Bad faith filing of Chapter 7

[womanonfire]

So initially we were looking for my husband to file a Chapter 7 since he has no assets and our family (also individually) will meet the means test if we file within the next month. I would file a Chapter 13 since I have a house with significant equity.

He was using upsolve and a flag popped because he started a new job on Monday making more money. It's an increase of 20k a year. So that is a 66% increase. Can he still get away with filing since it is a brand new job? Or should he file a separate chapter 13?

That is another thing that is not clear, can a married couple file two separate chapters and what would the benefit be? We have joint tax debt. In in his case, some would be unsecured and he would pass it to me since I could afford to pay it. But dang, I am using my asset to pay off his debt.

The tax debt and the interest rate on it is horrible. It is hard to pay down.

[justbroke]

He was using upsolve and a flag popped because he started a new job on Monday making more money. It's an increase of 20k a year. So that is a 66% increase. Can he still get away with filing since it is a brand new job? Or should he file a separate chapter 13?

You'd have to run the numbers to see if he has more than (about) $225 of disposable monthly income (DMI). If so, then it's going to push him in to a Chapter 13. I think the amount is currently $227.50 based on last change in 2019. Next change is February 2022 (every 3 years it changes).

That is another thing that is not clear, can a married couple file two separate chapters and what would the benefit be? We have joint tax debt. In in his case, some would be unsecured and he would pass it to me since I could afford to pay it. But dang, I am using my asset to pay off his debt.

Yes you could, but it's too complex to just say "yes it is beneficial." Way too many factors involved and you have to run a hypothetical at least 5 ways (joint Chapter 7, joint Chapter 13, spouse A files 13/Spouse B files 7, spouse B files 13/Spouse A files 13, only one files one chapter, etc).

The only true way to deal with significant IRS debt is to file a Chapter 13.

[womanonfire]

The only true way to deal with significant IRS debt is to file a Chapter 13.

Yep. Although the attorney he is talking to tomorrow who almost represented me told me at that time I could have also filed a Chapter 7 and passed off the taxes to him. I don't know why he can't do the same in a Chapter 7, especially if they are in my 100% plan?

Thanks for posting this, we will run this by the attorney to see if it can be finagled.

[justbroke]

A Chapter 7 cannot discharge taxes unless they fit the 3 rules (more than 3 years, 240 days since assessed, and at least 2 years since filed). So if they don't fit those rules, then they are "priority" tax debt. A Chapter 13 has the same rule, but a Chapter 13 can discharge the penalties and interest on the so-called "priority" portion of the debt! And, with no interest! The penalties and most of the interest becomes dischargeable. You just can't do that in a (with a) Chapter 7 when it comes to "priority" tax debt (with penalties and interest).

[womanonfire]

A Chapter 7 cannot discharge taxes unless they fit the 3 rules (more than 3 years, 240 days since assessed, and at least 2 years since filed). So if they don't fit those rules, then they are "priority" tax debt. A Chapter 13 has the same rule, but a Chapter 13 can discharge the penalties and interest on the so-called "priority" portion of the debt! And, with no interest! The penalties and most of the interest becomes dischargeable. You just can't do that in a (with a) Chapter 7 when it comes to "priority" tax debt (with penalties and interest).

All of our debt meets the criteria for discharge under Chapter 7 so you are saying that the interest already paid on the IRS debt get discharged and the amount owed get readjusted?

If you are in a 100% plan and not sure what to put on taxes owed for your plan, will you be able to amended it once the IRS enters a claim if it is for less? Or do I call the IRS and ask them directly for the figures before filing?

[justbroke]

If it meets the criteria, and you are married, then technically only one of you need to file. The problem is if you get divorced. Then one spouse would be left holding the bag. (Happened in my case!)

So if Spouse A filed Chapter 7 then its un-collectible to that spouse A... and to Spouse B under the rule. But if you divorce, Spouse B becomes liable. If Spouse B files a Chapter 7 or a Chapter 13 on that same debt, to discharge as to themselves, then you'd get a clean break. The dischargeable debt would simply be an unsecured debt in the Chapter 13. If you are in a 100% Chapter 13, then you would pay back all of the collectible (and dischargeable) tax debt.

The IRS is usually pretty good at classifying the debt appropriate as priority or general unsecured. Their claim would say as much (splitting the debt into the categories).

[womanonfire]

If it meets the criteria, and you are married, then technically only one of you need to file. The problem is if you get divorced. Then one spouse would be left holding the bag. (Happened in my case!)

So if Spouse A filed Chapter 7 then its un-collectible to that spouse A... and to Spouse B under the rule. But if you divorce, Spouse B becomes liable. If Spouse B files a Chapter 7 or a Chapter 13 on that same debt, to discharge as to themselves, then you'd get a clean break. The dischargeable debt would simply be an unsecured debt in the Chapter 13. If you are in a 100% Chapter 13, then you would pay back all of the collectible (and dischargeable) tax debt.

The IRS is usually pretty good at classifying the debt appropriate as priority or general unsecured. Their claim would say as much (splitting the debt into the categories).

I thought the automatic stay doesn't apply to the non filer when joint tax debt is owed. So if I filed a Chapter 13 100% plan, then they would still be able to charge him interest while I was in bankruptcy just as it is now.

