Chapter 7

Can I Keep My Tax Refund?

Written by Alethia Scipione

Photo by DonkeyHotey

Are YOU getting a refund?

Are you considering bankruptcy in Arizona and wondering what happens to your tax refund?  Here are some things you should know:

Tax refunds are not protected in bankruptcy.  Remember, there are certain “exemptions” (laws that protect your ‘stuff’) that you have when it comes to bankruptcy.  One thing that is NOT protected is your tax refund and the trustee would expect for the money to be turned over to him to help pay a portion of your creditors.  This is true no matter when your case is filed, which is why:

Timing is everything.  Your refund is calculated based on the day your case is filed.  If your case is filed mid-year, the trustee can take approximately 1/2 of your tax refund.   If your case is filed towards the end of the year – he can take almost all of it.  Let’s say your case is filed March 1, 2012, right before you get the 2011 tax refund mailed to you.  Technically, the trustee is entitled to all of the 2011 tax refund, plus 2 months worth of any refund for 2012.  Chances are likely he won’t wait until 2013 to collect the 2012 refund (plus I would advise you to adjust your taxes so you don’t receive a refund at all for that year); but usually the cost exceeds the benefit to the trustee for smaller refund amounts.  So if its that time of year to file taxes and you find yourself contemplating bankruptcy, you need to file your taxes, get your tax refund, spend it on reasonable and necessary living expenses (which yes, I’ll say it, CAN include your bankruptcy attorney fees) before your bankruptcy case is filed.  (Be sure to keep receipts for what you are spending your tax refund on, because the trustee WILL want to know).  You can’t save it, or buy a luxurious item or nonexempt item, like a boat.  You definitely want to seek advice from an experienced attorney before risking losing this money.

One final tip (AFTER bankruptcy):  Don’t make the government your 0% interest savings account.  I know a lot of people like to get a little less on each paycheck so at tax time they can get a nice big refund.  Many families use this as their summer vacation money, or money for home improvements, or big items like tvs or down payments on cars.   But giving the government your money for free for 365 days a year isn’t the best way to save.  Instead, save that same dollar amount in your own interest bearing savings account.  Although interest rates are very low right now, it would be better for you to earn even a little bit on your money instead of nothing.   Plus, once interest rates go back up, you’ll be in a good habit of saving money.  Instead of extra tax deductions, try having that same amount taken directly from your paycheck and direct deposited into your new savings account.  You won’t see it (just like when taxes are taken out).  It will just take some will- power to not touch it until your family vacation.  REMEMBER, this is not for when you are planning to file for bankruptcy (because a savings account is not protected in bankruptcy); but something to think about for after your case is over.  There is life after bankruptcy, and you can start thinking about that now.

After Chapter 7 Bankruptcy: Cleaning Up Your Credit Report

Written by Alethia Scipione

Your Phoenix Chapter 7 Bankruptcy case is over.   You can finally breathe again.  Now, it is time to roll up your sleeves and get to work on cleaning up your credit report.  I’m not going to lie to you, it is tedious, arduous task that you must stay on top of to actually finish.  But, I know you can do it.  You’ve come this far, right!?!

You will receive your discharge order from the court.  Hold on to that document, keep it in a safe place, because you will need to supply this information to the credit agencies.  After about six months from the date of your discharge you should order a free credit report.  You can get access to free annual credit reports, access to the three credit bureaus and access to their dispute processes through this website:

https://www.annualcreditreport.com

 

Simple things to look for:

  1. Verify personal information is correct – including current and former addresses, spouses/co-debtors, employers.
  2. Dispute any credit report inquiries that you did not authorize.

A little more difficult:

Remember before you filed for bankruptcy some of your accounts had been “charged off” by the original creditor and sold to a collection agency (or two or three)?  Well, it’s time to make sure these are reported accurately.  Most importantly, every single one should be listed as “Included in Bankruptcy” or “Discharged in Bankruptcy”.

