How to Identify and Avoid Bankruptcy Fraud

Posted by on Jul 24, 2015 in Bankruptcy | 0 comments

How to Identify and Avoid Bankruptcy Fraud

Filing for bankruptcy is becoming more common these days.  One of the main reasons is because the moment bankruptcy is filed any requests from creditors will be halted while the process is ongoing.  They cannot try to sue you or take any of your property to settle any debts you might have with them.  The creditors will have to go to the court in which the petitioner filed for bankruptcy where a judge will determine how the debts will be settled.  During the bankruptcy process the petitioner will be asked to list all of their debts and all of their assets.  There is the possibility that that some property will be liquidated to satisfy your debts.  Should the filer attempt to conceal any assets or improperly influence the proceeding in any manner, they will have committed bankruptcy fraud or a bankruptcy criminal crime, which is a federal offense.

Consequences of Bankruptcy Fraud
It is possible to punish bankruptcy fraud with either criminal or civil penalties.  If the court appointed trustee that is in charge of the filer’s case believes that fraud has been committed, then they can request that a civil penalty be imposed on the filer, which usually does not involve jail time.  However, if the fraud that has been committed is severe, then the trustee could pass the case onto federal prosecutors who can impose criminal punishment such as jail time.

Criminal and Civil Penalties
Civil penalties typically include the forfeit if the filers discharge rights. This means that your debts will not be discharged at the end of the filer’s case which in turn means that the creditors will be able to sue the debtor and take property to settle debts or attempt to collect their debts by various means.  There can also be a loss of exemptions meaning that assets that would normally be exempt from collection from creditors will no longer be protected.  If the filer is found guilty of bankruptcy fraud and is convicted, then there is the possibility of getting up to five years in prison. Five years is the maximum sentence the court can impose.  However if there is more than one offense, it can be up to five years per offense.  It is also possible to get probation for committing bankruptcy fraud, which usually involves keeping out of any trouble and maybe meeting with a probation officer a couple of times; a probation sentence can last up three years, although longer sentences are possible.  It is also possible to be fined for committing fraud; the maximum that a court can impose is $250,000 per offense.  Fines can be imposed by themselves or on top of other criminal penalties.

Hiding Assets
The most common form of bankruptcy fraud is when the person who filed for bankruptcy tries to hide assets or tries to mislead the court as to what property the filer actually has.  When the filer initially files for bankruptcy the court will ask for an inventory of all your assets called a bankruptcy estate.  This is done so the trustee can determine how much you are able to pay the creditors. The common purpose for some people deciding to hide their assets is so that they don’t have to give certain property up or so they can make a smaller payment.

Avoiding Foreclosure Scams
Typically, if a person is facing foreclosure on their house, they will try to do everything they can to make sure their family and themselves continue to have a home.  There are some companies that are aware of this and decide to try to make some money. They tell the homeowner that they can remove the foreclosure on their home if they pay a certain amount of money.  The fraud that is committed here is that after the company has been paid, they will file for bankruptcy in the name of the homeowner, sometimes without permission or even informing the homeowner. It is true that filing for bankruptcy will put a hold on the foreclosure, but one the court is aware that the homeowner was not a knowing member of the filing, the case will be dismissed and the foreclosure will resume.

Bribes
Attempting to bribe a creditor, the trustee, or anyone involved in the bankruptcy case can be considered bankruptcy fraud.  A bribe may occur when the filer attempts to convince a creditor to not file a claim against them when bankruptcy is filed by offering them some kind of monetary payment.

Giving False Information
Committing bankruptcy fraud is not an accident. Should the filer forget to list a gift that was received but never used, for example an old car from a family member.  If that gift was kept in storage for a long time and the filer simply forgot to list it then it is not fraud.  However, if the filer intentionally put the car into storage and knowingly forgot to list it, that is fraud.

Fraud In General
Bankruptcy fraud can be a broad range of things, but if you are unsure whether something is considered fraudulent or not, remember that if what you are doing can be considered taking advantage of the bankruptcy process in any way, odds are that it can be considered fraud. Some examples are, using your credit card to buy items with the sole intention of filing for bankruptcy and not paying off your credit card, getting rid of important documents, filing for bankruptcy in separate states at the same time, or giving false reports to anyone in the court.  It is good to know that creditors can also commit fraud by giving false reports or making false claims about the debtor.

