Bankruptcy is a negative word, and with new changes in the law, it is now also a mind-boggling word. Sadly, it is the only resort for a lot of people. Getting to the bottom of what bankruptcy is, what the filing needs and guidelines are, and the nitty-gritty of the process is imperative if you are convinced this is your last alternative to liberate yourself from financial problems. To add, it is a brilliant move to consult a Tampa tax lawyer if you wish to resort with bankruptcy filings.
Bankruptcy is a situation when a person or business is no longer able to settle financial obligations. When applied to individuals, three types of bankruptcy surface:
o Chapter 7 is mostly filed by individuals or couples. Debtors have a grace period to liquid assets to settle debts. They are given the chance to keep enough to make a fresh start financially (meaning they do not have to sell everything)
o Chapter 12 is tailor-fit for family farmers or fishermen
o Chapter 13 is also known as "debt reorganization." This is for people who have the ability to pay some or all of their debts. Typically, debtors are given three to five years to pay off their financial obligations.
Businesses have three alternatives: Chapters 7, 11, and 15. Chapter 7 business bankruptcies lead to the dissolution of the business. Chapter 11 assists businesses reorganizate debt and operations while staying in operation. Chapter 15 deals with the eradication of foreign debt. Your Tampa tax lawyer will help you determine which, if any, form of bankruptcy you quality for.
Bankruptcy relief covers, among others, credit card debt, medical expenses and unsecured loans. Child or spousal support and some tax debts, conversely, can not form part of it.
Your Tampa tax lawyer can very much help you in your filing requisites especially since bankruptcy legislation were reworked in 2005. The process is now more complicated. Allow me to illustrate this fact through a few examples:
o Copious amounts of documents regarding salaries and expenses are required for filing. Your Tampa tax lawyer can help you identify which forms you should submit and help you prepare them.
o Debt counseling from approve counseling outfits is required six months before filing.
o You have to meet income requirements. The new rules are aimed at decreasing the number of individuals who file for Chapter 7. You have to be in your state's median income, and also qualify for other requisites which differ county by county. People who do not meet the requirements of Chapter 7 will resort to Chapter 13.
There are two ways in checking if you qualify for Chapter 7:
a. Turn to the US Trustee Program of the Department of Justice
b. Seek advice from a qualified Tampa tax lawyer
Now, the biggest question is on how to file for bankruptcy. Yes, you can do it by yourself but the fact that this is a legal process calls for the services of a Tampa tax lawyer. Then, after deciding as to which provision you will file under, whether Chapter 7 or 13, you can now file your claim in any bankruptcy court. A trustee, in charge of ensuring you have all the information, is then assigned to you. You will also be demanded to notify your creditors so they will terminate in their efforts of collecting payment from you. As your bankruptcy claim is being processed, you may need to confer with your creditors. With all these detailed steps, it is clear that filing for bankruptcy is a lengthy process; you are then required to have adequate patience to see it through.
Finally, how does filing for bankruptcy affect your income taxes or IRS standing? The straightforward response is that it depends. Overall if a debt is forgiven, then that amount is treated as taxable income by the IRS, excluding the case of bankruptcy. However, bankruptcy will minimize the other tax benefits the debtor otherwise may have been qualified for. One more thing to consider is that when you file for bankruptcy, it makes a bankruptcy estate, which contains all your assets. If you file under Chapter 7 or 11, this creates a separate taxable entity, which means that you will have to pay taxes on the estate.
To learn more about the basics in bankruptcy, you may refer to the IRS. Another good strategy is to consult a Tampa tax lawyer . Deciding to file for a bankruptcy is stressful move; therefore, it is important that you have all you need to make this informed choice.