The United States Bankruptcy Code is comprised of several different chapters. Some chapters deal with administrative matters. Other chapters provide specific guidance on how a case must proceed. Chapter 13, a repayment bankruptcy, is reserved for debtors who are “natural persons,” as opposed to businesses or corporations. Businesses and individuals can file Chapter 7, a liquidation bankruptcy, but only individuals can receive a Chapter 7 discharge. When businesses need to restructure, they turn to Chapter 11, commonly called the “business bankruptcy.”
Recently the parent company of American Airlines filed for Chapter 11 bankruptcy protection. Chapter
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Every year Halloween stores pop up and disappear in time for consumers to purchase their favorite costumes, candy, and decorations. While managing pop-up Halloween stores has its ups and downs, this years holiday spending predictions will raise some retailers spirits.
Whether a tax refund will be taken by the Trustee in a Chapter 7 bankruptcy will depend on several factors.
As a general rule, the amount of taxes withheld from your pay are prorated over the entire year. This means that the portion of the tax refund for the time before the bankruptcy filing is property of your bankruptcy estate and is available to be used to pay your unsecured creditors.
As an example, if you filed a bankruptcy petition on December 1, the withholding from January through November is part of the bankruptcy estate.
At the 341 Creditors Meeting, the Trustee will usually advise the Debtor as to whether or not he will administer the tax refund. This decision will be based on a review of the tax return(s) provided to the Trustee.
For a tax refund to be worthy of administration, the Trustee will consider several factors:
- The amount of the refund. Often if a refund is small, the Trustee will not take it simply because it is not cost effective to distribute it to the unsecured creditors.
- Exemptions. Depending upon the state in which you live, the funds may be exempt under federal exemptions, state exemptions which permit a cash exemption or a wild card exemption, or an earned income tax credit exemption. In Louisiana, where I practice, we have a specific earned income credit exemption.
- Prior year(s) unpaid taxes. Taxes are normally a priority debt. If the refund is going to pay past due taxes, then the trustee will not take it since the priority debt must be paid before an unsecured debt is paid.
When possible, the easiest way to avoid having to give up a tax refund is to file the return, receive the money and spend it before the bankruptcy is filed. Paying for things such as pre-filing legal fees as well as the day to day necessities of life are permissible uses of a tax refund.
The receipt of a refund is only one issue in determining when to file a bankruptcy. Other issues like a pending foreclosure, repossession, or the expected receipt of a bonus can all affect the timing. Also, local practice in the court where you file will be a factor.
Something fairly unique to the State of California is that the area offers its residents a low income car insurance option. While there are plenty of ways to save costs on an auto insurance policy, many drivers end up opting for liability coverage only or even take the risk of driving without a policy at all. This is dangerous not only for the other drivers on the road, but certainly for the uninsured or underinsured driver. Not only is dangerous, it is also illegal since the State of California requires that drivers carries car insurance on their vehicles. California’s solution is to offer a different, more affordable policy for low income drivers and families.
The low California Low Cost Automobile Insurance (CLCA) program was developed by the California Department of Insurance but is administered by the California Automobile Assigned Risk Plan (CAARP). T
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When a bankruptcy case is filed the individual debtor announces his or her intent to proceed under Chapter 7, 11, or 13 of the federal Bankruptcy Code. Each bankruptcy chapter has its own advantages and challenges. During some cases, the debtor’s circumstances may change and another bankruptcy chapter becomes more beneficial. In these cases the debtor may be able to convert the bankruptcy case to a different chapter.
Converting a bankruptcy case to another chapter is a very simple process. There is a filing fee and a notice that must be filed with the bankruptcy court. The debtor is required to update the bankruptcy schedules to include any changes or new information. C
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