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Tax Refunds and Bankruptcy

Posted by on Jun 22, 2015 in Bankruptcy | 0 comments

Tax Refunds and Bankruptcy

Bankruptcy and taxes can be a difficult subject and it can have some serious consequences. One of the most commonly asked question is what will happen to my tax refund if I file for bankruptcy? There is no straight answer to that question, what happens to your tax return depends on what chapter you file your bankruptcy under. Filing under chapter 7 will probably protect the tax refunds while filing under chapter 13 could possibly mean less protection for your refund.

Tax Refunds in Chapter 7 Bankruptcy
When filing for bankruptcy your tax refund, whether already received or expected for that year, will be considered an asset. As with other exempt assets, if your tax refund is considered exempt the bankruptcy trustee will not be able to take it. Since the allowable exemption amounts for various assets vary from state to state, the amount of your tax refund that you can exempt depends on your state. If your state does not have a specific exemption for tax refunds, you may be able to use the wildcard exemption, which can be used to protect any asset. If you are still concerned about your refund during the bankruptcy, the timing of when you file is also important. Filing for bankruptcy during tax season can be a bit tricky, if you do file during tax season look into what exemptions your state offers. To get most use out of your refund consider using it to pay your legal fees for filing bankruptcy. If you file for bankruptcy at another time of the year, it could be a little more problematic if you are expecting a big refund. Another way to protect a tax refund is to defer more of your salary into an employer IRA or 401k.

Tax Refunds in Chapter 13 Bankruptcy
In a chapter 13 bankruptcy, your tax refunds will be analyzed by the trustee during the length of the plan, which can last anywhere from 3 to 5 years. If your plan pays less than 100% of your debt back to creditors, the trustee has the discretion to keep your tax refund during the life of the plan. Since chapter 13 requires that all disposable income be paid into the plan, most trustees classify tax refunds as disposable income. But keep in mind that even though your refund is being paid into your repayment plan, your plan payment will not actually be reduced.

Since determining what to do with your tax refund is largely discretionary, your trustee may allow you to keep the tax refund in special circumstances, for example the refund is needed to pay your living expenses because you find yourself in a situation. However, keep in mind that the trustee will most likely require you to contribute your tax refund as part of your plan payment. There is almost no way to keep your refund is the trustee has decided that it will go towards your repayment plan.

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What is Bankruptcy Fraud?

Posted by on Mar 23, 2015 in Bankruptcy | 0 comments

What is Bankruptcy Fraud?

If a person finds themselves in a state of having more debt than they can manage, it is possible they will file for bankruptcy. The moment bankruptcy is filed any requests from creditors will be halted while the process is ongoing. They cannot try to sue you or take any of your property to settle any debts you might have with them. The creditors will have to go to the court in which the petitioner filed for bankruptcy where a judge will determine how the debts will be settled. During the bankruptcy process the petitioner will be asked to list all of their debts and all of their assets. It is possible, depending on what property the filer owns, that some property will be liquidated to satisfy any outstanding debts. Should the filer attempt to conceal any assets or influence the proceeding in any manner, they will have committed at bankruptcy criminal crime, which is a federal offense. It is also possible that concealing assets can be a civil offense, the difference being the intention of the filer. If the filer commits the act with full knowledge and with the intent to mislead and commit fraud, then it is a criminal offense, in the case of civil fraud there is less misleading.

Hiding Assets From the Court / Bankruptcy Trustee
The most common form of bankruptcy fraud is when the person who filed for bankruptcy tries to conceal assets or tries to mislead the court as to what property the filer actually has. When the filer initially files for bankruptcy the court will create an inventory of all your assets called a bankruptcy estate. This is done so the trustee can determine how much you are able to pay the creditors. The common purpose for some people deciding to hide their assets is so that they don’t have to give certain property up or so they can make a smaller payment.

Making Bribes in the Context of a Bankruptcy
Attempting to bribe a creditor, the trustee, or anyone involved in the bankruptcy case can be considered bankruptcy fraud. A bribe may occur when the filer attempts to convince a creditor to not file a claim against them when bankruptcy is filed by offering them some kind of monetary payment.

Being Intentionally Misleading to the Court / Bankruptcy Trustee
Committing bankruptcy fraud is not an accident. Should the filer forget to list a gift that was received but never used, for example an old car from a family member. If that gift was kept in storage for a long time and the filer simply forgot to list it then it is not fraud. However, if the filer intentionally put the car into storage and knowingly forgot to list it, that is fraud.