Take note of any items that are being reported incorrectly and file a dispute using the instructions on the website or by mailing them directly at:

Equifax
P.O. Box 740256
Atlanta, Georgia 30374

Experian
P.O. Box 9554
Allen, Texas 75013

TransUnion
P.O. Box 6790
Fullerton, CA 92834

If you are making payments on something and find that those payments are not being reported try the following:

  1. Request a payment history from the lender/creditor.
  2. File a dispute with each of the 3 credit agencies attaching a copy of the payment history.
  3. The credit bureau is required to verify the accuracy within 30 days.  It should be corrected – either by the credit bureau or the lender.

Good luck on the final leg of your journey!  If you have comments or questions about this post you may contact me directly at alethia@amslawaz.com.

Chapter 7 Bankruptcy: You are unique

Written by Alethia Scipione

If you are considering a Chapter 7 bankruptcy you’ve probably scoped the Internet for answers.  As you’ve learned, there is a lot of information out there.  Maybe some of you have turned to your friends and family for support.  When times are tough, we all try to find information, solace, reassurance, and validation through these near and dear people.  Of course, they are supportive, and they have many ideas and suggestions.  They have done research on the Internet, too.   Maybe they have had a neighbor or co-worker file for bankruptcy or maybe even filed bankruptcy themselves.  But, unless they are licensed to practice law, and experienced in bankruptcy law, you should take the time to call an attorney for more information about bankruptcy.  Every case is unique.  This is why it is  so important to get information that is specific to you, your family, and your circumstances.  You need an attorney who will listen to all of your concerns and personalize this process for you as much as possible.

Sure, there are certain procedures, deadlines and parties that remain constant in any case, but the specifics of your case are different from your neighbor’s case.   You may have different types of property, or different types of debt.  You may make more money (or less money) than your neighbor, you may have more dependents, or have pending law suits or garnishments.   You may want to save your house, and your neighbors chose to walk-away from theirs.  It is  important to remember when you hear other people’s bankruptcy stories; it probably won’t be the exact same process for you.  Which is why you need someone who will treat your case as unique as it truly is, instead of just rushing you through the process like a factory line.  Everything depends on your specific circumstances.  The only way to find out what options are best for you is to set up an appointment with an attorney.  Call to schedule your appointment today 480-917-0340.

Will I Lose Everything if I File for Bankruptcy?

Written by Alethia Scipione

I file cases for people in the Phoenix metro area out of my Chandler office.  One of the most common questions people have is whether or not they will lose everything if they file for bankruptcy.  People are usually most interested in knowing what will happen to their houses or cars.  Generally speaking, if you are current on your house and car payments you can keep those assets.  If they are paid off, they must be protected by “exemptions” (laws that protect your asset).

The point of a chapter 7 bankruptcy is to give you a fresh start.  The law is meant to protect people like you who have been inundated with overwhelming debt that you can no longer afford to pay.  It is a way to release you from being a slave to credit.  But, most importantly, it is not a method to leave you homeless and without transportation, instead it is supposed to be a way to leave you with the things you need to move forward with your life, financially.

Here’s how it works in a nutshell: When you file a Chapter 7 bankruptcy, most of your assets are put into “the bankruptcy estate” and entrusted to a duly appointed bankruptcy “trustee”.   It is the trustee’s job to find assets of value that can be sold (liquidated) and then use that money to pay something towards your debt.  However, not everything you own will be liquidated, because each state has “exemptions” that protect your assets from creditors.  Each state’s law varies significantly.  Here is a condensed  list of Arizona’s exemptions:

Total per case:

$150,000 Homestead (primary residence)

For each debtor:
$4,000 Household furnishings
$500 Clothes & shoes
$500 Musical instruments
$500 Domestic pets, horses, milk cows & poultry
$1,000 Wedding bands/rings
$250 Books
$500 Typewriter, bicycle, sewing machine, family bible, burial lot, rifle, shotgun or pistol
$100 Watch
$5,000 Vehicle
$1,000 Prepaid rent, security deposits
$20,000 Life insurance

The following are 100% exempt:

