Archive for the ‘Legal Info’ Category
Tuesday, February 23rd, 2010
For many people considering filing for bankruptcy, it’s important to know whether they’ll be able to get on with their lives afterward—and for many, that will be determined by whether or not they have a car.
And, with car issues in the news pretty often these days, they’re certainly on our minds. Here’s a little crash course
on what you can expect to happen to your car if you file for bankruptcy.
Chapter 7 & Chapter 13 Bankruptcy
Whether you file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, you can expect an automatic stay to take effect. This stay prevents debt collection, wage garnishment, lawsuits related to your finances, foreclosure and repossession.
The automatic stay remains effective until the court discharges your case.
Cars in Chapter 7 Bankruptcy
Chapter 7 bankruptcy offers filers a complete discharge of many unsecured debts. Your car loan, though, is a secured debt (it’s attached to property—your car). If you file a Chapter 7 case, you’ll have three options for your car loan:
- Redeem: This option involves one lump sum payment to your creditor for the car’s current fair market value. If you can afford to do this, it may make life easier in the future, since you’ll have eliminated car payments. But because most people file for bankruptcy at a time when cash is not handy, it may not be a viable option for many filers.
- Reaffirm: This option allows you to essentially continue making payments on your lease or loan as you did before you filed for bankruptcy. In reaffirming your debt, you agree a second time to continue making payments according to a schedule agreed upon by both you and your creditor.
- Surrender: If neither continuing payments nor redeeming the car will work for you financially (for example, if you owe more on the car than it’s currently worth), you can also choose to surrender your vehicle to your creditor and have the remainder of your debt discharged.
Cars in Chapter 13 Bankruptcy
If you file under Chapter 13 bankruptcy, your car’s future will depend on when you bought it.
- Newer cars: If you bought your car within 910 days of your bankruptcy filing, you’re required to pay the full value of the car loan, though your interest rate may be reduced.
- Older cars: If you purchased your car more than 910 days before filing for bankruptcy, you’re only required to repay the car’s current fair market value.
Additional Resources
Understanding Vehicle Financing (PDF)
Understanding Vehicle Repossession (PDF)
Posted in Bankruptcy Laws, Legal Info, cars in bankruptcy, repossession | Comments Off
Thursday, January 28th, 2010
With tax season coming up, everyone is looking for new ways to save, either to get a larger refund or to afford paying taxes owed. Thanks to a new ruling, some graduate students may find extra breathing room come tax time.
The Wall Street Journal reports that, thanks to the persistence of Lori Singleton-Clarke, a Maryland woman, students pursuing a Masters in Business Administration degrees (MBAs) may now find their tuition is tax deductible.
Several aspects of the case could be important to MBA students and others looking to save money this tax season.
- Know the code. The Internal Revenue Service’s tax code is complex and detailed, so knowing where to look for potential deductions can help. Tax deductions for education can be found in IRS Publication 970 (see below).
- Ask for help. If you aren’t tax-savvy yourself, you may want to enlist the help of a professional tax-preparer or commit to learning how to work at-home tax software like TurboTax.
- Stay organized. The WSJ reports that Singleton-Clarke’s case was successful in part because she kept all her paperwork organized and was able to provide adequate documentation for her claim.
- Be persistent. Singleton-Clarke’s case was not always easy, sources note. But she stuck it out and ended up saving herself some serious money – and potentially paving the way for other graduate students to do the same.
Does Your Education Qualify?
Educational expenses eligible to be considered tax-deductible must meet certain specific criteria, including the following.
- Income limits for single and married individuals affect how much tuition can be deducted.
- Parents may deduct certain expenses for children whose education they fund, but only if the parents claim the children as dependents.
- Certain institutional fees (like health care and books) are not considered part of tuition and so are not eligible for the tax deduction.
- Even a single college- or graduate-level class could qualify you for the tax deduction.
A more detailed review of these regulations is available here, or you can browse this year’s version of Publication 970 (below, as a PDF).
Other Tax Concerns
Whether or not you pursued further education this year, stay alert during tax season. Certain predatory loans in disguise tend to crop around this time of year, including RALs (refund anticipation loans) and RACs (refund anticipation checks).
If you do wind up owing taxes that you can't afford to pay, you can file an extension and possibly work with the IRS to pay your taxes over time. Paying taxes owed is important since they typically cannot be discharged in bankruptcy.
Remember to keep your sensitive information (like bank account numbers and Social Security Number) private!
Additional Resources
IRS Publication 970 (2010)
Posted in Legal Info, Taxes, students, tax deductions, tuition | Comments Off
Thursday, December 17th, 2009
Late last week, the U.S. House of Representatives voted to approve a bill that introduces a spate of consumer protection measures.
The amendment that would have permitted homeowners to address foreclosure in bankruptcy by altering the terms of mortgage loans (in what’s known as “cramdowns”), though, did not make the cut.
