Our lives have changed in a flash.  The Associated Press warns that Americans must brace for new life of no school and growing dread.  We now spend more time in line at Walmart buying toilet paper than we do lining up for Black Friday sales. Parents worry about their jobs while they wonder who’ll watch their children while they are at work since schools have extended spring break or shut down for weeks.

The world has changed.  We are told to practice “social distancing” and not come within so many feet of our fellow human beings. People are wearing medical masks and gloves when they go out. Some people walk around with Lysol bottles.

The filing of a bankruptcy case creates an estate similar an estate that is created after someone dies. This estate is made up of one’s assets that are not exempt under the law. The United States government appoints a trustee in a Chapter 7 bankruptcy case to liquidate (or sell) any non-exempt assets and use the proceeds to pay unsecured creditors like credit cards. In order to be able to protect property and keep the trustee from taking from you when you file bankruptcy, the Debtor must claim the property is exempt under Florida or federal law. (Florida has “opted-out” of federal Bankruptcy exemptions, so Debtors may only use exemptions under Florida law or non-bankruptcy federal laws.)

The only part of tax refunds that is specifically exempt under Florida law is the part of the refund from the Earned Income Tax Credit. (Although Judge Jennemann in Orlando recently held that Child Tax Credit is exempt in Chapter 7 cases.)  The rest of your tax refund falls under the personal property exemptions under Florida law, which are among the stingiest in the nation. There are no specific exemptions under  Florida law to project the Child Tax Credit; the American Opportunity Tax Credit (which helps families pay for postsecondary exaction); the Lifetime Learning Credit (which helps people who go to college later in life or have to change jobs due to down-sizing or loss of jobs because of technology or free trade agreements); or the Child and Dependent Care Credit (which helps pay daycare costs for working parents). Many of these tax refunds are refundable and therefore give taxpayers a much larger refund than they otherwise would have received. If these refunds cannot be exempt under the law, you could lose them to the Chapter 7 trustee and not be able to spend them  the way in which you intended.

Fortunately, against common belief, there is actually a statute of limitations on IRS debt. A statute of limitations is a state or federal law that sets a specific time limit on how long an entity or individual can try to collect a debt from you. The statute of limitations for the collection of IRS debt is ten years. As with most things, there are some exceptions to this rule.

The statute of limitations begins to run when the tax is assessed. Taxes are assessed when an IRS official signs a form that states how much you owe in taxes. This occurs after you file your taxes, but fail to pay the full amount owed. The date on this form signed by the IRS official is the official date from which the ten-year statute of limitations period will begin to run.

However, there are some circumstances in which this statute of limitations might last longer than ten years. For example, the statute of limitations pauses when you file bankruptcy and will remain paused for another 6 months after your bankruptcy case has been concluded. The statute of limitations also pauses, or tolls, when the IRS reviews a possible settlement option you submitted, or if the IRS files a lawsuit against you. When the statute of limitations tolls, the IRS is not able to try to collect from you. The statute of limitations is then extended by the amount of time they were unable to move forward with any collection efforts.

You should also be weary of installment agreements you enter into with the IRS. Often, such an installment agreement includes a waiver of the ten-year statute of limitations.

If the IRS filed a lien against you or your property, you will be happy to know that the lien also expires with the ten-year statute of limitations.

While having an IRS debt can be very taxing and it might be very tempting to try to hide under a rock until the statute of limitations has expired, that is not always the best option. By doing nothing, you could potentially be putting yourself in a worst situation. Knowing your options is always the best option when dealing with any type of debt. Those with IRS debt, likely have other types of debts as well. Consulting with an experienced debt collection attorney can help you understand all of your options. Contact the Law Office of David M. Goldman, PLLC today.

The most advantageous benefit to using your tax return to help you file a Chapter 7 or Chapter 13 Bankruptcy is that using your tax refund to fund your bankruptcy allows you to use your refund in an essential and reasonable manner. When you use your tax refund in an essential and reasonable manner such as filing bankruptcy, then your tax refund most likely will be protected from your creditors and well spent.

