Bankruptcy Thread

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Bankruptcy Thread

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Beerdeer: Apr 25, 2006; Frank Herbert's Dude

How is tax debt handled in bankruptcy? My wife had her student loans discharged for disability and we have a big bill as a result.

# ? Feb 15, 2016 00:06

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# ? Apr 25, 2024 10:44

Boof Bonser: Jan 26, 2015; nvj is touched by your generosity!

Dik Hz posted:

I wonder how many liberal arts degree folks from Ivy League schools have ever called into Dave Ramsey's show? I'd guess zero, tbh.

Dave Ramsey is the remedial English teacher of the financial world. He's not teaching the honors course. His job is to turn failing students into not-failing students. And he's good at that. But if you're aiming for higher than a C, you should look elsewhere.

Anyway, my FIL is a bankruptcy trustee. He says that business is very slow right now, and that the recent law changes have deterred a lot of perspective bankruptors. Is that your experience, Boof?

Your FIL is absolutely right. Filings are plummeting faster than the price of oil strapped to the back of My Chemical Romance's cultural relevance. An illustration: I worked for the bankruptcy court a few years ago before I entered private practice. I worked there for one year doing a clerkship for a judge. At the beginning we were still coming down from the financial crisis, and each one of our calendars (pre-set times of week where we heard motions and things of that nature - a good indicator of how busy the court is) had about 75 different cases needing items decided. It routinely took about 4 hours to get through them all, sometimes more. A short year later, that was down by about 2/3 and an average calendar had 25 items. My feeling is it hasn't picked back up. For normal people, this is a good sign. For BK attorneys... well, we're a countercyclical bunch.

# ? Feb 18, 2016 13:49

Boof Bonser: Jan 26, 2015; nvj is touched by your generosity!

Beerdeer posted:

How is tax debt handled in bankruptcy? My wife had her student loans discharged for disability and we have a big bill as a result.

This should not be construed as legal advice. Tax debt is a complex enough topic that I really encourage you to see a local BK attorney about this.

In a chapter 7 BK, the general rule is that federal income taxes can be discharged. However, there are a ton of caveats here. This applies to income taxes only - things like payroll taxes, late fees, fines, penalties, and so forth cannot usually be discharged. Also, the debt must be three years old, so if you haven't tried to pay it for a while, you're going to be out of luck in all likelihood. Finally you must have filed a tax return pertaining to the debt you seek to discharge, and the return needs to have been accurate. Depending on how the math works out, unless you're in a really high bracket I don't know if it makes sense to go BK over the tax bill from some forgiven student loans. My guess is you might be able to pay it off in three years.

# ? Feb 18, 2016 13:52

Sub Rosa: Jun 9, 2010

Beerdeer posted:

My wife had her student loans discharged for disability and we have a big bill as a result.

IANAL but look into the "insolvency exception".

# ? Feb 18, 2016 18:14

Beerdeer: Apr 25, 2006; Frank Herbert's Dude

Boof Bonser posted:

This should not be construed as legal advice. Tax debt is a complex enough topic that I really encourage you to see a local BK attorney about this.

In a chapter 7 BK, the general rule is that federal income taxes can be discharged. However, there are a ton of caveats here. This applies to income taxes only - things like payroll taxes, late fees, fines, penalties, and so forth cannot usually be discharged. Also, the debt must be three years old, so if you haven't tried to pay it for a while, you're going to be out of luck in all likelihood. Finally you must have filed a tax return pertaining to the debt you seek to discharge, and the return needs to have been accurate. Depending on how the math works out, unless you're in a really high bracket I don't know if it makes sense to go BK over the tax bill from some forgiven student loans. My guess is you might be able to pay it off in three years.

Thanks for the info. Tax isn't our only problem, but it's one of them.

# ? Feb 18, 2016 19:09

Boof Bonser: Jan 26, 2015; nvj is touched by your generosity!

I really don't know the first thing about arranging deals with the Service, but something tells me that when someone is obviously insolvent they're willing to play ball a little, at least in terms of the payment schedule.

# ? Feb 18, 2016 20:49

Jeb Bush 2012: Apr 4, 2007; A mathematician, like a painter or poet, is a maker of patterns. If his patterns are more permanent than theirs, it is because they are made with ideas.

