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1)
Prior to filing for bankruptcy protection, debtors are required to
submit to credit counseling and meet other obligations intended to
dissuade them from seeking bankruptcy protection.
2) There is now a "means" test that limits access to a
straight liquidation of debts under Chapter &. Generally, if
the combined gross income of the debtor's family is greater than
the median family income in his or her state, he or she will be
placed in a 36-60 month repayment plan under Chapter 13 rather
than getting the coveted "fresh start" under Chapter 7
of the bankruptcy code.
The
news is not all bad for debtors. The new law increases the
exemption for retirement funds, exempts personal residences owed
for at least 40 months, and protects funds properly transferred to
asset protection trusts (e.g., Alaska or Delaware asset protection
trusts). There is also a mild incentive for creditors to work out
repayment plans outside of bankruptcy. A court may reduce an
unsecured consumer debt claim by up to 20% if the claim was filed
by a creditor who unreasonably refused a reasonable alternative
repayment schedule proposed by an approved credit counseling
agency on the debtor's behalf.
New
Exemption Limit on IRAs. The new law places a limit of $ 1 million
on the exemption for traditional and Roth IRSs. Qualified plans,
e.g., 401(k) and 403(b) plans, SEPs and Simple IRAs enjoy an
unlimited exemption.
More
Responsibility for Bankruptcy Attorneys. Under the new act, the
person preparing a bankruptcy petition must give assurances about
the accuracy of its contents. Attorneys must make a "
reasonable inquiry to verify that the information contained in
such documents is well grounded in fact."
Bankruptcy
can be a viable option for removing Federal Income Tax liabilities
in some circumstances. In order to have a real chance at
discharge, you must file Chapter 7 (assuming you are an
individual). If you have filed Chapter 7 before, you cannot
file again until 7 years have passed from the discharge date.
All
tax returns must have been filed to qualify for discharge, and
only those taxes that are at least 3 years old, and have not
been assessed in the last 2 years will qualify. Some taxes
such as payroll taxes are not dischargeable to the extent of the
trustee portion of the liability.
In
addition, bankruptcy will not remove the federal tax liens in
place so assets may be in jeopardy after bankruptcy until the
statute of limitations has expired.
We
have seen the IRS refuse to acknowledge the discharge of taxes
even when sent multiple letters by a certified bankruptcy
attorney. For this reason, I would suggest that if you are
considering bankruptcy, get competent legal help and know your
options before you act.
By
the way, the other title bankruptcy is Chapter 13, Chapter 13 will
not discharge federal taxes and is basically a reorganization of
your debt that will do you little if any good.
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