Tagged: Chapter 7
October 22, 2020 at 10:21 pm #44131Keith JonesBlocked
I have a client who owes in excess of $90K for tax years 2015 and prior. ALL of this amount appears to be eligible for discharge under Chapter 7 of the bankruptcy rules.
He is located in Nebraska and although he and his wife have an AGI just over $200K, it appears he is exempt from the means test due to taxes owed being “non-consumer debt”.
The client rents and has no equity in other assets.
I have ALWAYS tried to steer my clients away from bankruptcy. However it appears that this is the best solution for this situation.
The client will be 55 years old in January and will owe close to $50K for tax years 2017 through 2020.
My questions are:
1) Am I missing something or not taking everything inconsideration?
2) Does anyone have a recommendation for a bankruptcy attorney in Nebraska?
KeithOctober 29, 2020 at 10:03 pm #44156James WadeParticipant
I think you’ve done all you can. Ultimately, a bankruptcy attorney will make the determination whether to file or not after consulting the client.
Just make sure before you do the hand-off, let the client know that you are only telling them what taxes may be dischargeable. Say anything else bankruptcy is the province of the attorney. I had an issue with a client about this once. So learn from my mistake.
As an aside, anyone who reads this, get Morgan King’s Discharging Taxes in Bankruptcy. I know most of you aren’t bankruptcy attorneys but it has some great information on reading transcripts and doing the bankruptcy discharge analysis.
Jim WadeNovember 8, 2020 at 8:49 pm #44261Salvatore bochicchioParticipant
I have a somewhat similar case. 67 year old TP owes $200k with all but $30k dischargeable. No equity in assets. Future income barely full pays balance over CSED. We filed an OIC and offered the $30k. The offer examiner has recommended it for acceptance, waiting on review approval.November 14, 2020 at 6:07 pm #44373Shawn WrightParticipant
I have handled over 2,000 bankruptcy cases, and I routinely see clients re-establish their finances quickly after bankruptcy. Most of my clients have extremely poor credit, and I see their scores go from the low 500s to 600 within 3 or 4 months of filing. I tell all of my clients that their scores should be 720 or higher within 2 years. Many of them wind up buying homes with very competitive mortgage rates after 2 years from bankruptcy.
Moreover, a good bankruptcy attorney can size up the vast majority of prospective cases, and tell someone during the initial consultation if there might be an issue of not being able to protect all assets from the Bankruptcy Trustee.
As for discharging personal income taxes, bankruptcy is much more efficient than doing an OIC. The only advantage of an OIC is that you can get rid of taxes incurred within the 3 years prior to filing. Otherwise, bankruptcy is a very quick and efficient option for many taxpayers.
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