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You Can Protect Your Tax Refund in Bankruptcy

Posted on Wednesday, January 20th, 2016 at 10:18 am    

protect-tax-returnThe beginning of the year is always the busiest season for filing bankruptcy. Nobody likes to think about their financial troubles during the holidays, and often the holiday spending that so many businesses rely upon is the same tipping point for balanced debt to begin spiraling out of control. But the beginning of the year is also when many people get tax refunds. If the tax refund can cover the credit card bills, disaster may be averted. But if not, Northern Kentucky debtors need to figure out how to protect that tax refund in bankruptcy.

In the Northern Kentucky and Cincinnati, trustees always watch for bankruptcies filed during the first half of the year that do not properly protect a tax refund. Although the debtor’s tax refund can be appropriately reported and exempted in a Chapter 7 or Chapter 13 bankruptcy filing, do-it-yourself filers or inexperienced attorneys often fail to complete this crucial step. If the tax return is not properly reported or exempted, the trustee can seize the refund and use it to pay creditors. It is therefore very important to get an experienced bankruptcy attorney to properly file and protect the tax refund.

How can the Tax Refund Be Saved in My Bankruptcy?

A tax refund must be listed as an asset in the bankruptcy filing, even if the tax return has not been filed yet and even if you don’t know how much the refund will be. A reasonable estimate of the refund must be given, although you can also say you don’t know exactly how much the refund is. Trustees in Chapter 7 or Chapter 13 carefully review refunds for debtors that have minor children. Having minor children causes the earned income credit to be applied, and this generally provides for a high tax refund. However, the entire earned income credit can be protected from the bankruptcy trustee – again, this is something only an experienced lawyer knows how to do properly!

Chapter 7 trustees in Northern Kentucky are typically more likely to be aggressive in pursuing a high tax refund than a Chapter 13 trustee, since the Chapter 7 trustee can seize the refund outright if it is not exempted properly. This is, in part, how a Chapter 7 trustee gets paid. In Cincinnati, both the Chapter 7 and the Chapter 13 trustees are fairly aggressive in pursuing tax refunds.

There is no specific exemption in the bankruptcy code for a tax refund, so the wildcard exemption has to be used. In Cincinnati, this is a big problem because the wildcard (or miscellaneous) exemption used in Ohio is small. In Northern Kentucky, this is less of a problem because Kentucky law allows debtors to use the federal wildcard exemption. The federal wildcard exemption is very large and most tax refunds will be protected by it.

However, in Kentucky the federal wildcard exemption is also used to cover many other assets, such as the money in the debtors’ bank accounts, any firearms in the home, and any equity the debtor has in a second car. Thus, it is possible that, without proper legal advice, even a modest tax refund could go beyond the limits of the exemption and be taken by the trustee.

How Can Lawrence & Associates Help Protect My Refund?

Experienced bankruptcy lawyers make a big difference. In our consultations, Lawrence & Associates will explain how your tax refund can be spent on reasonable and necessary household expenses to protect it from seizure by the trustee. The lawyers at Lawrence & Associates have spent years learning exactly which expenses can be used to offset the tax refund and which cannot, thus avoiding the risk that the trustee will take the refund or delay the bankruptcy. Details matter, and our attorneys and paralegals are trained to find the details in your life that keep thousands of dollars of tax refunds in your bank account. Lawrence & Associates has been very successful over the years at putting money back in our clients’ pockets by offsetting their tax refunds with our attorney’s fees and thus protecting the debtor’s hard-earned cash from seizure by the Chapter 7 trustee.

You should not put off filing for bankruptcy if your debts cannot be repaid under your current interest rates, or if you are behind on payments and in danger of being sued or having a vehicle repossessed. Lawrence & Associates can help Northern Kentucky and Greater Cincinnati clients protect their assets. We are Working Hard for the Working Class. Call us today and learn how we can help you!

Bankruptcy Explained: What Type of Bankruptcy Should I File?

Posted on Friday, February 6th, 2015 at 9:04 am    

types of bankruptcyAdvice from an attorney is your best bet when deciding if you should file a Chapter 7 or Chapter 13 bankruptcy.  Are you facing foreclosure from a bank like Wells Fargo, being sued for medical bills by a hospital like St. Elizabeth, or confronting a mountain of Capital One credit card debt? Filing a Chapter 7 or Chapter 13 bankruptcy will end the harassing phone calls and letters. You must comply with the terms of any repayment agreement or you will lose these protections, so it is important to have strong legal guidance before agreeing to anything. Choosing the right kind of bankruptcy can mean the difference between keeping your house, keeping your car, keeping your money, or losing it all. Some of the things a Northern Kentucky Bankruptcy attorney will need to know is a client’s past income and current assets. Knowing the asset exemptions and median income levels of the client will help to make the decision easier.