When I file my plan, do I list debt to the IRS even though it fits the rule and include it in my payment plan? How do I get the figures to input it into my schedules?

I have not slept and I'm having a dumb day.

[justbroke]

I thought the automatic stay doesn't apply to the non filer when joint tax debt is owed. So if I filed a Chapter 13 100% plan, then they would still be able to charge him interest while I was in bankruptcy just as it is now.

Yeah, usually the 11 USC 1307 co-debtor stay (I didn't look it up so I hope it is right) kicks in, but not for debt. You're right and maybe it's just something they did for me, or they messed up... to our advantage. I don't know why the IRS decided not to go after the ex-spouse during the Chapter 13. Maybe they thought they'd get paid MOST if not ALL of the back taxes and penalties. It wasn't until almost one year after discharge, without notice, they started taking her refunds. Let's just say that the phone call was not pleasant!

From what I can tell is that they mark the account (flag it) some way that prevents collection from either spouse. I don't know if that is by default or just something they did in my case. Either way, they didn't pursue the ex-spouse until my Chapter 13 was well over and done.

When I file my plan, do I list debt to the IRS even though it fits the rule and include it in my payment plan? How do I get the figures to input it into my schedules?

[/QUOTE]I don't know. I would have paid it all in-plan had I known that the IRS would eventually try to collect from my ex-spouse (it was in the divorce decree that I took all the debt, including tax liability). What a pain.

[womanonfire]

I don't know. I would have paid it all in-plan had I known that the IRS would eventually try to collect from my ex-spouse (it was in the divorce decree that I took all the debt, including tax liability). What a pain.

So when I create a plan to pay back 100% of the debt, I include the balances from IRS website, even though they fit the rule of discharge. This might make me paying much more over the plan than I need to. When all the claims come in, and objections are done, do I amend the plan based on what was actually filed? I am paying back creditors from the get go that may not even file a claim it seems.

[justbroke]

I don't know if you will be allowed to pay "all" the IRS debt, especially with a non-filing (and working) spouse. By default the Trustee will pay the "priority" portion of the IRS' debt as priority (paid first). If there is money to the general unsecured creditors pool, the IRS general unsecured portion of its claim would be paid from that pool.

If you are in a 100% plan, then you could amend the plan so that you only offer a plan that pays 100% over the length of time you are required to be in the plan. I personally had objected to some claims, but it didn't matter for me as I wasn't in a 100% plan.

[womanonfire]

I don't know if you will be allowed to pay "all" the IRS debt, especially with a non-filing (and working) spouse. By default the Trustee will pay the "priority" portion of the IRS' debt as priority (paid first). If there is money to the general unsecured creditors pool, the IRS general unsecured portion of its claim would be paid from that pool.

If you are in a 100% plan, then you could amend the plan so that you only offer a plan that pays 100% over the length of time you are required to be in the plan. I personally had objected to some claims, but it didn't matter for me as I wasn't in a 100% plan.

Ok so my initial plan proposes to pay 100% of creditors everything because the total of everything I owe is less than my equity stake in my home. So I propose to pay what I think that I owe as of the filing and then through the claims process, objections, adversarial proceedings, etc. then plan gets amended after it is all sorted. This might put me paying over what is actually due to creditors. This is the part that I can't grasp. I guess it puts me in a position to pay off early if I overestimated what is owed.

The Trustee will object based on over all income but I want to propose a sale of the property in my plan to pay off all the creditors like as soon as I possibly can.

[justbroke]

Procedure on this differs by District, so I'll talk about what I did in my bankruptcy. My district does not confirm Chapter 13s until at least 30-60 days have passed from the last date to file a claim (the claim's bar date). This is the date for normal creditors and not governmental creditors. Also, my district wants everything to be done before they will enter into a final confirmation hearing and confirm the initial plan. This means that all lien stripping, secured status determinations, valuations, objections to claims, and anything else that would affect the plan.

I like the way my district handles this. That means that you should be able to have dealt with any objections to claims, as well as other motion practice before the plan is confirmed. Prior to confirmation, a debtor can keep amending the plan without the fanfare of going through an entire plan modification hearing. This is much better than having the plan confirmed "too early" and then going through plan modification afterwards.

So, I was on version 5 of my plan at confirmation. That version was based on all the valuations, lien stripping, and other items that affected the plan and the payments.

[womanonfire]

This is good to know! Things look like they drag in my district. I know my first plan will not get confirmed because I am by law supposed to list arrears and I am not providing for them in my plan. This is where the claim objections comes in.

Back to the taxes.... so by the filing date, we will qualify for a chapter 7 based on the means test. He got a new job so he and we will not qualify for long. Seems to me, that the Trustee would let me pay the taxes based on the fact that he could have filed and didn't. And if he doesn't my husband might be forced to file Chapter 13.

All of the IRS debt would be non priority based on the rule. But since I am in a 100%plan, I have to pay it all back.

[justbroke]

If you're in a 100% plan, then the IRS "general unsecured" debt would also be included in that base plan amount.

[womanonfire]

If you're in a 100% plan, then the IRS "general unsecured" debt would also be included in that base plan amount.

But all interest paid get's converted toward the principal amt. owed and penalties and interest paid on penalties also gets converted correct, even in a 100% plan?