for such probation while stay was in effect.”

This is true for whether a Chapter 7 or Chapter 13 bankruptcy is filed. However, by filing a Ch 13 bankruptcy, you are afforded more time to put together a plan to resolve the debt.

If you are struggling with a criminal restitution payment, and live in West Michigan, please give a call to discuss what we can do to help.

In a Chapter 13 Bankruptcy, if you are unable to exempt all of your assets, you will need to perform a liquidation analysis (LA).  The purpose of a liquidation analysis is to ensure the general unsecured creditors are receiving at least the amount they would be receiving if the unexempted assets were liquidated in a Chapter 7 bankruptcy. As such, cost of sale, trustee’s compensation, and priority debts are to be taken into consideration.

For example, let’s say that a client has $5,000 in unexempted assets and owes $1,500 to the IRS. Under this scenario, the Chapter 7 trustee’s fee would be 25%, reducing the amount to be actually distributed to $3,750. Of that, the first $1,500 will go to the priority class of creditors (IRS), leaving the remaining amount of $2,250 available for the general unsecured creditors. Therefore, $2,250 would be the result from the LA.

If we were dealing with a home where some of the equity is not able to be exempted, you may also deduct the cost of sale, typically 6% of the FMV.

For more questions about Bankruptcy or the Liquidation Analysis, please give us a call at (616) 920-0555.

A Chapter 7 bankruptcy is a liquidation bankruptcy, which in essence wipes out most of an individual’s general unsecured debts (i.e., credit card and medical bills) without a need to pay the balances through a repayment plan.  A Chapter 13 bankruptcy is a bankruptcy that reorganizes an individual’s debt and creates a monthly repayment plan that repays at least a portion of the debt over a period of three to five years.  The easiest way to qualify for a Chapter 13 bankruptcy is to not qualify for a Chapter 7, meaning, an individual would need to make more than the median income. In Michigan, the median household income from 2017 was $54,909. However, a Chapter 13 bankruptcy is not limited to only individuals who do not qualify for a Chapter 7 bankruptcy.

A Chapter 13 bankruptcy has a few more advantages than a Chapter 7 bankruptcy. For example, an individual who is behind on their mortgage has the ability to catch up on missed mortgage payments and prevent the possibility of a foreclosure action. An individual behind on car loan payments also has the option to restructure their debt to get caught up on missed car payments and prevent a possible repossession. This is not true under a Chapter 7 bankruptcy, in a Chapter 7 bankruptcy an individual is not able to catch up on missed payments. Therefore, the possibility of repossession or a foreclosure is still possible. Under a Chapter 13 bankruptcy, an individual is able to restructure their debt in a way to keep maintaining their payments as well as pay any possible arrears in order to get caught up and avoid the possible repossession or foreclosure.

When an individual falls behind on their mortgage, they have the benefit of filing for a Chapter 13 bankruptcy in order to prevent a foreclosure. Additionally, if the individual’s home is worth less than the first mortgage, any junior mortgages would be “stripped” away. Under a bankruptcy, those junior mortgages would be considered “wholly unsecured” and as such they could be stripped. Those junior mortgages would be treated the same as other unsecured debts and at the end of the bankruptcy, would be discharged the same as the other unsecured debts.

Another benefit to a Chapter 13 bankruptcy is that an individual will be able to keep all of their property under the bankruptcy, even if some is unexempted. In a Chapter 7 bankruptcy, property would need to be exempt in order for the individual to be able to keep their property. If an individual’s property cannot easily be exempt, for example, if an individual has a lot of valuable property or a lot of equity in their homes, then the individual’s total property may not be exempt. Any amount that is not exempt, the individual is required to either hand the property over to the trustee so that the trustee can sell it, or pay the trustee the monetary value in order for the individual to be able to retain possession. Whereas an individual filing for a Chapter 13 bankruptcy is able to retain possession of all property but must pay unsecured creditors an amount (typically pennies on the dollar) equal to the value of nonexempt assets through a process called the Liquidation Analysis.

Additionally, if someone owes significantly more on a vehicle than it is worth, they can “cramdown” the debts to its’s Fair Market Value (FMV).  This “cramdown” is allowed in Chapter 13 cases, as opposed to a Chapter 7. In order to utilize this process, the loan must have been acquired at least 910 days prior to the bankruptcy. This way, an individual who goes out and buys a new car and acquires a loan cannot turn around and file for bankruptcy in order to lower the loan.

So while there are a ton of advantages to filing a Chapter 7 bankruptcy, an individual may be more inclined to file a Chapter 13 bankruptcy, especially if a foreclosure or repossession is possible. It is good to check each individual’s needs in terms of what they are looking to get out of the bankruptcy, and not just to get out of debt.

A “cramdown” essentially reduces the principal balance of a secured debt from the outstanding loan amount down to the Fair Market Value. This is most often used with car loans, mobile home loans, household goods, and other personal property in a Chapter 13 Bankruptcy. This will allow an individual to pay the fair value of the property and the remaining balance would be lumped into other unsecured debt.

The most common example is a vehicle, if the vehicle is work $6,000 but there is a $13,000 loan on the vehicle, the individual would be required to pay the $6,000 as secured debt and the remaining $7,000 would be seen as unsecured debt which would be paid in proportion to all other unsecured debt. Any portion of the unsecured debt that was still due and owing on the loan would be discharged at the end of the bankruptcy.

The huge benefit of cramming down the loan is to be able to reduce interest rates, reduce the amount owed, stretch payments out over a longer term, and lower the monthly obligation. This “cramdown” is allowed in Chapter 13 cases, as opposed to a Chapter 7. In order to utilize this process, the loan must have been acquired at least 910 days prior to the bankruptcy. This way, an individual who goes out and buys a new car and acquires a loan cannot turn around and file for bankruptcy in order to lower the loan.

If you have questions about this process, or if you want to know what Russell can do for you, feel free to give us a call at (616) 920-0555.

When an individual falls behind on their mortgage, they have the benefit of filing for a Chapter 13 bankruptcy in order to prevent a foreclosure. A unique feature of a Chapter 13 bankruptcies is that junior mortgages, a second or third mortgage, can be eliminated if the house is worth less than the balance of the first mortgage. How this works, when an individual gets behind on their mortgage payments. The first mortgage could start a foreclosure procedure. Instead of going through with the foreclosure, that individual can file for a Chapter 13 bankruptcy, thereby stopping any foreclosure proceeding.

Additionally, if the individual’s home is worth less than the first mortgage, any junior mortgages would not receive anything from that potential foreclosure. Under a bankruptcy, those junior mortgages would be considered “wholly unsecured” and as such they could be stripped. Those junior mortgages would be treated the same as other unsecured debts and at the end of the bankruptcy, would be discharged the same as the other unsecured debts. At the end of the bankruptcy, the lien for the junior mortgages would be removed from the individual’s property and the individual would no longer need to worry about having multiple mortgages on their properties.

Disposable Income in the bankruptcy world will be whatever is left over after taxes, insurance, and any necessary household expenses. This disposable income must then be turned over to the Chapter 13 trustee.

However, there are additional forms of income that can come into when calculating disposable income: