Monthly Archives: July 2014

Can I File Bankruptcy If I Have a Payday Loan or Advance?

By

Can I file bankruptcy if I have a payday loan or advance? Yes you can. Payday loans are unsecured debts just like a credit card or medical debt. Payday advances are dischargeable. There are some issues though given the nature of the debt. Payday loans are usually to be repaid within a relatively short period of time. Given that payday loans are usually recently incurred when filing for bankruptcy protection there are a few issues for bankruptcy lawyers to discuss before filing for bankruptcy protection. The reality is few payday loan companies pursue nondischargeability claims At the same time, past results are not necessarily indicative of future results.

1. Payday Loans Are Horrible

Before discussing the pitfalls of filing for bankruptcy when you owe payday loans let us examine payday loans in general and how the work. Payday loans are supposed to be short term loans until the borrower gets paid next. The percentage rates are usually disgustingly high and should be illegal. We have documentation of a percentage rate of 1000%. To obtain a payday loan or advance it usually requires some sort of regular income of some significance. If make $200 a week you will most likely not qualify for an amount larger than that. Once you are approved for an amount to borrow, you will be asked to write a post-dated check for the amount borrowed to be cashed when you get paid. The original loan will have some sort of fee ranging from $40 to $100 for the loan. If you are unable to pay the loan back when you get paid some companies will allow the loan to be renewed for another high fee ranging from $40 – $100. What about that post-dated check you wrote? If the check bounces your bank will charge you fees too. Not paying the payday advance or loan on time will start a vicious cycle of increased fees. Borrowers commonly have to continue to obtain a new payday advance or loan to keep their bills paid while continuing to incur more and more fees.

2. Recently Incurred Debts May Not Be Discharged

Debts incurred or obtained close in time to filing for bankruptcy raises a number of issues. The problem is that the payday loan company may have an argument that you never intended to pay back the loan given you filed for bankruptcy so close in time to obtaining the loan. Bankruptcy Code Section 11 U.S.C. 523(a)(2)(C) provide for a 90 day look back for cash advances and payday loans. The payday loan company would have to file an adversary lawsuit against the bankruptcy filer alleging the payday loan should not be discharged given it was incurred within 90 days of filing the bankruptcy case. Bankruptcy Code Section 11 U.S.C. Section 523(a)(2)(A) governs debts incurred from fraud. If the case is filed within the 90 days of incurring the loan the payday loan could argue with circumstantial evidence you never intended to pay back the payday loan.

3. Payday Loans With Post-Dated Checks Are A Problem

Another problem is the post-dated check that was provided to the payday advance company. Section 326 of the Bankruptcy Code governs the automatic stay that becomes effective as soon as your bankruptcy attorney files your bankruptcy case. The automatic stay stops any and all collection activity. The problem is that Section 362 does not stop the presentment of a negotiable instrument, or a post-dated check. You need to research your circuit cases regarding this issue to determine if trying to deposit the post-dated check is a violation of the automatic stay or not.

While it is rare for a payday loan company to sue a bankruptcy filer for an unpaid payday advance or loan it is important to be fully advised of the potential ramifications or filing for bankruptcy protection with a recent payday loan or advance. It is more of a cost benefit analysis. If the payday loan is only $500 it does not make much sense to spend thousands of dollars to prove the loan should not be discharged. It does happen though.

What Events Can Toll or Stop The Clock for Reach Back Periods When Discharging Taxes in Bankruptcy?

By

There are a number of requirements to discharge taxes when filing for bankruptcy protection. Timing is everything. Taxes can be discharged if they taxes are three years old, filed on time or 2 years before the bankruptcy case was filed, assessed 240 days prior to the bankruptcy case, non-fraudulent return and no willful tax evasion. This article will not address the numerous issues that can arise regarding each of the requirements listed. This article focuses on what events can stop the clock or start the tolling of the different time periods. Your bankruptcy lawyer in your jurisdiction will be able to discuss how your state taxes are dealt with in bankruptcy.

Tuition Credits are not Student Loans

Tuition Credits are not Student Loans

For example, the due date for 2009 taxes is April 15, 2010. In theory taxes owed for 2009 therefore will be dischargeable after April 15, 2013, when filing for bankruptcy protection. So stops the clock on the three year period though? Or what stops the clock for the filed on time or return filed at least two years before filing for bankruptcy?

Bankruptcy Code Section 507(a)(8)(G) provides in part . . . . “applicable time period specified in this paragraph shall be suspended for any period during which a governmental unit is prohibited under applicable nonbankruptcy law from collecting a tax as a result of a request by the debtor for a hearing and an appeal of any collection action taken or proposed against the debtor, plus 90 days; plus any time during which the stay of proceedings was in effect in a prior case under this title or during which collection was precluded by the existence of 1 or more confirmed plans under this title, plus 90 days.

Events that Toll or Stop the Clock From Running

1. Filing Bankruptcy: The first event is the filing of a prior bankruptcy case. As soon as the bankruptcy case is filed the automatic stay is in effect stopping any and all collection activity, including collection of taxes. The time period of three years and 240 days is not stopped since the governmental agency is prevented from attempting to collect the taxes. However long the automatic stay was in effect should be subtracted from the total days. Bankruptcy Code Section 507(a)(8)(G) also adds 90 days to the time period.

