Tax time is here again and this is also the time of year that people struggling with debt consider bankruptcy. It is important to understand the interrelationship between taxes and Bankruptcy.
First, filing and collecting your tax refund can give you the money you need to hire an attorney to file your bankruptcy. So consider this if you are plagued with debts before you spend your refund check.
Second, if you are thinking about filing bankruptcy, it is usually best to have already filed your taxes and collected any tax refunds due to you before you file. At a minimum, you need to estimate what your tax refund will be. You want to make sure that your all of your property, which includes cash on hand or tax refunds owed to you, can be adequately sheltered by the exemptions you elect to use with your bankruptcy filing. You are going to elect either the Oregon exemptions or the Federal Exemptions. In some situations it may be necessary to collect your tax refund and use it to purchase or repair exempt assets before you file your bankruptcy so you can maximize your retention of assets.
It is perfectly acceptable to collect your tax refund in advance and use the money for your bankruptcy attorney fees, your living expenses, or needed medical care. You can also use your tax refund to buy or invest in exempt assets. For example, you might want to use the money to repair a home that is otherwise exempt. You might use the money to buy a car which will be exempt or to repair an exempt vehicle that you already own. The trap you want avoid is having a tax refund owing that is more than the exemptions you can claim and losing that tax refund money to the trustee.
There are some expenditures that you don't want to use your tax refund money on. Large payments to creditors right before filing your bankruptcy may be attacked by the trustee. Large payments on debts within 90 days of filing can be set aside and the trustee will grab the money and redistribute it to all your creditors on a more equitable basis. If you give the money to a business associate, friend, or family member to pay back a debt, the period of potential trustee scrutiny can be as long as a year. Spending excessively on luxury items, trips and vacations right before filing bankruptcy could result in the bankruptcy court finding that you are abusing the bankruptcy process and dismissing your case. So getting legal advice as to what types of expenses are acceptable and how to move your money and property around to maximize your use of the exemptions is an important pre-filing step.
The best thing to do is to consult with an attorney prior to making the decision to file a bankruptcy. Once you have filed it may be too late to get help. You generally won't be allowed to dismiss your bankruptcy and start over either. Once the bankruptcy trustee realizes that there are assets that the trustee can seize and use to pay creditors, the trustee is unlikely to consent to a dismissal of the case.
To avoid becoming a scam victim regard any call or email that asks any personal, business or financial information including a request to verify information as a possible scam!
Any legitimate callers or emailers will be willing to assist you in verifying that their calls or emails are legitimate. If they are pushy, anxious, evasive, or demanding when you ask questions or don't want to help you verify their identity or business legitimacy - they are scammers!
Here are the steps you need to take right from the start.
- Just don't respond to any emails that request personal or business info. Legitimate businesses that need your info will have a phone number and a person you can contact. Just don't respond to any requests for information by email ever. It is far too easy for people running international scams to send you emails with fake looking business logos and even fake return addresses. Also when you respond you signal that they have contacted a real person and you become a live fish on the hook for them to play with. You may also encourage them to further use your email address for spam. If you have to respond, do so only to request their contact information. But if you can tell who the business is from the original email, go to the next steps and don't reply.
- When contacted by phone, do not start answering questions or giving out information or any type - you start asking questions.
- Ask the caller to give you their full name, the name of the
company they work for, the location and name of the office they are calling from, a working number that you can all them back
on, and any extension you need to dial to get them back on the line. At this point most scammers will hang up but not always.
- Politely say you will call them back and hang up.
- Next use an independent means to verify the business and to verify that this call is legitimately related to a department in that business. Don't call the number you were just given. Instead use reliable independent sources of information you already have to contact the business. Remember that most billing statements have names, addresses and contact numbers so check your old statements for this info. If it's a bank, call your local branch. Once you have a good reliable number then call this number and ask to speak to the appropriate department depending on what the initial call was about. Discuss with someone in that department the call you received, who it was from, and the information you were given and what the caller wanted from you. Verify that the call and the request for information is for a legitimate reason related to the business.
- If the call is verified as legitimate - don't hang up and go back to calling the original caller. Instead ask to be routed internally to the call center where the person you need to talk to is located. Scammers can mimic legitimate calls and even give you correct information and ask questions that a real department employee would ask you. The problem is that there could be both legitimate calls and scam calls going on at the same time and asking the same questions. By asking to be routed internally from an office inside the correct business, you can be sure that you get to a legitimate department or call center and that you don't accidentally release info to a scammer the is convincingly mimicking a real call.