Scamming Homeowners as a Part of the Bankruptcy Process
Typically, if a person is facing foreclosure on their house, they will try to do everything they can to make sure their family and themselves continue to have a home. There are some companies that are aware of this and decide to try to make some money. They tell the homeowner that they can remove the foreclosure on their home if they pay a certain amount of money. The fraud that is committed here is that after the company has been paid, they will file for bankruptcy in the name of the homeowner, sometimes without permission or even informing the homeowner. It is true that filing for bankruptcy will put a hold on the foreclosure, but one the court is aware that the homeowner was not a knowing member of the filing, the case will be dismissed and the foreclosure will resume.

Bankruptcy Fraud In General
Bankruptcy fraud can be a broad range of things, but if you are unsure whether something is considered fraudulent or not, remember that if what you are doing can be considered taking advantage of the bankruptcy process in any way, odds are that it can be considered fraud. Some examples are, using your credit card to buy items with the sole intention of filing for bankruptcy and not paying off your credit card, getting rid of important documents, filing for bankruptcy in separate states at the same time, or giving false reports to anyone in the court. It is good to know that creditors can also commit fraud by giving false reports or making false claims about the debtor.

Punishment for Bankruptcy Fraud
It is possible to punish bankruptcy fraud with either criminal or civil penalties. If the court appointed trustee that is in y=charge of the filer’s case believes that fraud has been committed, then they can request that a civil penalty be imposed on the filer, which usually does not involve jail time. However, of the fraud that has been committed is severe, then the trustee could pass the case onto federal prosecutors, which if they find that serious fraud has been committed will give a criminal penalty, usually involving jail time.

Civil Penalties for Bankruptcy Fraud
Civil penalties typically include the forfeit if the filers discharge rights. This means that your debts will not be discharged at the end of the filers case, meaning the creditors will be able to sue the debtor, take property to settle debts, or attempt to collect their debts by various means. There can also be a loss of exemptions, meaning that assets that would normally be exempt from collection from creditors will no longer be protected.

Criminal Penalties for Bankruptcy Fraud
If the filer is found guilty of bankruptcy fraud and is convicted, then there is the possibility of getting up to five years in prison. Five years is the maximum sentence the court can impose, however if there is more than one offense, it can be up to five years per offense. It is also possible to get probation for committing bankruptcy fraud, which usually involves keeping out of any trouble and maybe meeting with a probation officer a couple of times; a probation sentence can last up three years, although longer sentences are possible. It is also possible to be fined for committing fraud, the maximum that a court can impose is $250,000 per offense. Fines can be imposed by themselves or on top of other criminal penalties.

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How to Prepare for Filing Bankruptcy

Posted by on Mar 10, 2015 in Bankruptcy | 0 comments

How to Prepare for Filing Bankruptcy

If you find yourself in a situation where you have too much debt that it has become impossible to manage and you have tried everything you can think of, it may be time to consider the option of bankruptcy. Most people don’t even consider bankruptcy as an option due to the stigma that it carries, but it is tool that is there to provide relief and a fresh start for those who really need it. If you are considering filing bankruptcy, there are a several things you should do before you file.

Debt Payments
It is advised that you do not pay above the normal balance that you owe to any creditor six months before you file, you may be doing it in good faith but to the court it may look like favoritism to a specific creditor. You can also elect to not continue paying your unsecured debts, if you have any.

Keep records of collection attempts
It is advisable to keep some sort of log detailing any collection calls by creditors, this can include the name, date, and time the creditor tried to collect. It may seem a bit tedious but it could also be beneficial for you since you have federal rights that protect you from harassment from collectors.

Refrain from extravagant expenses
It is important that you do not make any big expenses or go all out simply because you are planning on filing for bankruptcy. Doing so can be harmful to your eligibility to and it can be seen as fraudulent. Making large purposes with the intent of not paying back and planning on filing bankruptcy is considered taking advantage of the system and you can be prosecuted for that. Instead of spending the money you have on luxuries, it is better to spend it on necessities such as food or housing.

Get all your required documents together
It is important to be prepared in advance, since time is important. During your bankruptcy process, the court will appoint a trustee to your case. The trustee will be the one that you will interact with and turn in any documents that they ask for; it is advisable to remain on good terms with the trustee since they are the ones who will state to the judge whether you should get a discharge or not. Some of the important documents to have include credit bills from the last six months, bank statements from the last six months, pay stubs or proof of income for the last six months, your driver’s license and social security card, tax returns for the last 2 years, a title report stating any liens that could be on your property , copies of your deed or mortgage, paperwork from any property transaction for the last 2 years, and a statement that shows any profit or loss if you own a business.

