TheFloridaBankruptcyLawBlog

Many bankruptcy debtor have borrowed money from their retirement plans in an attempt to pay their monthly debt obligations and avoid bankruptcy. The retirement loans require repayment within a certain time in order to avoid income taxation including penalties. When those debtors do file bankruptcy they often suggest that their required loan repayments to their retirement plan be considered as necessary expenses when they calculate their means test eligibility. 

People considering bankruptcy are usually concerned about bankruptcy’s effect upon their credit score and what they need to do in order to rehabilitate their credit. I saw an interesting article in  Yahoo Finance about an interview with Mr. Mark Greene, the CEO of Fair Isaac & Co., the managers of your FICO score. 

The bankruptcy rules provide that a debtor may amend his bankruptcy schedules at any time prior to the case being closed. The debtor can file amendments which claim additional exemptions or new theories of exemption even when property was not claimed as exempt on the debtor’s initial schedules. 
There are, however, some limits on the debtor’s ability to make amendments. A creditor or trustee may object to an amendment which is made in bad faith or which prejudices the creditors.

Income tax refunds are part of the Chapter 7 debtor’s bankruptcy estate. Debtors who file Chapter 7 bankruptcy during the first four months of the calendar year and in November or December of the proceeding year should expect the Chapter 7 trustee to inquire about their anticipated income tax refund. In most cases, the debtor must agree in writing to send a copy of yet unfiled tax returns to the trustee and to hold any refund received until the trustee decides whether or not the refund is significant enough to administer for the creditors’ benefit.

Most people are optimistic about their future including most of my clients who file Chapter 13 bankruptcy. People believe, or hope, that bankruptcy’s protection will lead them to increase their future salary or business profits. A common question is whether a Chapter 13 debtor’s increased future income will make their Chapter 13 plan payment increase.