Bankruptcy lawyers regularly evaluate the dischargeability of taxes when deciding when to file a client's bankruptcy case.At base, the 3 year rule, the 2 year rule, and the 240 day rule routinely drive timing of a bankruptcy.But as we approach the end of the tax year, a client’s current year tax situation becomes another moving part in the “when do we file” analysis, unrelated to tax dischargeability.In the simplest situation, the client owes no back taxes and is appropriately withheld for the current year. No timing issue.But suppose the situation is not so simple. Several fact patterns cry out for careful timing of the commencement of the case.Client expects to owe taxes for current yearUnlike a Chapter 7 case, filing Chapter 13 does not create a separate taxable entity in the bankruptcy estate. Nor does it offer the debtor the opportunity to elect a short tax year.Instead, the start and end of the debtor's tax year is unaltered by an intervening Chapter [Continue reading...]

When the world was forced to adjust to new routines in March 2020 due to the global pandemic, I was instantly struck by how little my professional life changed. I'd worked remotely for over a decade, and my systems and procedures didn't change.Sadly, the same couldn't be said for many of my fellow consumer bankruptcy lawyers. I watched many of them struggle with remote videoconferencing [Continue reading...]

Regardless of the ultimate destination, all bankruptcy roads lead through Chapter 5.A few bankruptcy cases are derailed there.Because Chapter 5 provisions tell you what comes into the bankruptcy estate, what can be exempted, and what can be changed using Chapter 5.Sometimes the results from bankruptcy lawyers in Hyannis tell you that bankruptcy is not the right choice for your client, at [Continue reading...]

Not all exceptions to discharge in bankruptcy are found in the Bankruptcy Code.Inconvenient, but true.The first two non-Code exceptions to discharge that I encountered in practice were HEAL loans, dischargeable only if denying the discharge would be "unconscionable." (42 U.S.C. sec. 292f(g)); and a scholarship to attend a U.S. Military Academy.Turns out that my 2011 version of [Continue reading...]

In a perfectly executed world, clients who do business via an entity like a corporation or LLC would arrive with their business life neatly separated from their personal lives.However, that's not the world I practice in. It's probably not yours, either.Instead, I have to sleuth out the facts, and compare them to the individual's version.I see prospective debtors where the business [Continue reading...]

The liquidation analysis is central to every form of consumer bankruptcy. Yet too many attorneys think the formula is Assets minus Secured Debts minus Exemptions = Distributable estateNot by a long shot. So let's walk through the elements of a comprehensive liquidation analysis.You need it if you're assessing the vulnerability of assets to the trustee in a Chapter 7. It's one of [Continue reading...]

Why would a Chapter 7 trustee shut down a sole proprietorship business with no value?That question comes up again and again from newish bankruptcy lawyers who can't imagine that a trustee would demand the closing of the debtor's business.After all, goes the argument, the debtor needs to make a living and the business has no non-exempt value.The trustee's insistance on closing the [Continue reading...]

One trait makes a bankruptcy lawyer stand out.Bankruptcy forms promote the view that filing a case is just recording what the debtor owns and owes today.  If all you focus on is the here and now, you can assemble a bankruptcy petition.But if there is one, uniform failing in average bankruptcy lawyers, it's that they confine their attention to the here and now-what does the client have, owe, [Continue reading...]

We all get sucked in, at some time, to trying to rescue a Chapter 13 bankruptcy case gone bad. Dismiss and refile if often an appealing strategy.But, make sure that you don't let a bad situation get worse.Get your arms around Bankruptcy Code §109(g).When only a do-over will do, don't wait around.No payments for monthsThe debtor came to me for help when the trustee moved for [Continue reading...]

How do you forget capital gains taxes? More easily than you would think, apparently.When I see the same  blunder twice in two months and the price tag to the client approaches $100,000, it's time to write about it.It surfaced in two Chapter 11 cases for individuals where I have subbed upon conversion to Chapter 7.My first reaction was to write this as a "see, you shouldn't take cases [Continue reading...]

The "Tax Cut Act" actually increased the tax on consumer recoveries. Under the new tax law, most damage awards a consumer recovers stand to go, in large part, to the IRS.So even if you are successful in vindicating your legal rights, the expenses of getting the award aren't deductible from the gross award. The taxing authorities end up getting a large hunk of the total [Continue reading...]

Put off the division of community property in a marital dissolution at your peril.Hesitate and you risk all of the community property being swept up in a bankruptcy by the other spouse. And you'll have little control where community property assets fall.Community property is all inThe threat begins with the bankruptcy law provision that all the community property becomes [Continue reading...]

Have I got a story for you. A rousing tale of schedules, hearings, frustrations, and ultimately fortunes, traceable to a good story in the fee application.Maybe that's a bit overblown, but I'm telling this story with a purpose. Good stories lead to fair compensation for bankruptcy attorneys.Fee applications aren't hardFiling fee applications is central to sustaining an above-average [Continue reading...]