An adversary proceeding is a lawsuit that can be filed by a creditor, a trustee, or you (as debtor) during a bankruptcy court case. In each of the three instances the bankruptcy judge will make a decision about the matters presented to the court.

A creditor usually files an adversary proceeding because the creditor believes that the debt owed to them should not be discharged in the bankruptcy case. This may be so for a variety of reasons. One reason might be that the debt falls within one of the exceptions to a discharge, such as a debt created through fraud, willful or malicious injury, or a personal injury caused by driving while drunk. Another reason might be that the creditor contends that the filing of the bankruptcy case was done in bad faith. This type of adversary proceeding is not seen too often.

There are several reasons for a trustee to file an adversary proceeding. The more common motivation for a trustee to file an adversary proceeding is because they believe that the schedules were not filled out accurately and were intentionally fraudulent. If your paperwork is not filed on time, or is improperly filed, or if you miss a court date without a good reason then a trustee may file to have your case dismissed. Another reason a trustee may file an adversary proceeding is to try to collect money back from a creditor who received funds or property from you. A trustee may also file an adversary proceeding to undo a transfer of real property. Also the United States Trustee may file an adversarial proceeding to force you to change from a Chapter 7 bankruptcy to a Chapter 13 bankruptcy if the U.S. Trustee believes that the filing of the bankruptcy petition was done in bad faith.

Finally, you, as a debtor, may file an adversary proceeding against a creditor. You may do so to recover damages for a creditor’s actions taken in violation of the U.S. Bankruptcy Code, in violation of the automatic stay or the discharge injunction.

If you live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, or Golden, Colorado, and have any questions please feel free to contact me. Kevin D. Heupel, Colorado Bankruptcy attorney, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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Sara Murray and Conor Dougherty of the Wall Street Journal wrote an article yesterday discussing the bankruptcy figures for 2009. They wrote that the bankruptcy filings have risen by a third in 2009, stating that this surge in numbers were largely due to “foreclosures and job losses.”

Despite the change in the Bankruptcy Code in 2005 aimed at encouraging individuals to file Chapter 13 bankruptcy, which plans for repayment of debts, over Chapter 7 bankruptcy, which relieves the filer of many of their debts, more people are filing Chapter 7.

“Personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data.” It is the largest number of personal-bankruptcy filings since 2005, when consumers pushed to file prior to the new bankruptcy laws taking effect.

Chapter 7 bankruptcy cases were greater than 42% as of November 2009, compared with the same period a year earlier, according to the research center.  Whereas Chapter 13 bankruptcy cases increased by 12% and accounted for less than a third of 2009 bankruptcy cases as of November.  

There’s been some debate as to whether the growing trend toward filing personal bankruptcy is slowing down. But in December of 2009 there were 113,274 bankruptcy cases filed, which was a third higher than the number filed in December of 2008.

If you live in Denver, Colorado, or any of the surrounding areas, please feel free to contact me with any questions you might have.

Kevin D. Heupel, Colorado Bankruptcy lawyer, 303-955-7570, COBankruptcyHelpEmail, free-consultation form.

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If you owe taxes to the IRS you may be considering arranging some kind of installment payments. The problem with this “solution” to your tax debt is that the IRS charges large penalties and interest. The interest and penalties can accrue to such an extent that it doubles your tax debt every five years. This is not a very expedient way of trying to pay off your debt. As I mentioned in my last blog the one way to avoid IRS penalties and interest is through a Chapter 13 repayment plan.

The benefits from choosing the Chapter 13 bankruptcy repayment plan are significant.  Not only will the Chapter 13 prevent the IRS from charging you interest on a new plan, it can also decrease the interest you already have assigned to a previous tax debt. The same is true of the IRS penalties: they may be avoided with a new plan or already accrued penalties may be decreased. Also, your tax debt may be reduced to as little as one percent of your original debt. Since with a Chapter 13 bankruptcy you only have to pay back what you can afford on past income tax debts. Another benefit is the fact that once you begin a Chapter 13 bankruptcy case the IRS cannot levy any of your property. One more advantage with a Chapter 13 tax bankruptcy is that you pay the IRS what your budget allows under bankruptcy law standards. Thus you avoid using the IRS “living expense standards.” The bottom line is that usually with Chapter 13 bankruptcy you will pay back much less than what you would with an IRS installment agreement.

