Frequently when I get a call from someone considering a bankruptcy filing, the first question I’m asked is — complicated. Here are a few examples.
Are taxes dischargeable in Bankruptcy?
That depends. Some taxes, like sales taxes and some withholding taxes are never dischargeable. More commonly I am asked about income taxes, and not surprisingly the rules are complicated. The most important thing I can tell you in brief is that when you see tax problems developing (and they usually snowball on you), file your returns on time. Extensions are fine, as long as you file before theyexpire. If you can’t pay, well, you can’t pay; but file the return. There are three time frames that must be met before income taxes can become dischargeable, and one of them runs from the time that the tax return was filed. There is also some troubling case law developing in other parts of the Country limiting dischargeability for late-filed returns. Of course, if the IRS has filed a substitute for return, that is a whole different ball game. Yes, I know, this doesn’t make a lot of sense. It is a short answer to a very complicated question. Just remember to file your returns timely, and if you wind up way over your head with tax debt, contact a qualified Bankruptcy attorney in your jurisdiction for a consultation.
If I file for Bankruptcy, can I keep my car?
Well, that depends on a lot of things — is it paid for, are you current on it, how much equity do you have in it, have you maintained insurance, can you afford to make the payments?
Think about this one for a minute. There were over 6300 people who filed for Bankruptcy in the Western half of Oklahoma last year. If they were all hitchhiking to work, don’t you think you would have noticed? Generally, the impetus for this question is a deep seated sense of shame and a fear that you have been bad and are going to be punished. I don’t mean to belittle this, it is very real; and most of us have a voice in the back of our heads that says things like this to us, but bankruptcy isn’t about punishment; and most people who file for Bankruptcy keep their cars. Are there exceptions? Yes, but that is a whole different blog post.
I’m married, does my spouse have to file with me?
Probably not. Now, are there reasons why you may want to file jointly? Yes. Are there times when you both need to file in order to get a particular result that you want? Yes. If your spouse doesn’t file with you, will your filing affect your spouse? That really depends, and that is one of many reasons why I require that non-filing spouses attend the initial appointment with the filing spouse.
Is the Trustee going to come to my house?
Well, I don’t know. Are you inviting him for dinner? Seriously, now, the Chapter 7 panel trustees are highly compensated professionals who get paid a very small amount of money to administer cases. They make their money administering non-exempt assets. No one is paying them to go through your sock drawer. Now, if a Trustee has reason to believe that you are concealing valuable assets, can a Trustee get a search warrant for your home or office? Well, yes; and in 22-years of practice, I have seen that happen once. The Debtor went to prison for a number of years for all kinds of fraudulent behavior. So, don’t hide uncashed royalty checks; and the Trustee will not be paying you a visit.