Attend a credit counseling class
Anyone that files for bankruptcy must take a class on credit within six months of the bankruptcy filing date. This is mandatory according to bankruptcy law; the good thing is that there are a couple of ways of taking the class; in person, over the phone, or online. Ask your attorney of if you have any questions about signing up for the class. A competent bankruptcy attorney should be able to refer you to a very low cost credit counseling course that satisfies the court’s requirements for filing bankruptcy.

Speak with an attorney about filing bankruptcy
The bankruptcy process can be difficult to maneuver if you do not have the right knowledge and experience. There are many circumstances that can affect your eligibility of filing for bankruptcy, and then it needs to be determined which Chapter you can file under. It is possible to represent yourself but it is not advised if you have no prior experience with bankruptcy courts as they can be quite difficult. Having an attorney can help you a great deal and spare you a couple of headaches.

Begin thinking of your life after your discharge
Once your debt has been discharged you are free to start over on clean slate, financially at least. It is a good idea to have some goals ion some mind to work towards to. Most people make claims such as living solely on cash from then on, which is nice but also a little inconvenient at times. It might be a good idea to try to start re-establishing some credit. Whatever your goals are, just keep them in mind as you continue to work towards your future.

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Tax Implications of a Personal Bankruptcy

Posted by on Oct 16, 2014 in Bankruptcy | 0 comments

Tax Implications of a Personal Bankruptcy

Tax Implications of a Personal Bankruptcy

Almost everything you do has a tax consequence and filing for bankruptcy is not an exception. Every bankruptcy kind has its own impact on taxes in ways that may not be realized. After all, if it involves taxes, there are rules. One major advantage of bankruptcy is that your discharged debt does not have any real impact on your taxes as a result of it does not count as nonexempt financial gain. In other words, you will not be taxed on your discharged debts.  However, if you surrender a home or have not made any mortgage payments – you would not be necessarily eligible for the mortgage tax deduction.

Also, if you are in the middle of an IRS audit, filing bankruptcy will not stop the audit. It will stop collection actions until the bankruptcy process is finished and if the IRS does not issue a Relief of Stay motion. However, the 10-year statute of limitations is extended for the complete time of the bankruptcy continuing and thirty days for body time. Any time collection action comes to a halt, like throughout the process of a suggestion in compromise or throughout the time you’re deemed presently not collectible, the statute is extended, it is recommended to bear that in mind if considering bankruptcy as an option.

While bankruptcy can discharge certain kinds of income tax debts, not all tax debt may be discharged in bankruptcy. Elements that are considered to be priority debt cannot be discharged. This includes support payment, student loans, drunken driving charges, fines stemming from the commission of a criminal offense and priority tax debts: sure penalties (trust fund penalty), fraud assessments and therefore the monetary fund portion of payroll tax debts. Priority debt should be entirely repaid in a Chapter 13 bankruptcy reorganization.

For taxes to be dischargeable in bankruptcy, they have to be income taxes that are a minimum of three (3) years previous as counted from the maturity date of the official document as well as extensions. The personal tax return needs to have been filed by the taxpayer; it cannot be any form of a substitute filed return ready by the IRS. Also, the tax should be assessed at a minimum of 240 days. Therefore if you recently filed your 2006 tax return, you are not free from the liability in a bankruptcy case discharge until 240 days have passed by. And if the IRS has filed a lien against your real or material possession, the tax lien will still be enforceable as to that property.

If you excluded the number of discharged debt from financial gain, you need to use that quantity to scale back sure deductions and credits, known as tax attributes. Generally, these attributes should be reduced in the following order, net in operation losses, general business credit carryovers, minimum tax credits, capital losses, basis of your property, passive activity loss and credit carryovers, and foreign tax credit. It is important to know that if you haven’t filed your tax returns, it doesn’t matter however previous the liability, those taxes can’t be discharged in bankruptcy.

One way bankruptcy will assist you together with your liabilities is within the space of cancellation of debt financial gain. Normally, after you settle a debt for fewer than its full price whether or not it comes from a negotiation with the owner of your credit card debt, a brief sale or another state of affairs wherever you pay but the complete quantity owed on a debt, the distinction between what you owed and what you truly paid is taken into account financial gain for tax functions. This kind of financial gain is termed Cancellation of Debt Income and is typically in the course of the issue of a 1099C form that is announced to the IRS.

Luckily, bankruptcy could be a complete defense to the 1099C financial gain issue. If you filed bankruptcy, debts enclosed in your bankruptcy don’t lead to debt forgiveness financial gain. Furthermore, financial condition could be a defense to the 1099C issue furthermore. This implies that if your liabilities (debts) equals over the honest value of your assets you’re technically insolvent and can’t be accountable for tax penalties on forgiven debt even for debts reduced outside of bankruptcy.  If you do have any 1099C’s issued for debts that were included in your bankruptcy, you should consult with an experienced bankruptcy attorney that is willing to work with your CPA to resolve the possible tax issues.