Chapter 7 Bankruptcy

A bankruptcy lawyer’s first step will be to determine whether you are eligible for protection under Chapter 7. The 2005 revisions to the bankruptcy laws require that, to qualify to discharge debts under Chapter 7, you must submit to a “means test,” demonstrating to the court that you lack the means to repay your creditors in a Chapter 13 proceeding. We will conduct a means test and, if you qualify, we will prepare and file all documents required to complete the Chapter 7 process. We will carefully explain which debts can be eliminated, as well as which assets you can protect, so that you get the benefit you deserve.

In General, You Cannot File a Chapter 7 Bankruptcy If You…

  • have filed a bankruptcy in the last eight years
  • have assets with significant value that you don’t want to lose
  • have income over median for your household size in the Commonwealth of Kentucky.

Make Sure to Assess The Value of Your Property Correctly

Figuring out how to correctly assess the value of your property, or the correct number for median income, can be a daunting task, and the consequences of making a mistake are very drastic. A Northern Kentucky Bankruptcy lawyer will make sure your bankruptcy is filed correctly so that you get the maximum benefit from your decision to file.

You Get Immediate Relief  After You File a Chapter 7 Bankruptcy

Once you file for protection, an automatic stay goes into effect, preventing your creditors from calling, writing or taking any other legal action to collect the debt. A Chapter 7 bankruptcy petition can also stop foreclosure proceedings, wage garnishments and repossession actions. With the help of a lawyer, in Kentucky, a Chapter 7 bankruptcy proceeding can generally be completed in 3 to 5 months.

Chapter 13 Bankruptcy

If you don’t qualify to permanently discharge debt under Chapter 7 or prefer to set up a new payment plan with your creditors, we will help you reorganize your debt in a Chapter 13 bankruptcy filing. We will prepare and file all the necessary paperwork to complete the process and will represent you in hearings or meetings with creditors, the bankruptcy trustee or the bankruptcy court. We will help you put together a reorganization plan and will review all proposed repayment plans to ensure they are appropriate.

You Get Immediate Relief  After You File a Chapter 13 Bankruptcy

When you file for protection under Chapter 13, an automatic stay goes into effect, which prevents your creditors from calling, writing or using any other means to collect the debt, other than through the bankruptcy proceeding. The automatic stay will suspend foreclosure or repossession actions, as well as wage garnishments, giving you time to get back on your feet financially. In many instances, you will be able to reduce the amount you have to pay, sometimes to as little as a penny on the dollar, by entering into agreements with your creditors. A Chapter 13 bankruptcy can be ideal for someone with large medical bills or credit card debt, allowing you the opportunity to keep most or all of your assets and enter into payment arrangements that are workable.

Contact Us (859.371.5997) for a Free Consultation

Bankruptcy Explained: There Are Legal Solutions That Provide Debt Relief to Those Who Need It

Posted on Thursday, January 29th, 2015 at 2:37 pm    

fresh start bankruptcyThere are many reasons that individuals and families find they can no longer afford to pay monthly bills. Some may have recently gone through a divorce. Others have been injured at work or in an accident and are unable to earn an income. Many are facing increased interest rates on mortgages or credit cards and cannot keep up. There are also people who simply let spending get out of control and cannot find a way out. Have you received notice that your wages will be garnished due to delinquent payments on your financial obligations? Has the bank started foreclosure proceedings on your home? Is your car about to be repossessed? Or have you realized that try as you may, there is just no way for you to stay current on all of your bills? Regardless of the financial problems you are facing, it is important to realize that there are legal solutions to help you obtain debt relief.

Immediate Relief For Pressing Financial Problems

Above all, do not ignore your financial problems or lawsuits that creditors bring against you. These issues will not disappear. Your best option is to contact a bankruptcy attorney at the first sign of financial distress. Even if you are facing immediate foreclosure, repossession or wage garnishment, Lawrence & Associates can provide swift legal action to help protect you. Your start to a fresh financial future begins when you contact a Northern Kentucky bankruptcy lawyer. A bankruptcy attorney will help you file Chapter 7 bankruptcy or Chapter 13 bankruptcy. Good Fort Mitchell, Kentucky bankruptcy lawyers will take the time to fully explain your legal options and the bankruptcy process in an understandable way — not with complex legal jargon. Good bankruptcy attorneys will also provide advice on how to stop creditor harassment, garnishment, foreclosure and repossessions.