  • Food, fuel & “provisions” for 6 months
  • Earnings of minor child
  • Social Security
  • Unemployment compensation
  • Workers compensation
  • Welfare assistance
  • Health, accident or disability insurance
  • Child support
  • Firemen/Police relief/pension benefits
  • Teacher retirement
  • State employee retirement
  • Fraternal Benefit Society benefits
  • School equipment used to teach
  • Firefighting equipment

See Arizona Revised Statutes §9-931, §9-968, §20-881, §23-783, §23-1068, §§33-1101-02, §33-1104, §§33-1123-31, §38-792, §43-1201, §46-208, 42 U.S.C. 407(a), SEC 207

This list above is not all inclusive and certain limitations apply for some.  Contact me to find out more.

Bankruptcy Basics

Written by Alethia Scipione

Falling behind on our bills leaves us feeling embarrassed, stressed, scared, and out of control. You have sleepless nights and find that it affects every aspect of your life. It is happening all over America, people are filing for Bankruptcy like never before. In the fall of 2008, Bankruptcy filings in Arizona had increased 87.5% since the year before. It is unfortunate that bankruptcy clients are sometimes viewed as being irresponsible. The truth is, the majority of my clients were faced with unexpected circumstances that left them struggling to pay their debts. Many have lost jobs or had a significant decrease in income. Others have filed for divorce and find that two households are much more expensive than one. Still others have been faced with serious medical conditions and mounting medical bills, or even a death in the family. If you find yourself unable to make even minimum monthly payments on your credit cards, if creditors are harassing you, if you have been sued or your wages have been garnished – bankruptcy may be an option.

A Chapter 7 bankruptcy is often referred to as a “liquidation” bankruptcy. In the most basic of terms, when you file for bankruptcy all that you own is considered part of the “Bankruptcy Estate”. A trustee is assigned, and acts with the sole purpose of finding assets to liquidate in order to provide some payment to creditors. Many items are exempt from the Bankruptcy Estate, meaning – you get to keep them. Exemptions vary by state. In Arizona, the important things include: your house (up to $150,000 of equity); if you own a car free and clear $5,000 is exempt from the estate. Your household goods and furnishings, up to $8,000, are exempt. Essentially, in a Chapter 7 case, you get to keep everything you own, and all of your debt is discharged. Some common assets that are not exempt (meaning the trustee would sell) are rental property, timeshares, and land. Speak with an attorney to determine which of your assets would be exempt if you file for bankruptcy.

A Chapter 13 bankruptcy is commonly referred to as a “reorganization” of your debts. A trustee is assigned to your case, and a plan is created to make payments to your creditors. The plan payment will include priority debts such as mortgage arrears; past due taxes, child support, and alimony. The plan payment also will include a payment for your car(s), and administrative expense for your attorney, a trustee fee and finally a percentage of your unsecured debt. After the plan term of three to five years, any unsecured debt left over will be discharged. Current legislation, if passed, will allow judges to modify the mortgage on your primary residence. This will be especially beneficial to those of you whose houses are “upside down” and help you get out from under debt.

A Chapter 11 bankruptcy is commonly used by businesses to reorganize debt. Businesses are able to continue to operate and a plan (approved by creditors and the court) is implemented to repay debts. Certain types of debt are non-dischargeable in bankruptcy, including income taxes, student loans, domestic support obligations (child support/alimony), criminal fines, debts resulting from intoxicated driving, debts incurred fraudulently.

In 2005, The Bankruptcy Abuse Prevention and Consumer Protection Act was passed. Most notable is the new “means test” which was developed to determine if a debtor is eligible for a Chapter 7 or must file a chapter 13. Call an attorney for advice on whether or not filing for bankruptcy is the right choice for you. Other alternatives could include debt negotiation/settlement; and debt consolidation programs. Take the step to give yourself freedom from your worries and know that you are certainly not alone.

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    Law Offices of Alethia M. Scipione P.C. is a federally designated Debt Relief Agency under the United States Bankruptcy Laws. We assist people with finding solutions to their debt problems, including, where appropriate, assisting them with the filing of petitions for relief under the United States Bankruptcy Code.

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    National Association of Consumer Bankruptcy Attorneys