- If you don't have a number for the business from prior contact, then it may be necessary to research the business on the internet to get the proper contact number. This will only work for well known major businesses like American Express, or Bank of America. If it's a business you have never heard of before then even the website you find could be phoney.
- Still not sure? Then don't cooperate and give out any information. If there is truly a legitimate business need for you info you will probably get something mailed to you at an address that your previously gave to the legitimate business.
- Check for scam alerts. Below you will find information how to contact either the Oregon Department of Justice of the Federal Trade Commission to find out if the type of contact you have just gotten is a known scam. You can also try typing in the language from an email into your Google browser. The more common scams tend to use the same language over and over again and you will probably get a web page where your language is being reported and discussed by other consumers that have already spotted the scam.
- Don't get involved in scam baiting. There are even some consumers that will not only report the scam but will play along with the scammer and update their reports for you to read on various web pages. This is called scam baiting. I don't recommend playing this game because some of these scammers are real pirates with real guns and real bullets. They may be in some foreign country but they could have friends or relatives in the US and you could end up in a life threatening situation. So you can Google scam baiting if you want to read more about it but stick to just reading about it.
Other steps you can take:
Contact the Oregon Department of Justice.
(DOJ) They should be able to tell you if the type of call you got is part of a scam they are already aware of. Sometimes the scammer may already be under investigation.
If you have a question about a consumer-related issue or would like to
file a complaint against a business please contact the Attorney
General’s Consumer Hotline
at 1-877-877-9392 from 8:30 a.m. to 4:30 p.m., or complete an online Consumer Complaint Form
Some of the services and additional information on the DOJ website include:
Oregon Scam Alert Network
Here you can read about current scams and submit your email so you can be notified of scams alerts as they are released. There are also links to other helpful pages:
Go to the Federal Trade Commission website
and read about the various consumer fraud and identity theft problems that this website discusses. There is also advice on steps to take to protect yourself and what to do after you have become a victim to minimize your damages:
Under this topic you will find info on:
Limiting Unwanted Calls & Emails
phone calls and emails are important, some can be annoying, and others
are just plain illegal. Learn how to reduce the number of unwanted
messages you get by phone and online.
internet offers access to a world of products and services,
entertainment and information. At the same time, it creates
opportunities for scammers, hackers, and identity thieves. Learn how to
protect your computer, your information, and your online files.
Kids' Online Safety
opportunities kids have to socialize online come with benefits and
risks. Adults can help reduce the risks by talking to kids about making
safe and responsible decisions.
Protecting Your Identity
your important papers secure, shredding documents with sensitive
information before you put them in the trash, and limiting the personal
information you carry with you are among the ways you can protect your
identity. Find additional tips to reduce your risk of identity theft,
including how and when to order your free credit report.
Repairing Identity Theft
you suspect someone has stolen your identity, acting quickly to limit
the damage is key. Take a deep breath, and then place a fraud alert on
your credit file, order your credit reports, and call the FTC to report
Under this topic you will find info on:
- Children’s Privacy
The Children’s Online Privacy Protection Act (COPPA) gives parents
control over what information websites can collect from their kids. The
— with new provisions in effect on July 1, 2013 — puts additional
protections in place and streamlines other procedures that companies
covered by the rule need to follow. If you run a website designed for
kids or have a website geared to a general audience but collect
information from someone you know is under 13, you must comply with
COPPA’s requirements. Questions? Send them to CoppaHotLine@ftc.gov.
- Consumer Privacy
Think your company doesn't make any privacy claims? Think again — and
you've pledged. Consumers care about the privacy of their personal
information and savvy businesses understand the importance of being
clear about what you do with their data.
- Credit Reporting
Does your business use consumer reports or credit reports to evaluate
customers’ creditworthiness? Do you consult reports when evaluating
applications for jobs, leases, or insurance? Here's information about
your responsibilities under the Fair Credit Reporting Act and other laws
when using, reporting, and disposing of information in those reports.
- Data Security
Many companies keep sensitive personal information about customers or
employees in their files or on their network. Having a sound security
plan in place to collect only what you need, keep it safe, and dispose
of it securely can help you meet your legal obligations to protect that
sensitive data. The FTC has free resources for businesses of any size.