Contact Us (859.371.5997) for a Free Consultation

Important Considerations Regarding Debtors and Their Spouses in a Chapter 7 Bankruptcy in Kentucky

Posted on Friday, January 23rd, 2015 at 3:23 pm    

spouse bankruptcyWhen considering filing for Chapter 7 bankruptcy in Kentucky, a debtor who is married needs to take into account how one’s marriage will affect his or her ability to file. For example, according to the U.S. Dept. of Justice, the state median family income for filing a Chapter 7 bankruptcy in Kentucky is $40,020 for a single person household, while for a two person household, it is $46,815.[1] This is a particularly important factor which must be calculated when filing for bankruptcy. The bankruptcy Means Test is a formula used to determine whether your income is low enough for you to file Chapter 7 bankruptcy. High income filers who “fail” the means test may still file Chapter 13 bankruptcy as a way to discharge a portion of their debts, but it usually won’t wipe out their debts altogether.

Is the Debt in the Debtor’s Name or the Spouse’s Name?

The married debtor needs to determine whether the debts are solely in the debtor’s name, or if they are also in the debtor’s spouse’s name as well. Debts that were obtained in both spouses’ names will make each spouse jointly and severally liable for payment of that debt. Therefore, it is often necessary for both spouses to file for bankruptcy in order to avoid liability of the debt.

Conversely, if only one partner in a marriage is responsible for a debt, then generally only that spouse should file for bankruptcy. However, even in circumstances where only one spouse needs to file for bankruptcy, the debtor-spouse is still required to list his or her spouse’s income as part of the household income that is used in the Means Test. See e.g., In re McSparran, 410 B.R. 664 (Bankr. D. Mont. 2009) (unexplained failure to list non-filing spouse’s income was fatal to confirmation). Generally, this makes it more likely that the debtor’s household income will be greater than the allowed median family income, and consequently, make the debtor less likely to be eligible to file Chapter 7 bankruptcy.

Determining Eligibility to File for Chapter 7 Bankruptcy

Other factors used in determining eligibility for Chapter 7 Bankruptcy are known as adjustments. For example, a debtor’s household expenses are taken into consideration as a way to determine the debtor’s actual disposable income, and can have the effect of preserving a debtor’s eligibility to file a Chapter 7 bankruptcy when the debtor’s household income is greater than the allowed median family income. The inclusion of the debtor’s household expenses will usually be factored into the Means Test by a debtor’s bankruptcy attorney, especially when the attorney is attempting to ensure that his or her client is eligible to file Chapter 7. However, one of the most overlooked “tools” available to a married debtor who is otherwise ineligible to file a Chapter 7 due in part to the inclusion of the debtor’s spouse’s income are Marital Adjustments. “The Marital Adjustment is the portion of a non debtor spouse’s income that is not paid on a regular basis to the household expenses of the debtor or debtor’s dependants.” (John P. Gustafson, The Chapter 13 Means Test:Line-by-Line, February 7, 2013).

This means that a debtor can deduct from the non-filing spouse’s income any amount used to pay for personal expenses that are separate from the debtor’s household expenses. These expenses, also known as “marital deduction expenses,” have the effect of reducing the debtor’s spouse’s income used in the Means Test to solely the amount that is used to contribute towards the debtor’s expenses or the debtor’s dependent’s expenses.

Marital Deduction Expenses

Although there is little case from the Kentucky Federal Courts regarding what qualifies as marital deduction expenses, most courts have generally found that the following can be considered marital deduction expenses:

  • Alimony Payments
  • Student Loan payments made by the non-filing spouse for his or her own student loans
  • Car payments for the non-filing spouse’s car
  • Credit Card payments for non-filing spouse’s credit cards.
  • Etc.

Therefore, although it is clear that there are many different ways in which a debtor could become eligible to file a Chapter 7 bankruptcy, it can be a rather daunting task for someone who is unfamiliar with the bankruptcy laws and requirements.

If you are attempting to make this determination on your own, or know someone else who is, please don’t hesitate to contact Lawrence & Associates. Our attorneys are extremely knowledgeable and dedicated to making sure that you are able to take advantage of all the protections that are afforded to you in a bankruptcy.

Contact Us (859.371.5997) for a Free Consultation

[1] http://www.justice.gov/ust/eo/bapcpa/20130501/bci_data/median_income_table.htm

Immediate Relief For Pressing Financial Problems

Above all, do not ignore your financial problems or lawsuits that creditors bring against you. These issues will not disappear. Your best option is to contact a bankruptcy attorney at the first sign of financial distress. Even if you are facing immediate foreclosure, repossession or wage garnishment, Lawrence & Associates can provide swift legal action to help protect you. Your start to a fresh financial future begins when you contact the bankruptcy law firm of Lawrence & Associates. Our firm helps clients file Chapter 7 bankruptcy and Chapter 13 bankruptcy. When you work with our firm, we will take the time to fully explain your legal options and the bankruptcy process in an understandable way — not with complex legal jargon. We can also provide advice on how to stop creditor harassment, garnishment, foreclosure and repossessions.

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