Provisions of the Bill
The Wall Street Reform and Consumer Protection Act, as it’s known, includes the following provisions:
- Mortgage lending reform: The bill would outlaw the type of predatory lending that allowed for the subprime boom and subsequent bust. Essentially, the bill requires mortgage lenders to lend only what their borrowers can repay.
- Increased consumer protection: It creates the Consumer Financial Protection Agency, a government group proposed earlier this year whose job would be to protect Americans from unfair financial practices and fraud of all stripes.
- Amped up oversight: The Financial Stability Council, another provision of this bill, would identify firms that are intrinsically risky and increase monitoring and oversight of these to prevent widespread financial crises.
- Bailout replacement: If this bill becomes law, taxpayer bailouts will be a thing of the past, because it includes orderly measures for closing firms that are “too big to fail.”
- Limits on executive pay: In addition to giving regulators an opportunity to halt what seem to be questionable payment policies, the bill would give shareholders a chance to weigh in on the salaries and retirement packages of a firm’s executives.
- Increased investor protections: The bill would increase the power of the Security and Exchange Commission (SEC) and mandate an examination of the securities industry to determine what reforms are needed.
- Regulations on derivatives: All-new regulations would be instituted for the derivatives market, which reportedly has a value of at least $600 billion.
- Hedge fund registration: Those who run hedge funds would have to register with the SEC and comply with regulatory guidelines to minimize risk for investors.
What Happens Now?
At this point, the bill will move on to the Senate, where it could be modified before becoming law, perhaps with a new bankruptcy amendment.
But, in the words of Speaker Nancy Pelosi, the bill “sends a message” to Wall Street and consumers about a new era of protection.
Additional Resources
Full Text of HR 4713 (PDF)
Posted in Bankruptcy, Consumer Protection, Legal Info, forelcosure, laws | Comments Off
Wednesday, December 16th, 2009
Between 2003 and 2009, the number of fraud cases investigated by the U.S. Justice Department saw a steep decline—including a 44% drop in bankruptcy fraud cases, according to an article in USA Today.
Bankruptcy fraud, corporate fraud and securities fraud cases all received less attention from Federal prosecutors, according to Justice Department documents, with corporate fraud cases falling 55%, even as our country fell into economic crisis.
And while the number of new fraud cases filed in federal courts has increased over the past few months as investigators struggle to prevent another financial mess, the case load is still lighter than it was at the beginning of the decade.
What is Bankruptcy Fraud?
Bankruptcy fraud is a federal felony offense that may include concealment of assets or debts from the bankruptcy petition. Failure to include an asset when filing bankruptcy is one of the most forms of bankruptcy fraud, and often includes "giving" a valuable asset, such as a car, to a relative or friend to protect it from liquidation.
If a debtor has transferred or sold any property within two years of filing bankruptcy, such property may be taken by the bankruptcy trustee as an asset.
According to the USA Today article, the Justice Department filed only 82 charges of bankruptcy fraud in the fiscal year ending September 20, 2009—despite nearly 1.5 million bankruptcies being filed in that time.
Posted in Justice Department, Legal Info, asset, bankruptcy fraud | Comments Off
Saturday, November 21st, 2009
The White House announced in a press release on November 17th that President Obama has made an executive order to create a Financial Fraud Enforcement Task Force. Part of the reason for the executive order, it seems, is the number and complicated nature of various financial fraud cases related to the current economic crisis.
Sources indicate that the goals of the force are to prevent abuses in the financial sector that could lead to economic turmoil in the future as well as to bring to justice those responsible for the current state of affairs. This task force will reportedly replace the Corporate Fraud Task Force implemented by the Bush administration after the scandal at the Enron Corporation.
The following groups will fall under the wing of the task force:
- Mortgage lenders & modifiers: Groups responsible for initiating and altering the terms of home loans, much maligned for their role in the current crisis, will be under the task force’s watchful eye.
- Securities law: This is the branch of law that regulates money, stocks and bonds.
- Stimulus spending: Government funds intended to perk up the economy, too, will be overseen by this group.
- Government bailout of the financial sector: This especially controversial bailout has been identified specifically as a target for the task force.
Too Much Fraud?
In recent years, growth and innovation in the financial sector (including such innovations
as subprime mortgages) have proven to be more than the Securities and Exchange Commission (which is responsible for regulating stocks, bonds and the like) can handle.
And reports indicate that, despite concerns about national security, officials in the FBI and Department of Justice have been shifting resources away from terrorism cases and to financial fraud cases.
The hope, apparently, is that this group will form a more specialized unit, able to deal exclusively with cases of financial fraud.
The Next 30 Days
The Task Force will reportedly hold its initial meeting within the next month. Headed by Justice Department officials, it’s supposed to include help from the Department of Treasury, Department of Housing and Urban Development and the Securities and Exchange Commission, among others.
Geithner: Beyond Prosecution
Treasury Secretary Timothy Geithner has been quoted as asserting that prosecuting fraud cases after the fact is not workable; he apparently sees the Task Force as a comprehensive reform for financial oversight.
Posted in Financial Literacy, Legal Info, Obama, financial fraud | Comments Off
