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If you have a general question about filing for bankruptcy, you can submit your questions here through our online form. Please note that all questions received are answered by a real bankruptcy attorney, however, the answers given are only meant to be general in nature and are not meant to replace legal advice in any way.

If you need an attorney, try to find bankruptcy lawyers in your area. Again, none of the information found on this site is meant to replace the advice you can obtain through a qualified legal professional, in your own state (as certain things differ by state in bankruptcy), who has taken the time to look at the specifics of your case before answering your questions.

Is the Median Income the Only Factor in Deciding if Chapter Seven is Allowed?

Q: "If your income is below the median income for your state, does the bankruptcy court automatically assume you are not trying to abuse the system and allow you to file for Chapter 7? Or are there further guidelines you must follow regarding your income, expenses, and disposable income? Also, can you include a car payment in your expenses if you are giving it up, since you are still under contract to pay it?"

Conflicting information, North Carolina

A: As to your first question, there hasn't been a definitive consensus by the courts (and probably won't be for years). The majority of courts have held that your current monthly budget (income and expenses) is another factor that must be analyzed in addition to the means test in determining eligibility. For example, if you are below the median income on the means test, but your current monthly income/expense budget shows a surplus, the US Trustee will likely move to convert your case to a Chapter 13 repayment Plan.

Your second question is also an unsettled area of law. A strict reading of the new laws allows you to amortize the contractual payments that are due on any secured debt (vehicles or otherwise) over the next 60 months FOR THE MEANS TEST. However, you clearly cannot include that expense on your current expense budget (Schedule "J") if you intend to surrender the collateral. Thus, once again, there may be a disparity between your eligibility under the means test and your current monthly budget.

Can You Owe Back Taxes on a Vehicle Years After a Bankruptcy?

Q: "19 years ago chapter 7 was filed due to wrecking a leased vehicle that was not covered under insurance due to dealership error. The vehicle was a total loss. The debt was discharged but now the IRS is saying that back taxes are owed on the part of the debt that was charged off in bankruptcy. Is this normal practice after so many years?"

Signed: The past is coming back, Georgia

A: This doesn't sound right to me. Section 108, I believe, of the Internal Revenue Code, specifically excludes from income any debt "forgiven" in a bankruptcy case. Thus, it cannot be taxable. However, certain tax attributes (such as capital loss carryforwards, etc.) may be affected for the year in question. 19 years ago is a long time though and I honestly don't know if the IRS section I just gave you was in effect then. I assume it was, but you should check with a tax attorney who has knowledge of bankruptcy laws.

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Ask a Lawyer Archives:

+   Is your median income the only factor in deciding if chapter seven is allowed?
+   Can the IRS come after back taxes of a discharged debt years later?
+   Do I list original debtors, collection agencies or both on my bankruptcy filing?
+   Is bankruptcy an alternative to home buying investments gone bad?
+   How is income determined when deciding if you are eligible for bankruptcy?
+   Can filing bankruptcy wipe away student loan debts?
+   Two houses and backed up credit card payments; Is bankruptcy best?
+   What counts as legitimate living expenses when filing bankruptcy?
+   Questions about using a bankruptcy lawyer vs. filing Pro Se
+   Is a back child support payment considered income when filing bankruptcy?
+   Will claiming bankruptcy affect the co-signer on my car?
+   Does one spouse filing bankruptcy affect the couple's joint tax return?
+   I can't pay an accident judgement, can bankruptcy get rid of it?
+   How are joint marital assets affected by a wife's bankruptcy filing?
+   Do I have to claim my 401K withdrawl as income?
+   Can I sign over a car to my daughter prior to filing?
+   Chapter 13 in danger of being dropped but would like to save the house
+   Debt collector calls may force us into bankruptcy
+   Husband claiming bankruptcy, but the wife has good credit
+   Need tips to find a credit counseling agency