While I would like to say it is better to file bankruptcy before the end of the year so that you can have a fresh financial start in 2017, there are two big things to keep in mind. If you do not use your tax refund in a necessary and reasonable manner, it will be lost to your bankruptcy estate. Luckily, attorney fees are considered a reasonable and necessary expense. Therefore, by waiting until you receive your tax refund to file bankruptcy and using that tax refund to pay for your bankruptcy, you will guarantee that you will not lose your tax refund, and that it will be used for your benefit.

The other great advantage to waiting to file bankruptcy until you receive your tax refund is the majority of people find it almost impossible to come up with the money necessary to file bankruptcy. Your tax refund allows you to pay for your bankruptcy all at once.

If your tax refund is more than your attorney fees and the cost of filing bankruptcy, then you can protect the rest of it if you have available exemptions, or you can spend the rest on necessities. Necessities can include food, your mortgage payment, clothing, medical expenses, etc. Just make sure not to spend your tax refund on any luxury items.

When you should file your bankruptcy depends on a lot more than just simply receiving your tax refund. Timing is one of the leading reasons why it is so imperative to speak with an experienced Jacksonville Bankruptcy Attorney who can make it easier for you to figure out if bankruptcy is the best option for you and when you should file your bankruptcy. Contact the Law Office of David M. Goldman, PLLC today to speak with an attorney.

“SEC. 7345. REVOCATION OR DENIAL OF PASSPORT IN CASE OF CERTAIN TAX

DELINQUENCIES.

If Stephen’s home is foreclosed upon and the bank forgives a $50,000 debt, he will owe taxes for his actual annual income, plus this $50,000. You could’ve argued that $5,000 wouldn’t effect what bracket he was in before, but $50,000 is almost certain to increase his tax bracket and will leave him with a minimum of $12,500 in additional tax debt. As a result, Stephen may be in debt for a long time. If he didn’t have the money to pay his mortgage, it doesn’t make sense that he’d have enough money to pay the taxes.

It was because of Stephen’s scenario that the Mortgage Debt Relief Act of 2007 was passed. The act allows a person whose homestead has been foreclosed on to have his debt forgiveness income waived so long as it is less than a million dollars per year.

1. Sue the ex-homeowner for the deficiency (an amount the bank knows they’re not going to get) or 2. Write the loss off on their corporate taxes.

When a bank writes a loss off on corporate taxes, the amount of the write off becomes Debt Forgiveness Income to the ex-homeowner. The IRS says that when someone’s debt has been forgiven, their total worth has gone up, therefore this counts as income. When this happens, the ex-homeowner will actually get a 1099-C for the difference and will owe income taxes on the new amount.

An unsecured debt is when you make a promise to repay the debt, but the debt is not secured by any collateral. If you default on the promise, the creditor cannot take your property without obtaining a judgment.

A priority debt is a debt that is entitled to repayment ahead of other debts that you owe. Taxes and some attorney fees are priority debts. A list of priority debts can be found in 11 U.S.C. §507.

1. Debts arising from fraudulent conduct 2. Government-backed student loans (unless severe hardship can be shown)

3. Debts stemming from death or personal injuries related to your operation of a motor vehicle while intoxicated 4. Certain taxes and fines 5. Some debts not listed on your bankruptcy 6. Domestic support obligations (alimony, child support, etc.)

Your unsecured creditors might also get some payments through the Chapter 13 Plan. If they will and how much will they receive is determined by your means test and the amount of unexempt property that you have. Any amount of unsecured debt that you have over this amount will be discharged at the successful conclusion of your Chapter 13 bankruptcy. For example, if you owe $20,000 in unsecured debt and your case only dictates that you must repay $5,000 to unsecured creditors, the $15,000 balance gets discharged or forgiven when you successfully complete your Chapter 13 Plan. If your case dictates that no money must be paid to unsecured creditors, then the entire balance of $20,000 would be forgiven.

To see how a Chapter 13 Plan would be structured for your specific situation, contact a Jacksonville Bankruptcy Attorney today for a free consultation.