Should I consider Ch.13?

[southernbelle]

Should I seriously consider filing Ch. 13 since it will take me over 5 years to pay off non-dischargeable taxes which totals over 100k. I did the on-line means test and my monthly payments in a Ch. 13 would be approx. $900 - $975.

The monthly payments I would be paying towards the taxes if I made repayment arrangements on my own would be $1000. The $1000 doesn't include mortgage or anything else, just the taxes. When I added penalties and interest, it would take me well over 10 years to pay the taxes back.

I live alone and can afford the Ch. 13 payments, but don't want to haggle with the Trustee while trying to establish new credit to rebuild after filing.

Trust me, the last thing in the world I want is to deal with a Trustee for the next 5 years, but it would keep me from paying on this tax debt forever. I'm not behind on any secured debt payments and stopped paying cc debt about a month ago. Which ever I choose, 7 or 13, I plan to file in a month. Anyone have any thoughts? Thanks for your input.

[woeisme]

If you can afford almost $1000 per month in payments based on your means test, I don't see how you can file CH 7, I'd think you'd be forced into a 13 with that much disposable income. Unless I'm missing something, it seems like your choices are try to pay yourself for 10 years or do a 13, with a 7 being off the table.

You might want to look into lawyers that deal with the IRS and see if they can arrange some kind of deal for a partial payment or to stop the interest and penalties. I've never dealt with the IRS (thank GOD!) but I see these lawyers advertising on the TV all the time about making deals where they get some of the back taxes forgiven. That might be a better route than the 13 if you can work something out with them.

[biotechsolution]

Can all the non-dischargeable taxes be paid in 5 years?

southernbelle..

The main problem is that all the non-dischargeable taxes must
be able to be paid back in the 5 year term or your Chapter 13
won't be confirmed.

Unfortunately the IRS and state comptrollers can charge interest
in Chapter 13 plans but the interest rate should be under 5%.

If you non-dischargeable taxes are over 3 years old but able to be discharged you may still be able to have the penalties discharge.
This seems to be circuit dependent but some circuits have ruled that way. This could be a determining factor on whether to file the 13.

I'm not understanding something...if it's going to take you 10 years to pay it back after the 7 discharge, how will you be able to pay it back within 5 years in the 13?

One more thing......even though you are filing a business 7 filing make sure you still don't show a big + on your schedules. You're not subject to guidelines when making your schedules so you can have other expenses and not subject to IRS liimits. So increase things so that there isn't any excess. Even though they can't dismiss under 707(b) they can make things interesting under 707(a).

[krielly]

We included payroll witholding taxes which were past due at the time of filing in 10/05.
The breakdown was as follows:
principal taxes owed the IRS - Priority debt - paid at 100%
interest and penalties - claimed by the IRS as a non-secured debt
The IRS is only receiving 36% or so (as that is our unsecured percentage) of their proof of claim on the interest & penalties).

This also stopped further penalties & interest from accruing during the payoff.

[biotechsolution]

the question is whether the IRS and State have classified your debt has unsecured or secured. I take it since you will have to be repaying it after the 7 discharge then it classified has either priority or secured.

If it is secured you can reduced the amount to just what you have in assets that are exempted at the time of filing.

But has for priority, it must all be paid back in the Chapter 13 plan. But the penalties would be stopped. But they can charge interest in a Chapter 13.

[southernbelle]

[JollyGG]

I didn't see medical insurance on there.
Do you have any student loans?
Is home owners insurance and taxes included in your morgage payment?

[biotechsolution]

I would think if you are single and only claiming 0 or 1 in deductions you state and local taxes should be at least double the $560.00.

Also don't increase your retirement too much, that can send up a flag. Remember you can't be dismissed under 707(b) but the courts are looking more and more at dismissing under 707(a) for non-consumer debt cases.

[aachudneymiles]

TiVo$20? only 20 not consider luxury?

[southernbelle]

Technically my divorce will become final in a couple of weeks and I am waiting until after then to file BK, but right now my local taxes are being deducted as married claiming 02. Since this change will happen when I get the divorce decree finalizing everything, I am trying to wait so that the tax adjustment will be in effect.

I also forgot to add expenses of $136/mo health insurance, weight watchers $40/mo, and my US Postal Service PO Box (which is used to get forwarded mail from the business) $10/mo although I don't think ww will be allowed. This will bring my disposable income to $522.53. I don't know how much more wiggle room will be allowed or additional ''allowed" expenses can be added, but I'm sure some of the ones I have listed will get kicked out. I'm hoping my salary gets adjusted enough with the change in filing status so that my disposable income is decreased a bit more.

Does anyone know if having any disposable income at all qualifies me for dismissal under 707(a)? Thanks again.

** I don't have any student loans and taxes and insurance are included in the mortgage payment**

[biotechsolution]

southernbelle:

I think you safe. Below is a good link for you to read.

Basically a court of appeals ruled that your lifestyle can't be considered in a bad faith dismissal, 707(a).

Basically don't worry about extra expenses because they won't be looked at too hard in a non-consumer case.

http://jbublick.blogspot.com/2007/09/707b-does-not-prohibit-consideration-of.html

[southernbelle]

Thank you sooo much biotech. This information really helps. I don't feel as nervous as I did earlier.

[CindyLou]

I think you could do more for food...what does the IRS guideline say for this? I would go with what it says, but I think its more than 200...could be wrong, but double check and see.

Also,on the business equipment storage, be sure everything you have in there is exempt. That would be a red flag to check out what you have stored.

I agree on the tIvo. Even if you keep it I think adding it as an expense is a stretch.

Be careful on the retirement. The amounts you already had coming out should be ok, but anything new might be frowned upon.

As far as the withholding exemptions: You should be claiming now whatever your status will be on Dec. 31 of this year or you are going to owe more taxes. So if you will be single by Dec. 31 then you should change you withholding for both La. and Federal to single and 1 (unless you have things to itemize with).

[southernbelle]

I had to rent the business storage space to fill it with business equipment because I had no other place to put it. To help prove what is in it, I took pictures before I put the lock on it and closed it. I am also keeping an itemized list of equipment and the location of each piece because some of it is at my home and some is in storage and I even had to abandon some of it because I didn't have anyone to move it. I took pictures of everything and the storage space is up the street from where the business was.

On the retirement, I've been wanting to contribute with this voluntary retirement account for months and filled out the paperwork just in case something weird happens in my case and I end up in a 13 because I don't want to put off contributing the extra retirement money. The amount coming out of my biweekly paycheck for the extra is $150.00 which is in addition to the required $358.52 per month coming out already. Since most of my retirement was pulled out and used to help to get the business started, I don't really have any retirement right now and because I'm over 35, I really need to "catch up".

I wonder if I put off filing for a couple more months if the added retirement wouldn't look as "last minute".

Hopefully it won't seem shady, but my thinking is with my age, I really need to put in as much as possible because right now I don't have anything. I think you are right about the TiVo and I will change the withholding exemptions as soon as possible. The taxes withheld will be significant and I don't have anything to itemize.