How to Prevent Corporate Bankruptcy
Sunday, January 13th, 2008If your business is strapped for cash or if you’re starting a new business… read this.
Click here to play
Archive for January, 2008
How to Prevent Corporate Bankruptcy
Sunday, January 13th, 2008If your business is strapped for cash or if you’re starting a new business… read this.
Click here to play
Avoiding Bankruptcy - How to Avoid a Financial Problem
Sunday, January 13th, 2008Bankruptcy may seem like a quick and relatively easy fix to a big problem, but it isn’t.
Click here to play
Avoiding Bankruptcy - How to Avoid a Financial Problem
Sunday, January 13th, 2008Bankruptcy may seem like a quick and relatively easy fix to a big problem, but it isn’t.
Click here to play
Avoiding Bankruptcy - How to Avoid a Financial Problem
Sunday, January 13th, 2008Bankruptcy may seem like a quick and relatively easy fix to a big problem, but it isn’t.
Click here to play
How Bankruptcy Can Be Used to Deal With Foreclosure
Friday, January 11th, 2008The media is full of stories about the skyrocketing rates of foreclosure. Often, people believe they can save their home and they scramble to find the best possible way to prevent their home from being taken away. Not uncommonly, however, the handwriting is on the wall—the home will be lost—and the homeowner’s chief concern is how to move on without causing further harm to his or her economic status. In either situation—keep the home or move out—bankruptcy can be an incredibly useful tool in dealing with foreclosure.
What is foreclosure? In California and most other states, a foreclosure starts when you fall behind on your payments for several months. Your lender sends you a Notice of Default giving you a period of time to cure the default—typically three months. If you haven’t caught up by the end of the default period, you are notified that the property will be sold at public auction—on a date scheduled roughly 20 to 30 days later. If you still haven’t adequately dealt with the problem by that date, the property is sold and you can’t get it back unless your state laws provide a redemption period—one last grace period for you to recover the house by paying off the loan being foreclosed on.
Some people facing foreclosure on their home manage to work out a settlement with their lender under which the payments they’ve missed get tacked on to the end of the loan period. Others get their lenders to agree to a short sale—that is, you sell the property for whatever you can get for it and the lender writes off the difference between what you owe and the sale proceeds. If the loans being written off were used to acquire or improve the home, there is no income tax liability. If the loan was used for other purposes (for example, a home equity loan used to fund a vacation) then the amount written off can be considered as taxable income. See New Tax Break for People Who Default on Their Mortgages.
Bankruptcy may provide some relief. At the point you are faced with the forced sale of your property, you will undoubtedly start thinking about bankruptcy if you haven’t before. Bankruptcy may help you keep your home or, if that’s not in the cards, at least get you out from under your mortgage without liabliity for the deficiency (the difference between what you owe and what the property is ultimately sold for). And bankruptcy also eliminates any tax liability you might have for loans taken out against the property for purposes other than property improvement. By delaying the foreclosure process, it can also help you save some money to deal with the aftermath of your bankruptcy. (more…)
New Tax Break for People Who Default on Their Mortgage
Friday, January 11th, 2008Until this year, people who defaulted on their mortgage would often get an extra kick in the teeth—a tax bill on the difference between what they owed and what the property was finally sold for. With a new federal law, Congress has changed this for the better.
How the old law worked. Prior to 2007, if you owed $300,000 and your home was sold at auction for $250,000, the lender would file an IRS tax form 1099 reporting the $50,000 difference as plain old taxable income to you. Since debt forgiveness just doesn’t seem like it should be taxed as income, this practice left many people fuming (or worse). Mercifully, the Internal Revenue Code allowed you to escape the tax if you could prove you were insolvent at the time or if you got rid of the debt in bankruptcy.
The new law. Now, with a few exceptions, Congress has done away with this practice (in a new law, H.R. 3648), effective for the 2007 tax year and the following two years. This means that whatever happens to your home mortgage during that period will not increase your income tax. Whether the law is allowed to sunset after 2009, or whether Congress acts to make it permanent, will probably depend on just how broke the government feels at the time.
