Jacksonville Bankruptcy Lawyer Blog

Senate Bill 1813 will allow for the revocation of passports from anyone who owes more than $50,000 to the Internal Revenue Service. The Bill will Amend Sub-chapter D of Chapter 75 of the Internal Revenue Code of 1986 to read:

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

``(a) In General.--If the Secretary receives certification by the
Commissioner of Internal Revenue that any individual has a seriously
delinquent tax debt in an amount in excess of $50,000, the Secretary
shall transmit such certification to the Secretary of State for action
with respect to denial, revocation, or limitation of a passport
pursuant to section 4 of the Act entitled `An Act to regulate the issue
and validity of passports, and for other purposes', approved July 3,
1926 (22 U.S.C. 211a et seq.), commonly known as the `Passport Act of
1926'."

The Bill goes on to list a few exceptions to passport revocation such as if a deficiency has since been paid, for a pending hearing to determine the legitimacy of the debt or lastly in the case of joint filers who are no longer married or were subject to other separated, joint filing scenarios.
I don't believe that there is a large number of people emigrating for purposes of income tax-avoidance, but that's only because I've never heard or read of it being an issue. That being so, this appears to be more of a punitive provision, made to punish those who don't or can't pay their taxes by preventing them from vacationing or visiting friends or relatives abroad. This is similar in effect to the powers of the County Family Law Court to take driver's licenses away from non-child support paying parents.
Whether this bill passes or not, people who owe Federal Income Tax should know that under the right circumstances, income taxes can be discharged in a bankruptcy. The general caveats are that the taxes must be filed at least three years prior to the date of filing and that the assessment by the IRS needs to have occurred more than 240 days ago. I have been fortunate enough to do this, which requires service upon Eric Holder as the Attorney General.
If you have income tax debts that you wish to discharge, contact a Jacksonville Bankruptcy Lawyer or call us at (904) 685-1200 for a free consultation.

The Mortgage Debt Relief Act of 2007 was enacted as a response to the growing foreclosure problem. More specifically, it addresses the issue of "Debt Forgiveness Income." Debt Forgiveness Income is an IRS theory that if a debt you owe is forgiven, you have gained in monetary value because you no longer are required to pay that debt. That gain in value is taxable as income despite the fact that you didn't actually earn any money. For example: Stephen owes $5,000 in old medical bills. He can't pay the bills, so the hospital forgives the debt and writes it off on their taxes. Come tax time, he will receive a Form 1099 for $5,000 of additional, previously untaxed, income for that year. Now, $5,000 may not be too much of a problem, even in the highest tax bracket this would only increase his taxes by $1,750, the trouble starts when the amount forgiven is higher, as it is with a house.

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.

This waiver is set to expire by January 1, 2013, which has some economists worrying. Personally, I think these economist's concerns are without merit. The original act of 2007 was set to expire in 2009. When 2009 rolled around, Congress could see that there was still a problem and passed the Emergency Economic Stabilization Act of 2008, which extended the tax waiver until 2013. So, as gloomy as our housing economy is, I cannot fathom that Congress will not pass another act extending the homestead foreclosure tax waiver, but if they do, the debtors can always file bankruptcy and discharge the debt before it becomes a tax liability.

If your home is in foreclosure and you have questions about your future or the tax implications forthcoming, contact a Jacksonville Bankruptcy Attorney or call us at (904) 685-1200 for a free consultation.

When a home is foreclosed on and sold for less than the amount owed, the bank has two options:

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.

For example, a debtor who makes $50,000 a year with a balance of $200,000 lets their home go into foreclosure. The house is sold on the courthouse steps for $150,000. The bank can either sue him for the $50,000, which they know they're unlikely to obtain, or they can write the $50,000 off as a loss which causes the debtor's $50,000 of taxable income to increase to $100,000 for that year. Can you imagine having to pay taxes based on double your income without having actually earned the income?

There are situations when you may be exempt from a forgiveness of debt and the related taxes.

This is an unfortunate but real possibility for people who go into foreclosure without knowing what can happen to them. If you have questions about how to avoid these issues or don't want to go through them without legal counsel, please contact us at (904) 685-1200 for a free initial consultation or contact a Jacksonville Foreclosure Attorney or a Jacksonville Bankruptcy Attorney.

Debt can be classified as secured, unsecured, or priority. A secured debt is one that is collateralized by property. This means that if you default on the debt, the creditor can take the property that secures the loan. Your mortgage loan is probably secured by your home. Your auto loan is probably secured by your auto.

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.

If you are having issues with debt, contact Jacksonville Bankruptcy Attorney today for a free consultation.

Most debts are dischargeable in bankruptcy. However, there are a few debts that are not:

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.)
7. Debts arising from willful and malicious injury by the debtor to another person or property.

To see if your debts qualify for discharge, contact a Jacksonville Bankruptcy Attorney today to schedule a free consultation.

When you file for Chapter 13 bankruptcy, you will pay off your debts through a Chapter 13 Plan that lasts anywhere from 3-5 years. A Chapter 13 Plan allows a debtor to catch up on most any debt, including mortgage arrearages, owed taxes, missed payments on vehicles, HOA dues, legal fees, fines owed to the city or state, and more.

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.

Yes, if it is a non-priority debt. Taxes become non-priority debt when 1. the return was due more than 3 years prior to filing the bankruptcy 2. the return was filed at least 2 years before you filed for bankruptcy 3. the tax debt was assessed at least 240 days prior to filing AND 4. you are not guilty of any type of fraudulent behavior, like tax evasion. Also, you cannot have signed a settlement agreement with the IRS. This can be an in-depth analysis, so it is best to have a competent attorney look at your specific situation. To schedule a free consultation today, get in touch with a Jacksonville Bankruptcy Attorney by calling 904-685-1200.