- Gramm-Leach-Bliley Act
The Gramm-Leach-Bliley Act requires financial institutions –
companies that offer consumers financial products or services like
loans, financial or investment advice, or insurance – to explain their
information-sharing practices to their customers and to safeguard
- Red Flags Rule
The Red Flags Rule requires many businesses and organizations to
implement a written Identity Theft Prevention Program designed to detect
the warning signs – or red flags – of identity theft in their
- U.S.-EU Safe Harbor Framework provides a method for U.S. companies to transfer personal data outside
the European Union in a way that's consistent with the EU Data
Protection Directive. To join the Safe Harbor, a company must
self-certify to the Department of Commerce that it complies with EU
standards. The FTC enforces the promise that companies make when they
certify that they participate in the Safe Harbor Framework.
Under this topic you will find information on:
- Credit and Loans
If you extend credit to consumers, are in the business of offering
loans, or help companies that do, know your compliance
responsibilities. (Looking for information about credit reports or
consumer reports? Visit Credit Reporting.)
- Debt If you market products or services promising to help consumers with
their debts – or assist companies that do – are you up on the rules and
laws that apply to your business? (For resources related to the Fair
Debt Collection Practices Act, visit Debt Collection.)
- Debt Collection
The Fair Debt Collection Practices Act protects consumers from
abusive or harassing treatment by debt collectors and establishes
guidelines for the industry. Is your company complying with the law?
The FTC enforces laws that protect consumers from deceptive mortgage
practices by certain kinds of lenders. The FTC also takes action when
companies use illegal tactics directed to people facing foreclosure. If
your company is within the jurisdiction of the FTC, are you complying
with the law?
- Payments and Billing Under the law, businesses must take steps to ensure that charges to
customers' credit cards, debit cards, phone bills, and other accounts
are authorized. Those principles also apply to mobile payments. Does
your company process payments for others? There are compliance standard
Under this topic you will find information on:
- Shopping & Saving
budgeting is the key to maintaining a financial safety net and spending
wisely. Whether you’re shopping for things you buy routinely — or
saving for that occasional big ticket item — planning is key. These
shopping tips can help you save money on everyday purchases, as well as
on some products and services you buy once in a while.
- Buying & Owning a Car
a car can be an expensive proposition. Read tips on buying vs. leasing,
negotiating the best deal, financing, getting the most out of
warranties and service contracts, using gas efficiently, and avoiding
- Credit and Loans
about credit and loans involve lots of factors, including how much
money you need, what terms you’re offered, and who is behind the offer.
If you are choosing a credit card or wondering whether offers of credit
and loans are on the up and up, these tips can help.
- Dealing with Debt
collection, debt management, debt relief, debt settlement... Debt is a
four-letter word that’s the subject of some complex laws. Learn how to
exercise your rights under the Fair Debt Collection Practices Act — and
how to recognize debt-related scams and frauds.
- Resolving Consumer Problems
don’t always go right. Sometimes you don’t get what you ordered;
sometimes you get an item of the blue. What are your obligations? And by
the way, are there advantages to using any particular method of payment
in terms of consumer protections?
Some really good news for Oregon Debtors facing bankruptcy. Governor Kitzhaber has signed SB396 into law and
Oregon debtors now have the opportunity to elect federal exemptions or
Oregon exemptions when filing bankruptcy. SB396 reversed the 30 year
ban on use of federal exemptions in Oregon bankruptcy cases. The bill
can be used in all
bankruptcy cases filed after July 1, 2013.
In addition, there has been added to the already existing Oregon exemptions a new exemption for
Health Savings Accounts in an unlimited amount.
What does this mean for Oregon Debtors? It means more ways to protect your property and assets that youare allowed to retain when filing bankruptcy. For example the Oregon exemption for an automobile is $3,000.00. But if you elect to use the Federal Exemption you would be able to exempt a car worth $3,675. The real benefit of using the Federal Exemptions is that you can borrow the unused portion of the Federal Homestead exemption up to $11,500 for an individual can be used instead to increase another Federal Exemption amount.