2. Request for a Hearing: Once you receive a letter in the mail from the IRS or FTB that you allegedly have unpaid taxes you may request a hearing to object or challenge the taxing authorities findings. Once you make this request the time period for looking back to determine if the taxes are dischargeable is tolled or stops. In addition once the event is over the time starts to run again 90 days must be added to the time period.

3. Appeal of Any Collection Action: This is more or less the same as making a request for a hearing. If the IRS or FTB levied on your bank accounts or informs you of a proposed assessment and you appeal the collection action or assessment the time period looking back is again stopped or tolled.

4. Offers In Compromise: If you make an offer in compromise it will stop the 240 day period while the offer is pending or in effect, plus 30 days. See Bankruptcy Code Section 507(a)(8)(A)(ii)(I). The trap here is if you had an offer-in-compromise in effect previously but no longer. The time the OIC was in effect must be calculated and added to the 240 day time period. Also, it only tolls the 240 day period with the taxing authority the offer was made to.

5. Extension to File Return: The Internal Revenue Service requires a form be filled out to obtain an extension of the deadline to file a tax return. Some states, like California, will automatically extend the deadline to file a return if not filed on time. This is an issue that needs to be looked at closely. Do not assume the federal tax time periods and deadlines are the same for whatever state taxes are owed as well.

The good news is that entering into an installment agreement with the Internal Revenue Service or Franchise Tax Board does not toll or stop the time periods. This is our recommendation also. If all else fails then enter into an installment agreement as soon as possible. Ignoring the taxing authority will only make matters worse. You do not want the government levying on your bank accounts, garnishing your wages or issuing tax liens on your real and personal property.

Hayward California Bankruptcy Attorneys and Lawyers

By

It is 2014 and things a looking better for the economy and housing market in the Bay Area. That does not mean everyone has recovered from the mortgage meltdown and sluggish economy. Our Hayward California bankruptcy attorneys and lawyers are ready to discuss your circumstances during a free consultation right now. We have offices in Oakland, California and Fremont, California for your convenience. We will also conduct free phone consultations to determine if bankruptcy is right for you. We have helped many clients from Hayward California area become debt free and live happier, healthier lives. Please give us a call at 1-877-9NEW-LIFE to schedule a free consultation.

Chapter 7 Bankruptcy Case

Many people call this a straight bankruptcy and liquidation bankruptcy case. I honestly do not know why people call Chapter 7 bankruptcy straight bankruptcy. Are other chapters bent? Now calling this type of bankruptcy a liquidation case makes more sense. In a Chapter 7 bankruptcy case exemptions protect your stuff or assets. If what you own is worth more than can be protected then the Chapter 7 trustee assigned to your case can take that stuff and sell/liquidate it for the benefit of those that you own money, your creditors. If there is a bankruptcy estate with assets those assets are liquidated. During your free consultation our Hayward California bankruptcy attorneys and lawyers will discuss your assets with you and what exemptions are available to protect the stuff you own. Most Chapter 7 cases are cases without any assets to turnover. California’s exemptions are generous and usually will protect all of your assets, so the only thing that happens if your debts and discharged. Whether you qualify to file a Chapter 7 case and discharge all of your debts depends upon your assets, expenses and income. A typical Chapter 7 case from the date of filing the petition to the court signing the order of discharge will take around 100 days approximately. The only appearance you need to make, and our Hayward California bankruptcy attorneys and lawyers will be appearing with you, is at the Section 341 of the Bankruptcy Code meeting of the creditors. The Chapter 7 trustee randomly assigned to your case from the standing panel will ask a series of questions to verify information in the bankruptcy petition and investigate your financial circumstances. The 341 meeting of the creditors usually only takes about 5 to 10 minutes. You must have a valid unexpired identification card and proof of your social security number for the meeting of the creditors.

Chapter 13 Bankruptcy Case

Chapter 13 is the chapter of the Bankruptcy Code that allows individual and small business owners to reorganize their debts in a Chapter 13 Plan of reorganization. During your free consultation our Hayward California bankruptcy attorneys and lawyers will explain the reorganization process. Filing a Chapter 13 case is usually more expensive given there is more work involved. A typical Chapter 13 plan will last between three to five years depending upon your circumstances. There are many reasons why filing a Chapter 13 case may benefit you financially. Chapter 13 will allow you to catch up on missed mortgage payments, missed car loan payments, pay back taxes without interest or penalties, discharge taxes, discharge unsecured debts, get rid of underwater mortgages or home equity lines of credit and much more. Even if your income is high and you can afford to pay back your debts Chapter 13 can help. Unsecured debts like credit cards are paid back in a Chapter 13 plan without paying any interest. This is a huge savings and will allow you to pay back your debts in 5 years instead of the 20 years it will take when adding in interest each month. Our Hayward California bankruptcy attorneys and lawyers have filed hundreds of Chapter 13 bankruptcy cases in the Bay Area. We have free consultations available to discuss your finances today. Do not wait until you are sued or wages are garnished to act. Find out how bankruptcy can help now to help you make better decisions going forward.