Boof Bonser posted:

I think I have an idea...
So you're telling me that I list my assets, sell off the non-exempt ones, give the proceeds to creditors, and then I get to walk away debt-free? Well what if I don't list all my assets? Or what if I give them to a family member to hang onto for a while...?

Do not do this. Here are a few reasons:

(1.) You are not the first person to come up with this idea. Like, at all. There are entire branches of the federal government devoted in large part to catching people who do this.
(2.) This is called bankruptcy fraud, and it's a federal crime.
(3.) You can get your lawyer in really hot water too.

Bankruptcy can offer a ton of relief for debtors, but you have to play fair with the system to get the benefits. Schedule all of your assets, notice all of your creditors, and don't gently caress around. Even if you don't end up being criminally prosecuted, you're almost certain to lose your discharge, meaning that your credit report shows a bankruptcy but you don't even get the benefit of the bankruptcy.

In case anyone was considering it, it turns out it's also a bad idea to claim bankruptcy while simultaneously posting pictures of large piles of cash on instagram.

Jeb Bush 2012 fucked around with this message at 18:37 on Feb 22, 2016

# ? Feb 22, 2016 18:31

Devian666: Aug 20, 2008; Take some advice Chris.; Fun Shoe

Jeb Bush 2012 posted:

In case anyone was considering it, it turns out it's also a bad idea to claim bankruptcy while simultaneously posting pictures of large piles of cash on instagram.

This is drat hilarious. I'm wondering how his lawyer is going to deal with this.

# ? Feb 24, 2016 22:35

VendaGoat: Nov 1, 2005

Devian666 posted:

This is drat hilarious. I'm wondering how his lawyer is going to deal with this.

Drop him as a client? :shrug:

# ? Feb 24, 2016 22:45

Devian666: Aug 20, 2008; Take some advice Chris.; Fun Shoe

VendaGoat posted:

Drop him as a client?

I'd recommend putting a clown nose on his client and firing him out of a cannon. Probably the best chance to resolve this.

# ? Feb 24, 2016 22:50

PyRosflam: Aug 11, 2007; The good, The bad, Im the one with the gun.

Devian666 posted:

This is drat hilarious. I'm wondering how his lawyer is going to deal with this.

I had some law classes, basically the lawyer is forced to do a wink wink nudge nudge to the judge OR request to be removed, the judge will understand the request and most likely deny it. The tact understanding is that you cant really replace a lawyer mid way through.

As funny as it sounds, this is the same thing accountants should do if there not willing to blow the whistle, basically quit and there is a tact understanding in the industry that quitting and being unable to talk about why they quit tends to revolve around an employeer ethics violation and that you don't want to rock the boat.

# ? Mar 8, 2016 03:33

Boof Bonser: Jan 26, 2015; nvj is touched by your generosity!

I have not logged into teh forums but I'll be around for a bit if anyone has any burning BK questions they feel like asking.

# ? Aug 10, 2016 05:12

Nocheez: Sep 5, 2000; Can you spare a little cheddar?; Nap Ghost

PyRosflam posted:

I had some law classes, basically the lawyer is forced to do a wink wink nudge nudge to the judge OR request to be removed, the judge will understand the request and most likely deny it. The tact understanding is that you cant really replace a lawyer mid way through.

As funny as it sounds, this is the same thing accountants should do if there not willing to blow the whistle, basically quit and there is a tact understanding in the industry that quitting and being unable to talk about why they quit tends to revolve around an employeer ethics violation and that you don't want to rock the boat.

I believe the word you are looking for is "tacit."

# ? Aug 10, 2016 13:54

Beerdeer: Apr 25, 2006; Frank Herbert's Dude

Sub Rosa posted:

IANAL but look into the "insolvency exception".

FYI we did this and it helped us out immeasurably

# ? Aug 12, 2016 03:05

Boof Bonser: Jan 26, 2015; nvj is touched by your generosity!

Nocheez posted:

I believe the word you are looking for is "tacit."

I worked for the court at one point in my career and we would get lawyers filing motions to withdraw all the time. They were always super unspecific and filled with vague stuff about "communication breaking down" and we generally assumed that meant the client was trying to use them to commit fraud and they found out about it.

# ? Aug 12, 2016 07:21

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# ? Apr 25, 2024 10:44

Sub Rosa: Jun 9, 2010

Beerdeer posted:

FYI we did this and it helped us out immeasurably

Super glad to hear it

# ? Aug 12, 2016 07:27

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > Bankruptcy Thread

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