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Thursday, March 21, 2013
Got your bankruptcy discharge?
Great! You’re on your way to a fresh start.
Now you’ve got work to do.
◊ List the debts that didn’t get discharged. Family support, recent taxes, student loans, or taxes for years for which you haven’t filed bankruptcy are not dischargeable in bankruptcy. The discharge order does not say which debts survive the process – or ask your attorney.
◊ Verify lien balances The discharge eliminates your personal liability for dischargeable debts; liens survive. If you plan to keep a house or car encumbered with liens, find out what you owe and resume payments. Otherwise, the creditor can enforce its lien by foreclosure or repossession.
◊ Rearrange banking Online banking and automatic bill pay may have been disabled while you were in bankruptcy.
◊ Set up automatic savings Bankruptcy probably brought home to you how little net worth you have and how thin the safety net is. Arrange for automatic savings for both an emergency fund and for retirement.
◊ Save your bankruptcy papers- You’re nearly certain to encounter efforts by buyers of zombie debts to collect debts that have been discharged in your case. You need to be able to show that the debt was scheduled in your case. Creditors with notice, and those they sell their worthless accounts to without notice, were discharged.
◊ Join a credit union Credit unions are owned by their members. They are in business to make loans to members. Rates are usually better than the banks, and the profits flow to members. About the only kinds of credit I’m enthusiastic about are car loans and home loans. Plan to be eligible to apply for a loan by joining now.
◊ Check insurance coverage If you elected to surrender property through the bankruptcy that still stands in your name, make sure that you are insured for liability. Liaibility insurance covers you for claims of anyone injured on your property. Electing to surrender property doesn’t take you off title til someone else goes on title. Don’t let post bankruptcy claims arising from property you’re trying to get rid of spoil your fresh start.
◊ Pull a credit report Several months after your discharge, check your credit report to make sure all discharged debts reflect a zero balance. The ugly history can properly remain, but you are entitled to a showing that you now owe nothing.
Take advantage of the opportunity that bankruptcy has provided, and go forth and prosper.
Now you’ve got work to do.
◊ List the debts that didn’t get discharged. Family support, recent taxes, student loans, or taxes for years for which you haven’t filed bankruptcy are not dischargeable in bankruptcy. The discharge order does not say which debts survive the process – or ask your attorney.
◊ Verify lien balances The discharge eliminates your personal liability for dischargeable debts; liens survive. If you plan to keep a house or car encumbered with liens, find out what you owe and resume payments. Otherwise, the creditor can enforce its lien by foreclosure or repossession.
◊ Rearrange banking Online banking and automatic bill pay may have been disabled while you were in bankruptcy.
◊ Set up automatic savings Bankruptcy probably brought home to you how little net worth you have and how thin the safety net is. Arrange for automatic savings for both an emergency fund and for retirement.
◊ Save your bankruptcy papers- You’re nearly certain to encounter efforts by buyers of zombie debts to collect debts that have been discharged in your case. You need to be able to show that the debt was scheduled in your case. Creditors with notice, and those they sell their worthless accounts to without notice, were discharged.
◊ Join a credit union Credit unions are owned by their members. They are in business to make loans to members. Rates are usually better than the banks, and the profits flow to members. About the only kinds of credit I’m enthusiastic about are car loans and home loans. Plan to be eligible to apply for a loan by joining now.
◊ Check insurance coverage If you elected to surrender property through the bankruptcy that still stands in your name, make sure that you are insured for liability. Liaibility insurance covers you for claims of anyone injured on your property. Electing to surrender property doesn’t take you off title til someone else goes on title. Don’t let post bankruptcy claims arising from property you’re trying to get rid of spoil your fresh start.
◊ Pull a credit report Several months after your discharge, check your credit report to make sure all discharged debts reflect a zero balance. The ugly history can properly remain, but you are entitled to a showing that you now owe nothing.
