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24

Oct 2020

When you file bankruptcy, they make it hard to pay your car payment

Posted by / in Chapter 7 Bankruptcy, Weekly Posts /

When you file bankruptcy, they make it hard to pay your car payment. Be prepared to use the mail.

You file bankruptcy and you want to keep your car. You know that means you need to keep paying.

Seems like the car finance people would welcome your payments; but they make it hard. That may be the most annoying thing that happens when you file bankruptcy. So be prepared.

If you know what to expect, here’s how to prepare.

Here’s the key info you need to round up, before we send in your bankruptcy papers:

Your account number

Your payment address

The date each month the payment is due

The date of the final payment

When you file bankruptcy, the car finance company will stop sending you bills. If you had an automatic deduction form your bank account, they will turn that off. They will shut off your internet access for your account.  And if you call for information, you probably won’t get is.

All that is pretty annoying.  (I explain here that’s because “you don’t have to pay.” Of course the car still has to pay.)

Here’s how to make your car payment when you file bankruptcy. You can use the mail.

How to make your car payment, when you file bankruptcy. You can mail a check every month.

How to make your car payment, when you file bankruptcy. You can mail a check every month.

So once you file bankruptcy, paying the car is like paying the rent; you need to remember it on your own.

You can make a note on your calendar to mail them a check every month. Or you can use your bank’s bill pay to automatically send a check. (Filing bankruptcy stops the car finance people from taking money automatically from your account. But it doesn’t stop your bank from sending money automatically from your account.)

That’s why you need to track down the account number and payment address before we send in your bankruptcy papers. So you have all the info you need to set up that bill pay with your bank.

If you know what to expect, it’s really not that hard.

And if it’s the most annoying thing about filing bankruptcy, well, for most people bankruptcy works.

 

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19

Jul 2020

IRS Means Never Having to Say….

Posted by / in After Bankruptcy, Blog, Chapter 7, Chapter 7 Bankruptcy / No comments yet

IRS Means Never Having to Say….Anything

The IRS is not like most creditors. (Your probably knew that.)  The IRS in bankruptcy is not like most creditors in bankruptcy, either.

Knowing what debts have been cleared (discharged) by your bankruptcy is easy for most debts. For credit cards, loans (including payday loans, who want you to think they are somebody special), car loans, medicals. When those debts are properly listed (scheduled) in the bankruptcy, they are automatically discharged, unless they object.

So, for example, Capital One. Was your Capital One card listed on the schedule of debts? (Schedule F.) Yes. Did they object? No. Then they are discharged.

That’s NOT the rule for the IRS in bankruptcy.

IRS and Bankruptcy: Not Like Other Debts

IRS logo illustrating the IRS in bankruptcy

IRS in bankruptcy is not like other creditors.

First of all, not all income tax debts can be discharged. (Some people assume none can be, but you know better than that.) The main rule is you can discharge taxes that were due more than three years ago, and were properly filed. See 11 USC § 523(a)(1).

More than Three Years—Look at the Calendar

The due date for taxes is usually April 15, unless there was a holiday, or you asked for an extension, or because of some natural disaster (Covid-19 in 2020) there was an automatic extension.  523(a)(1).

That you can figure out for yourself, usually. (There are other rules on timing that do apply. This is NOT a complete analysis.)

Properly Filed—Lots of Gray Area

I say “properly filed” but that’s not the wording in the law. It’s my shorthand.

Your taxes do have to be filed, by you. (When people are chronically late, the IRS will often look at the W-2’s, estimate a tax and send you a bill. That does NOT count as filing a return for bankruptcy purposes).

You can’t file a fraudulent return. And you can’t willfully attempt[ed] in any manner to evade or defeat such tax.

That gray area is enough to give anyone who owes taxes some worry about what the IRS will do. You might feel certain you don’t pay because you were broke, but worry the IRS says you were evading.

I Got My Discharge. Am I OK?

The IRS does NOT have to say. The IRS does NOT have to tell the bankruptcy court, or you, if they say you filed a fraudulent return or willfully attempted to evade. They can decide whenever they want that they think you’re an evader.  You find out when you get collection notices again.

Is There Anything I Should Do?

Actually there is. You should get your account transcript and look at the IRS notes. You can see if they have your debt coded as discharged in bankruptcy. Or are they showing something else.  You can get your transcripts here.

Get your tax account transcript.  The IRS has several different transcripts, For what we are talking about, the tax account transcript is the one you want.

What If There’s an IRS and Bankruptcy Problem?

If there’s a problem, you need to talk to a lawyer who knows more than I know about about tax law and the IRS and bankruptcy.  That’s not me.  I’ve told you all I know, here.

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25

Jun 2020

After bankruptcy….the car still has to pay!

Posted by / in After Bankruptcy, Blog, Chapter 7 Bankruptcy, Weekly Posts / No comments yet

…But the Car Still Has to Pay.

When you file Chapter 7 bankruptcy, that means you don’t have to make the car payments.

But that does not mean you get a free car. You don’t have to make the car payments, but the car still has to pay.

That’s because the car finance company is attached to the car title. Lawyers call that a lien.  If the debt that’s attached to the car isn’t paid, the lien holder will repossess the car.

Don’t Forget to Make the Car Payment

It’s easy after bankruptcy to forget to make the car payment.  If it slips your mind, the car finance company won’t send you a reminder. Why? Because you don’t have to pay. They also won’t send the car a reminder letter. They know the car doesn’t open its mail.

And if you get a week behind, they won’t call and demand payment. Because you don’t have to pay. And they won’t call the car, because the car doesn’t have a phone. Only one thing happens if you forget to pay. You wake up in the morning and the car is gone.

Don't forget to make the car payment. The car still has to pay.

If you forget to make your after bankruptcy car payment, you won’t see the car. the car still has to pay.

Does Paying the Car Help Your Credit Score?

Suppose you forget to pay and the car gets repossessed. The repossession won’t show up on your credit report.  That’s because the bankruptcy discharges the debt from you. But that also means your car payments won’t show up on your credit report if you do pay. You don’t have to pay.

Only one thing happens if you pay. You keep the car.

Only one things happens if you don’t pay. When you wake up in the morning, the car is gone.

You need to make the car payments if you want to keep the car. 

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