What this means: more options for those losing their homes. In past blog posts, I have touted bankruptcy as a good way around the tax issue–since debt discharged in bankruptcy has never been considered to be taxable income. I explained that if you were going to lose your home anyway, bankruptcy was preferable to foreclosure or some of the other remedies such as “short sales”and “deeds in lieu of foreclosure,” all of which generated taxable income. Now, if your default is on a mortgage or other debt secured by your home that is used to buy or improve your home, you can choose the best possible course of action without worrying about the tax ramifications. In some cases this will be a short sale, in others a deed in lieu of foreclosure, or if your overall debt situation warrants it, a Chapter 7 or Chapter 13 bankruptcy.
Exceptions to the new law. This tax break doesn’t apply to loans for real estate other than your principal residence. If you walk away from a loan on your second home in the country, for example, expect a 1099 in the mail. Similarly, if you take out a home equity loan and take that world trip you’ve been dreaming of for 50 years rather than use the money to improve your home, you may end up on the wrong side of a tax bill. In both of these situations, bankruptcy will still be an attractive way to avoid income tax liability.
About Us
Friday, January 11th, 2008The Coleman Law Firm was founded in 1984 and has since been a national leader in the area of complex commercial litigation. Although small in number (currently nine attorneys), the firm has an outstanding record of success in highly sophisticated matters against some of the largest and most powerful defense firms in the country. The firm has achieved its success not just through the multifaceted skills and experience of its attorneys, but also with cutting-edge technology and innovation in the marshaling, analysis and presentation of evidence in complex cases. The firm has introduced innovations in the structuring of fees, handling cases on a contingent, blended or hourly rate basis. The firm’s team approach to litigation assures dedicated and thorough representation for all of its clients.
Areas of Practice:
- Trial Practice
- Complex Litigation
- Accountants Malpractice
- Legal Malpractice
- Bankruptcy Litigation
- Business Litigation
- Insurance Litigation
- Class Actions
- Civil Appeals
- Labor and Employment Law
- Civil Rights
- Intellectual Property
Steve Jakubowski
Mr. Jakubowski, founder and author of nearly all posts for this blog, has worked in complex chapter 11 bankruptcies and reorganizations for twenty two years. He has represented diverse parties and interests on a variety of bankruptcy litigation and reorganization matters, as well as in commercial litigation in federal and state courts involving distressed companies or situations and recieverships proceedings. He can be reached at sjakubowski@colemanlawfirm.com. His full bio is here.
Professional Associations:
- Of Counsel, The Coleman Law Firm (1988 - Present)
- Member, Trial Bar, N.D., Ill
- Member, American Bankruptcy Institute
- Commissioner, Lincolnwood Traffic Commission, Lincolnwood, Illinois, 2006 - Present
- Vice President, Lincolnwood Kollel, 2004 - Present
- Director, Chicago Loop Synagogue, 1999-2006
- Eitz Chaim (Tree of Life) Awardee, Chicago Community Kollel Institute of Advanced Torah Studies, December 2001
Education:
- Union College (B.S., 1980)
- University of Chicago Law School (J.D. 1985)
Bar Admissions:
- Illinois 1985; USDC
- N.D., Ill, 1987
Advertising & Promotions Law
Thursday, January 10th, 2008Corrected Bankruptcy Means Test Forms Posted on U.S. Courts Website
Tuesday, January 8th, 2008Update: January 15th, 2008
Be aware that many local courts are still offering the defective “original version” of the fillable .pdf means test forms, rather than the fixed “v2″ versions (see below). It does not appear that the U.S. Court System has informed the lower courts that the new forms need to be posted.
I feel sorry for anyone who is trying to use them.
Original Post:
The defective means test forms that were discovered on the U.S. Courts website this weekend and mentioned in this blog two days ago were fixed this afternoon (1/8/2008).
The government quietly replaced the defective forms with ones that work. I tested them. They really do work. Woo hoo!
How can I tell if I have the fixed version of the form?
If you downloaded the January ‘08 means test form from the U.S. Courts before Tuesday, January 8th, you have an old form and should replace it. The old means test form (version “f”) is unusable.
- OLD = ends with the letter “f” — > B_022A_0108f.pdf.
- NEW = ends with the letters “v2″ –> B_022A_0108v2.pdf.
Links to the revised, fixed forms:
Official U.S. Courts forms page
