ARE YOU CONTEMPLATING BANKRUPTCY AND FILED A BANKRUPTCY PREVIOUSLY? WHEN CAN YOU FILE AGAIN?

again-thumb-375x343-60741When can you file bankruptcy again if you already filed?

If you filed a bankruptcy case before and are worried that you may need to use bankruptcy again, you are probably concerned about whether you can file a bankruptcy case again and discharge the debt.

The primary stumbling block for those who have previously filed, is whether or not they are barred from filing again and receiving a discharge of the debt because they filed a bankruptcy and received a discharge in the past.

There are other rules that pertain to your ability to file that have nothing to do with dates and I suggest that you speak to an experienced bankruptcy lawyer about those rules and those that follow here…but,

Here are the basic date rules:

If you want to file a chapter 7 bankruptcy now:

a. You can’t have filed a chapter 7 bankruptcy within the last 8 years and received a discharge.

b. You can’t have filed a chapter 13 bankruptcy within the last 6 years and received a discharge.

If you want to file a chapter 13 bankruptcy now:

a. You can’t have filed a chapter 7 case within the last 4 years and received a discharge.

b. You can’t have filed a chapter 13 case within the last 2 years and received a discharge.

If you file a case before these time frames have run, you may be able to file again, but you won’t receive a discharge of debt. The key to understanding whether you will be eligible will be whether you actually received a discharge in the previous case. If the case was dismissed prior to the entrance of a discharge order, than the list above shouldn’t apply to you.

The “Discharge” is a permanent Order of the Bankruptcy Court that prohibits certain creditors from taking any collection action including communication.

Determining whether and when you should file for bankruptcy can be a complex undertaking. Nuances like the one above add to the complexity. Make sure and have a qualified bankruptcy attorney fully analyze your situation before deciding to file…again.

IF YOU FILED YOUR INCOME TAX RETURN ONE DAY LATE WILL IT FOREVER BE BARRED FROM DISCHARGE IN BANKRUPTCY? SOME COURTS ARE SAYING YES.

File Tax Return Late?  Debt Barred From Bankruptcy Discharge?

uniqlo-sorry-im-late-tshirt-735856I repeat myself on an almost daily basis when I tell people that income tax debt and certain other tax related debt is dischargeable (the obligation to pay it can be eliminated) in bankruptcy if certain requirements are met. The requirements in their most basic form are:

a. The tax return that forms the basis for the debt must have been due for filing more than 3 years before the bankruptcy is filed.

b. The tax debt can’t have been assessed (determined to be a debt formally) within 240 days of the bankruptcy filing date.

c. The taxpayer cannot have committed fraud or “willful” evasion in relation to the debt.

d. The taxpayer must have filed the tax return more than 2 years before the bankruptcy case is filed.

There are two issues I often confront in relation to the above rules.

The first issue is what my client has done to stop the clock from running on the above time frames. Prior bankruptcy filings, prior offers in compromise and certain types of appeals may serve to extend some or all of the dates and make the bankruptcy filing more difficult.

The second issue has to do with the 4th item above, and that is whether the taxpayer filed the tax return at least two years prior to the bankruptcy filing and whether the taxpayer filed the tax return before the IRS or state taxing agency assessed a debt based on a return it created.

A new issue is slowly spreading across the US in relation to the 2-year rule however.

Specifically, some courts are using a decision out of the US Court of Appeals for the Fifth Circuit, McCoy v. Mississippi State Tax C.pdf, 666 F.3d 924 (5th Cir, 2012) to interpret the bankruptcy code in a way that will be very detrimental to delinquent tax return filers.

Several Courts have now interpreted a provision in the bankruptcy code to mean that if a tax return was filed late, by even one day…the 2-year rule doesn’t matter, and the debt can never be discharged.

The reasoning these courts are using has missed a step and the IRS’ own litigation position on the issue CC 2010 016 (1).pdf differs from these opinions. Nonetheless, this line of reasoning is spreading.

Right now the IRS is not challenging the discharge of debt related to late-filed income tax returns in Arizona bankruptcy cases. However, there is no Arizona case that speaks to this issue directly and the Ninth Circuit Court of Appeals hasn’t faced the issue either.

It is possible as a result, that a late-filed return may never be considered dischargeable in a bankruptcy case at some point in the future.

My advice to those who think they may have a large tax debt remains the same. Have the return created, take it to an experienced tax resolution attorney and consider filing it before the IRS creates a return for you.

An obvious addendum to the advice – file your returns on time.