So you could exempt a car worth up to $15,175 by adding the $11,500 to the existing car exemption of $3,675.00 Or maybe you have some property that doesn't fit into a specific category. Combining the wild car exemption of $1,225 with the transferable amount of $11,500 gives you an exemption of $12,725 to apply to any property you want to keep. (This amount doubles for a married couple for an amount of $25,450.00)
Whether you use the Oregon Exemptions or the Federal Exemptions is something you will need to discuss with your bankruptcy attorney as part of your pre-filing bankruptcy strategy. But this gives you a lot more options. So if you considered filing bankruptcy in the past but were told you would lose certain property which kept you from filing, you might want to talk to a bankruptcy attorney again and see if the outcome will be more favorable given the change in Oregon's exemption laws.
Here is a list of the various Federal Exemptions that can now be used by Oregonians filing bankruptcy if they chose to elect:
11 U.S.C. (Title 11 of the
United States Code) Section 522(d)
522(d)(1), (5) - Real property, including mobile homes and co-ops, or
burial plots up to $22,975. Unused portion of homestead, up to $11,500
may be used for other property.
522(d)(2) - Motor vehicle up to $3,675.
522(d)(3) - Animals, crops, clothing, appliances and furnishings,
books, household goods, and musical instruments up to $575 per item, and
up to $12,250 total.
522(d)(4) - Jewelry up to $1,550.
522(d)(9) - Health aids.
522(d)(11)(B) - Wrongful death recovery for person you depended
522(d)(11)(D) - Personal injury recovery up to $22,975 except for
pain and suffering or for pecuniary loss.
522(d)(11)(E) - Lost earnings payments.
522(b)(3)(C) - Tax exempt retirement accounts (including 401(k)s,
403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs,
and defined benefit plans). (Fully exempt.)
522(b)(3)(C)(n) - IRAS and Roth IRAs to $1,245,475.
522(d)(10)(A) - Public assistance, Social Security, Veteran’s
benefits, Unemployment Compensation.
522(d)(11)(A) - Crime victim’s compensation.
Tools of Trade:
522(d)(6) - Implements, books and tools of trade, up to $2,300.
Alimony and Child Support:
522(d)(10)(D) - Alimony and child support needed for support.
522(d)(7) - Unmatured life insurance policy except credit insurance.
522(d)(8) - Life insurance policy with loan value up to $12,250.
522(d)(10)( C ) - Disability, unemployment or illness benefits.
522(d)(11)( C ) - Life insurance payments for a person you depended
on, which you need for support.
522(d)(5) - $1,225 of any property, and unused portion of homestead up to $11,500.
As 2011 draws to a close some of you are still stunned by the lack of recovery of our economy. Maybe you finally found a new job but it's for lower pay or less hours. You remain buried in debt. This might be a good time to consider getting rid of the debt that piled up during a long period of unemployment or during an extended illness or other calamity that put you behind.
There are limits to the amount of income you can earn and still completely discharge your debt in a chapter 7 bankruptcy so filing when your income is still relatively low may be your best chance to wipe out debt for a fresh start. If you wait until your income improves and still can't pay your debt you might be limited to a chapter 13 bankruptcy plan which will require you to make payments towards your debt for up to 5 years. By using a chapter 7 bankruptcy now to get rid of all your debt, you will be debt free and able to move on in your life rebuilding your credit to again plan for your future retirement and other future needs.
First you are going to want to collect any 2011 tax refunds due to you since unlike wages owed to you where 75% of the back wages are exempt, tax refunds don't get that same favorable treatment in bankruptcy and up to 100% of the tax refund due to you can be collected by a bankruptcy trustee and used to pay your creditors. With some simple advanced planning you can file for your refund as soon as you get your W-2s from your employers and your tax refund will be on it's way. Once you receive the refund you can use the funds to pay for your bankruptcy and spend any additional money on necessities for you and your family.
You can consult with an attorney now about whether bankruptcy is a good option for you. I offer a free preliminary phone consultation and more intensive office screening at a low cost. It is important to talk to an attorney before you spend your tax refund just to certain you don't inadvertently spend it in a way that the bankruptcy trustee will object to or that you buy some other asset that is not exempt and can be taken from you.
As a general rule you can spend your refund on reasonable expenses for food, clothing, shelter and medical expenses as well as attorney fees related to your bankruptcy. It is still a good idea to get legal advice first. Talking to a lawyer about bankruptcy does not commit you to filing a bankruptcy. It is only a preliminary step to explore solutions to your debt situation. In the course of talking to you I might be able to suggest other non-bankruptcy solutions.
For more free information on Bankruptcy please use the tool bar and click on "Articles and Links"
Attorney at Law