Bankruptcy is a very powerful tool that helps millions of Americans get relief from crushing debt every year. The ultimate goal of a bankruptcy is the bankruptcy discharge, basically an order prohibiting the affected creditors from ever collecting on a discharged debt. December is typically a slow month for bankruptcy filings, but the subsequent months might be even worse, depending on your situation.
If you used your credit cards for Christmas, they may be nondischargeable. - 11 U.S.C.§ 523(a)(2)(C)(i)(I) states that consumer debts owed to a single creditor and
aggregating more than $500 for luxury goods or services incurred by an
individual debtor on or within 90 days before the order for relief under
this title are presumed to be nondischargeable.
Likewise, if you got cash advances for Christmas, the debt may be nondischargeable. - 11 U.S.C.§ 523(a)(2)(C)(i)(I) states that cash advances aggregating
more than $750 that are extensions of consumer credit under an open end
credit plan obtained by an individual debtor on or within 70 days before
the order for relief under this title, are presumed to be
nondischargeable.
If neither one of those fit your situation, creditors will sometimes ask that a debt be declared nondischargeable due to fraud. They will essentially say that you made misrepresentations about your financial condition when using your credit cards and you knew that you would be unable to make the payments. They generally use 11 U.S.C.§ 523(a)(2)(A) to argue this, which states that a discharge does not apply to any debt for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual
fraud, other than a statement respecting the debtor’s or an insider’s
financial condition.
If you are considering filing bankruptcy, the longer that you wait between credit card usage and filing your bankruptcy the better. If you used any credit card for more than $500, it is best to wait at least 90 days before filing your bankruptcy.
If you receive large tax refunds, it might make since to wait until after you have received it and spent most of it. Chapter 7 bankruptcy is a liquidation bankruptcy. You turn over all of your unexempt assets over to the trustee. The trustee may liquidate any unexempt asset that you have the right to receive within 6 months after the filing of the bankruptcy petition. If you are filing bankruptcy during the winter months, one of the assets may be your tax refund. The amount of what is exempt depends on state law. For instance, people in Georgia may be able to protect up to $5,600 pursuant to O.C.G.A. §44-13-100(a)(6), however Louisiana residents can only protect the portion of their refund attributable to the earned income credit, and Florida residents who own a home can only exempt $1,000 in personal property (this includes furniture, clothing, cash, and tax refunds). Many jurisdictions require Chapter 13 debtors turn over all or most of their tax refund to the trustee every year that their case is pending.
If you generally get large tax refunds, it might make sense to wait to file your taxes until after you have received and spent most or all of the tax refund. That does not mean that you should go spend the refund as fast as possible for the purposes of filing bankruptcy. The trustee may ask you to show where you spent the money and can seek judgement against friends and family that have been paid with the refund or even ask that your case be dismissed for fraud. You can use the money to pay utility bills, catch up rent payments or car payments, make minor home and car repairs, etc.
If you are considering filing bankruptcy, Simplified Document Solutions can help you get a bankruptcy discharge for a low flat $249 fee. To get more information, please call Charles at (678) 490-5841 or visit our website at www.249bankruptcy.com.
Visit & Like us on Facebook to stay up to date on new changes to the bankruptcy code, as well as special offers by Simplified Document Solutions.
This is intended as general information, not legal advice. Your situation may have complexities that are unknown to the author and have not been considered in this blog. If you have specific questions about your situation, you may wish to obtain information from competent counsel.
Friday, December 26, 2014
5 Things That You Need To Do Now to Reduce Your Tax Liability
With only a few days left in 2014, it may seem like there is
nothing that can be done with such short notice to reduce your tax
liability. This is simply not true. While you can’t change how much income you
made over the course of the year or increase your tax withholdings that were
set too low over the course of the year, there are some small things that you
can do to reduce your tax liability and/or increase your tax refund before the
end of the year.
All of these things may not be a good idea for
everyone. Whether these things are best
for your situation depends on your past tax years, your current tax situation
and income, and your expected tax situation next year. If you are unsure if something is a good
idea, it might make since for you to contact an experienced tax professional
before making any moves.
- Pay Your Student Loan Interest:
This is one
of my favorite moves since it is pretty easy and you don’t hear about it very
often. Student loan interest is deductible
up to $2,500 per year, even if you don’t itemize your deductions (subject to
income requirements). I generally pay
the accrued interest on my student loans on December 30 to reduce my income for
that calendar year.
- Pay Your January Mortgage Payment:
If you do
itemize your deductions, one of the biggest deductions is your mortgage
interest. Pay your January mortgage
(that you have to pay anyway) in December to increase the amount of interest
you pay in this calendar year.
NOTE
REGARDING MORTGAGES: During the 2012 &
2013 tax seasons, a problem started showing up.
People who had always itemized their deductions suddenly realized that
it no longer made financial sense to do so.
This was due to mortgage modifications that drastically reduced their
interest rates. To those that got
mortgage modifications early in the year or late last year, you might find that
it doesn’t make sense to itemize anymore due to the drastic decrease in
mortgage interest paid. It’s not all
bad, if you are one of these people, you are probably saving a lot of money on
a monthly basis, even if it means Uncle Sam gets a little more at the end of
the year!
- Donate to Charity:
Have you
noticed that charities are pushing for money this time of year? Not only are people in a more giving mood
around the holidays, they are also looking to decrease their tax liability. Since you can donate to most charities and
churches through their website, you can really do this up until the clock
strikes midnight on New Years.
If you don’t
have money to give, you can go through your closet to see if there is something
that can be given to Goodwill or Salvation Army to be sold in one of their
thrift stores. They will give you a 2014
receipt as long as you can get it to them before they close on December 31. This might give you a chance to reduce those
overflowing closets after Santa gave the kids all of those new toys.
- Invest in an IRA:
IRAs are a
great investment tool to plan for your retirement in the future and reduce your
current tax liability. Most people can
deduct a contribution up to $5,500 per year to an IRA and you don’t have to
itemize your taxes to do it. For certain
low-income taxpayers, you may also be eligible for a credit of a portion of the
contribution. So you get to take it
twice! An added benefit of this contribution
is that you have until April 15 to contribute and you can even use your tax
refund to contribute. Please contact an
experienced tax professional to get more information on how to maximize your
contribution.
- Time your invoices:
If you are
self-employed, time your invoice to reduce your tax liability. For those who have had an unusually good
year, you might want to send out your last invoice to your clients after
January 1. If you have had a bad year financially
and you expect to do better next year, get your invoices out now so you make
more income this year.
Simplified Document Solutions provides professional individual
tax preparation by an experienced and IRS Certified tax preparer for a fraction
of the cost of the competition. You can
reach Simplified Document Solutions by telephone at (678) 490-5841 or you can
schedule an appointment online by going to www.simplifieddocumentsolutions.net
or www.249bankruptcy.com.
Simplified Document Solutions
100 Hartsfield Center Pkwy.
Suite 500
Atlanta, GA 30354
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