How Does Bankruptcy Affect Judgments?
Interviewer: Does bankruptcy help against judgments as well?
Your Allowable Exemptions Can, In Some Cases, Remove Liens Resulting From Judgments
Vance: In general, if someone gets a judgment then the creditor either starts garnishments or they seize bank accounts or they put liens on your property. If they put a lien on the property and there’s equity for that lien to attach to, then you’re pretty much stuck with that debt but a judgment lien cannot interfere with your bankruptcy exemption.
In Ohio, if someone has a house that’s worth 100,000 worth of equity and they have a $10,000 credit card liens, judgment leans on it for credit cards, because of your bankruptcy exemption for your home is between 132,000-$136,000, you could still remove lien if you filed bankruptcy because it cannot interfere with your exemption.
Home Foreclosures And Bankruptcy
Interviewer: What if your home was in foreclosure? Is bankruptcy going to help you with that?
In A Chapter 7 Bankruptcy, You Must Be Current With Your Mortgage Payments To Retain Your Home; In A Chapter 13 Bankruptcy, Your Arrearage Can Be Structured Into Your Payment Plan
Vance: Yes, yes. In Chapter 7, you’d have to be current with payments, or they will foreclose on you. A lot of people are filing Chapter 13 bankruptcies to save their homes from foreclosure. This is because a Chapter 13 allows you to take the arrearage, the amount of money that you’re behind, and put it into the three- to five-year repayment plan.
Let’s just say someone comes is five months behind in their house which is about $8,000 or $9,000 of arrears. If you filed a Chapter 13 bankruptcy form, you take that eight or $9,000 and put it into the repayment plan.
Then the next month, they start making their regular house payment again, so they’re current the next month but they’re making their Chapter 13 payment and stretching that eight or $9,000 over the three- to five-year plan.
Bankruptcy And Back Taxes
Interviewer: How does bankruptcy affect your taxes or does it at all? I’ve heard your taxes cannot be included in a bankruptcy. Is there any type of forgiveness of debt or anything you can work out with the IRS?
Vance: Yes, there is. I had a client about three or four years ago and he had $399,000 of IRS debt.
If Your Returns Have Been Filed Over 3 Years Ago, You May Be Able To Discharge The Debt
It depends on the file. The return has to have been filed and it has to have been over three years ago and you could discharge that debt in bankruptcy. We’ve discharged the entire $399,000.
This is also the state level and the city level. Here in Ohio, we have state and city taxes. It all depends on if the return was filed. The return has to have been filed and the debt has to be over three years old.