If you and live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, Golden, Colorado, or any of the surrounding areas, and have any questions please feel free to contact me.

Kevin D. Heupel, Colorado bankruptcy attorney, 303-955-7570, COBankruptcyHelpEmail, or free-consultation form.

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As I promised in last week’s blog, I am going to continue to review some of the relevant information regarding bankruptcy and income taxes. This will be no more than a summary of the issue since the concerns involved can be complex.

Let’s first look at Chapter 7 bankruptcy and the tax relief that it affords you. There are five factors considered when determining whether or not your taxes can be eliminated via a Chapter 7 bankruptcy case. If your taxes fall into any of the following five categories then they may not be discharged: One involves any taxes for which a return was due to be filed within three years before the date of filing bankruptcy. For instance, the tax return for 2002 income taxes was due to be filed by April 15, 2003, and thus, these income taxes cannot be discharged by filing bankruptcy on or before April 15, 2006; or, second, any taxes determined by the IRS within 240 days prior to filing bankruptcy. The assessment date is whatever date that tax liability is recorded on IRS records; or, third, any taxes not yet assessed but still assessable; or fourth, any taxes for which a return was filed late and filed within two years before filing bankruptcy; or, fifth, any taxes of a debtor who is charged with committing fraud related to filing a return or who willfully tried to evade taxes attempted to be discharged. If your income tax does not apply to any of the above categories then your taxes will be completely eliminated via Chapter 7 bankruptcy.

Whereas in a Chapter 13 bankruptcy case, any taxes which are non-dischargeable will be considered priority debts and must be paid in full during the Chapter 13 plan. But the good news is there will be no interest charged. Dischargeable taxes are treated as general, unsecured creditors in Chapter 13 bankruptcy, and are eliminated in Chapter 7 bankruptcy. The secured portion of tax liability must be paid during a Chapter 13 bankruptcy, in full and with interest, but without further penalty. As for Chapter 7 bankruptcy, secured tax liens cannot be discharged.

As you can see, some of the issues involved with income tax and bankruptcy are complicated. If you are dealing with income tax debt and live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, Golden, Colorado, or any of the surrounding areas, you may well want to contact me. Please feel free to do so.

Kevin D. Heupel, Colorado bankruptcy attorney, 303-955-7570, COBankruptcyHelpEmail, or free-consultation form.

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The first of the New Year seems like a perfect time to review some of the issues involved in bankruptcy and income taxes. As I have mentioned in an earlier blog, people often think that tax liability cannot be eliminated through bankruptcy.  The Bankruptcy Code does offer you considerable income tax relief. Whether or not filing bankruptcy will offer you such relief depends upon the specifics of your case, such as the type of bankruptcy you are filing, the nature and status of your tax liability.

Federal income tax is the only tax that is eligible for discharge. Bankruptcy offers no relief from: taxes which you were responsible for collecting from others, such as FICA withheld from employees; excise taxes such as estate and gift tax, sales tax, or fuel taxes.

The IRS is permitted to file a tax lien to perfect its tax claim against you. Once a tax lien is filed it becomes a secured lien on all of your property. If you have a tax lien in place before you file bankruptcy, the IRS’s secured tax lien takes priority over the bankruptcy filing. This means that bankruptcy cannot dislodge the lien from your property. Thus property that might otherwise be exempt in a bankruptcy case cannot be sold or transferred without payment of the IRS tax lien. In other words, in this case bankruptcy offers no tax relief.

In my next blog, I will clarify the instances in which bankruptcy does afford relief to you as it applies to your tax debts.  In the meantime, if you live in Denver, Aurora, Arvada, Brighton, Broomfield, Commerce City, Englewood, Highlands Ranch, Lakewood, Lafayette, Littleton, Northglenn, Westminster, Wheat Ridge, or Golden, Colorado, and have any questions contact me.

Kevin D. Heupel, Colorado bankruptcy attorney, 303-955-7570, COBankruptcyHelpEmail, or free-consultation form.

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