Forgiveness of debt is often thought as nonexempt income, but not once it involves bankruptcy or financial condition. Sometimes, even although you have filed for bankruptcy, your past creditors will still submit a form 1099C to the IRS. This is often a simple state of affairs to handle, particularly if your tax specialist is accustomed to bankruptcy’s impact on forgiveness of debt financial gain. All you would like to try and do is submit the IRS form 982 alongside your taxes and you will most likely not have to pay taxes on the discharged debts in your bankruptcy.

In closing, the tax implications associated with the fling of any bankruptcy case can be very confusing – and if you have any reason to be concerned about the tax issues in your own situation, it is imperative you consult with an experienced bankruptcy attorney that is willing to work with your Certified Public Accountant (CPA).  Call us at 770-609-1247 to speak with an experienced bankruptcy attorney today.

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Bankruptcy & Divorce: What To Expect if Your Ex-Spouse Files Bankruptcy

Posted by on Aug 13, 2014 in Bankruptcy, Divorce, Family Law | 0 comments

Bankruptcy & Divorce: What To Expect if Your Ex-Spouse Files Bankruptcy

Can an ex-spouse’s bankruptcy still impact me after a divorce?

Yes, an ex-spouses bankruptcy can still impact you following a divorce. Bankruptcy following a divorce can impact you in a number of ways, but generally speaking it may either allow for your ex-spouse to make financially obligations as per court order easier or it may attempt to waive the payments owed – altering your rights to collect on certain payments. If ones ex-spouse does file for bankruptcy it can also be anticipated that the ex-spouse may be pursued for the debt despite previous court decree. Bankruptcy courts have the liberty at times to disregard labels of types of payments required by family courts and therefore either require the ex-spouse to pay financial obligations and or waive other property settlement debts despite court orders. If you have a specific question concerning an ex-spouses bankruptcy it is important to contact a bankruptcy attorney and one that may also specialize in family law if possible as family court documents will need to be reviewed to establish ability to pursue such debts. One could possibly avoid such complications if they do not waive their rights to specifically owed family support in exchange for promises or other types of family payments outside of those specifically listed as child support or alimony.

Chapter 7 v Chapter 13:

In order to establish if a clause in a divorce decree is obligated or can be waived as a property settlement debt is the first necessary step in evaluating whether or not a debt may be waived. By law particular debts such as alimony and child support may not be waived by law; however, if additional payments are agreed under court order to provide for such support then they may be waived as part of a property settlement under some areas of bankruptcy law. In chapter 7 property settlements are non-dischargeable, but in chapter 13 bankruptcy such debts may become dischargeable. A chapter 13 bankruptcy therefore has the ability to cause significant damage to an ex-spouse if it is determined by the bankruptcy court that the debt is related to a property settlement. There are special situations where a bankruptcy court may still hold property settlement debt as non-dischargeable. One example would be circumstance in which an individual waived their rights as an agreement to pay off debt- the debt could therefore not be discharged regardless of nature.

What to do if a chapter 13 bankruptcy filed by an ex-spouse is affecting you?

Again the first step in handling this case is to hire an experienced bankruptcy attorney. Secondly, the attorney will need to review all of the pertinent divorce decree documents. The determination of whether or not the debt can still be collected upon may come down to the wording of the final court order. Even in some instances where it is stated that the debt could not be discharged on the bankruptcy court may not be held liable for the waiver of debt due to the debts nature. In other words the determining factor really comes down to the specified nature of the debt. Lastly, you should seek an order from the bankruptcy court that distinguishes that family court obligations owed are non-dischargeable.

How long will I have to dispute a bankruptcy discharge of my ex-spouse?

The time given to dispute a discharge is relatively short and all creditors and collectors including ex-spouses should be notified following the initial filing for bankruptcy. If you are the individual filing for bankruptcy you will need to inform your legal counsel of any and all individuals including ex- spouses that may still collect on debt prior to filing the bankruptcy. If you have received notice of an ex-spouses bankruptcy then it should be provided within the notice the amount of time left to dispute the discharge of debt. If not specifically mentioned it should be anticipated that the debt may be disputed for discharge in thirty days or less. It is important to contact a bankruptcy attorney to immediately begin work on your case after receiving a bankruptcy notice to the creditor.

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