A debtor filing bankruptcy may file under one of several bankruptcy chapters. Most individual debtors file either a Chapter 13 or a Chapter 7 bankruptcy. In order to file a Chapter 7 bankruptcy a debtor may have to complete the bankruptcy “means test.” The calculations involved in the means test are complex and should be done by an experienced bankruptcy attorney; however, some general information about the means test may be helpful if you are considering bankruptcy. Additionally, there are exceptions where the “means test” does not apply and will not be completed as part of a chapter 7 bankruptcy filing. For example, if a debtor’s debts are primarily business debts, the “means test” will not apply. Why is the Means Test Used? Unlike other chapters, a Chapter 7 bankruptcy allows the debtor to discharge, or eliminate, most of his or her debt without repaying any of it. The “means…
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District Court Denies Debtor Discharge of Student Loans: Appellate Panel Says ‘Not So Fast’! We’re following a potentially important bankruptcy case in 2013 that may affect the ability of individuals to discharge student loan debts in bankruptcy. On August 21, 2013, the U.S. Bankruptcy Appellate Panel for the Eighth Circuit (B.A.P.) reversed and remanded a decision of the U.S. Bankruptcy Court for the Eastern District of Missouri which denied a discharge of a debtor’s student loan debt. The B.A.P. found that denying the debtor a discharge of her student loan debts to National Collegiate Trust was an undue hardship on the debtor and remanded the decision to the Bankruptcy Court to look at each individual loan owed to National Collegiate Trust to determine if the debtor could pay any one or more of those loans owed over the course of a year. The Debtor in this case did not seem…
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There is a myth that income taxes can never be discharged in bankruptcy. For individuals or families facing economic difficulties taxes can be particularly difficult to overcome because of penalties and interest that accrue. In reality, you can discharge your back federal, state, and local income taxes in Chapter 7, Chapter 13, and Chapter 11 bankruptcy. Making a determination on which taxes are capable of being discharged can be complicated. However, it is possible to discharge entire tax debts in bankruptcy, if the taxes fall within three important requirements: 3-Year Requirement. The first requirement is that for taxes to be dischargeable, they must become due at least three years before you file for bankruptcy. Bankruptcy CodeB B’507(a)(8)(A)(i). 2-Year Requirement. Second, your income tax returns must have been filed two years before filing your bankruptcy petition. This means you can discharge income taxes, even if you filed your tax forms late,…
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