Take advantage of the opportunity that bankruptcy has provided, and go forth and prosper.
CAN THE IRS IGNORE A BANKRUPTCY?
The bankruptcy stay is the first major benefit for the debtor when a bankruptcy is commenced. Immediately after the filing fee is paid and a petition is filed, virtually every type of collection activity is called to a halt. An order is entered by the bankruptcy court under 11 USC Section 362 prohibiting nearly all creditors from taking any type of collection action. After months or even years of calls, letters and perhaps wage garnishment the automatic stay of the bankruptcy court is a welcome relief indeed. But does it stop everyone? Does it stop even the Internal Revenue Service?
While there are few exceptions to the protection a debtor in bankruptcy is given by the automatic stay, collection by the IRS is not among them. That is to say, even the IRS is prohibited from collecting after the petition has been filed. While the IRS can continue to audit tax returns during a bankruptcy proceeding, and may even determine that a tax is due, it cannot start or continue enforced collection. The IRS must stop any wage levy and if it files a tax lien after the bankruptcy petition has been filed, it must withdraw the lien.
What happens if the bankruptcy automatic stay is violated? Well, as a general principal, if a creditor violates the automatic stay by accident, it must return the money or stop the collection action as soon as it learns about the bankruptcy. However, if the stay violation is done willfully (ie., on purpose), then the creditor faces serious penalties as federal law provides strong remedies for the debtor. After a willful stay violation, the debtor can not only recover the money or property that was wrongfully taken, attorney fees and even punitive damages may be available.
The IRS instructs its collectors to stop all collection activities when they learn of a bankruptcy. In spite of these instructions, there are times when an overzealous tax collector violates the automatic stay on purpose. While some statutory remedies are available, the debtor cannot recover punitive damages against the government. Special rules apply and, based on 26 USC §7433 (d)(1) an aggrieved taxpayer in bankruptcy must first go through IRS administrative process to fix the problem. Treasury Regulation 301.7433-2(d)(1) sets out a procedure that must first be followed before any damages can be recovered from the IRS.
Despite the additional requirements of IRS regulations, the bankruptcy stay remains powerful protection from the tax collector. There are few other situations in which the debtor can tell the IRS to stop collections and count on the court to back them up. If you are being harassed by the IRS, call us today for a free consultation.
While there are few exceptions to the protection a debtor in bankruptcy is given by the automatic stay, collection by the IRS is not among them. That is to say, even the IRS is prohibited from collecting after the petition has been filed. While the IRS can continue to audit tax returns during a bankruptcy proceeding, and may even determine that a tax is due, it cannot start or continue enforced collection. The IRS must stop any wage levy and if it files a tax lien after the bankruptcy petition has been filed, it must withdraw the lien.
What happens if the bankruptcy automatic stay is violated? Well, as a general principal, if a creditor violates the automatic stay by accident, it must return the money or stop the collection action as soon as it learns about the bankruptcy. However, if the stay violation is done willfully (ie., on purpose), then the creditor faces serious penalties as federal law provides strong remedies for the debtor. After a willful stay violation, the debtor can not only recover the money or property that was wrongfully taken, attorney fees and even punitive damages may be available.
The IRS instructs its collectors to stop all collection activities when they learn of a bankruptcy. In spite of these instructions, there are times when an overzealous tax collector violates the automatic stay on purpose. While some statutory remedies are available, the debtor cannot recover punitive damages against the government. Special rules apply and, based on 26 USC §7433 (d)(1) an aggrieved taxpayer in bankruptcy must first go through IRS administrative process to fix the problem. Treasury Regulation 301.7433-2(d)(1) sets out a procedure that must first be followed before any damages can be recovered from the IRS.
Despite the additional requirements of IRS regulations, the bankruptcy stay remains powerful protection from the tax collector. There are few other situations in which the debtor can tell the IRS to stop collections and count on the court to back them up. If you are being harassed by the IRS, call us today for a free consultation.
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