How to get Credit Reports?

EXPENSIVE CREDIT REPORTS

If you walk in with 3 credit reports that are a mile long each, I’m going to get your credit reports from my service, download them directly into my software and charge you for it. For a married couple for 3 a source report it is $53 and single $33 at this writing.

But don’t worry about that because my attorney’s fees are downright affordable compared to everyone else.

Free Credit Report

A great way to know how many creditors you have is to go to AnnualCreditReport.com to get your free annual credit reports. Make sure that you check mark all three credit reports on the page that asks which ones you want. Last I saw if you tried to check one at a time, it wouldn’t let you go back again unless you cleared your cookies first.

Also FreeCreditReport.com is a good place to go. They charge for a credit rating monitoring service but then allow you to get a free credit report with all three merged reports, once you have that, go back immediately and cancel the service before they charge you. You may have noticed that their link doesn’t work, they recently wrote to me and asked me to delink this post, I guess they didn’t like it that I was telling people to cancel their worthless service. 

Having your credit report is a great tool for assisting your bankruptcy attorney to process your bankruptcy petition whether in chapter 7 bankruptcy or chapter 13 bankruptcy. However, it doesn’t end there, you may have received collection letters, or letters from attorneys, or even a summons and complaint. Make sure that you bring those to your attorney because he or she doesn’t know about them unless you tell him. And if you verbally tell him and don’t provide it in writing, you may be wasting your breath.

Documentation Beats Conversation Every Time.

Not sure if you’ve been sued? But have you been delinquent on your debt payments for a while? Have you moved or had your house foreclosed?

You’d better Check the Courts and County Recorder’s Offices:

Check the County Recorder’s Offices to see if a creditor has recorded a judgment lien against you:

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How to Discharge Income Taxes in Bankruptcy

Before we get started, Disclaimer: Nothing in this article may be mistaken as legal advice. Attorney David Nelson, is licensed only in California, and this article is intended only for readers in California. This article is for entertainment, educational, extra-curricular, and medical purposes only.  If you decide to rely on this, heaven help you.

Chapter 7

Yes, you can discharge taxes in bankruptcy.  No, not all of them but some of them.  I hate to mention this part, when it comes to credit cards, medical bills and collection agencies, I only want one statement so that I have the addresses, account numbers and balances.  But with the IRS, Franchise Tax Board and Board of Equalization, I want you to bring every letter with you that they ever sent you.  In those letters are the answers to many of the questions and rules we will go over below.  California sales taxes are calculated against gross receipts and therefore discharge in bankruptcy under the same rules.

To discharge income taxes, whether Federal, State, or California Sales Taxes, many rules have to be followed.  Because this article only discusses income taxes, then it is important to remember that these are taxes that are assessed against gross income or gross receipts. See 11 USC 507 a 8 and 11 USC 523 a 1

There are several rules involved.  What’s worse is that the rules all involve the timing of the bankruptcy.  Often you’re in my office because of a lawsuit or a wage garnishment, or your bank account has recently been levied and you want to file immediately in order to stop the bank or your employer from sending your money to the Sheriff’s Office.

Problem is this, if you owe a bunch of money to the IRS and have to wait to file your bankruptcy in order to get rid of the tax, you’re going to have to decide whether the amount of tax to be discharged is more or less important than the amount of money the Sheriff is about to take away from you.  Notice that I said more important not bigger.

The Rules

  1. The tax year must be over.  Kind of a “No Duh” moment.
  2. The tax return (if required) must have been filed.  This is also a “No Duh” moment.  Prior to 2005 you used to be able to discharge the tax even you hadn’t filed if you chose to file a chapter 13 bankruptcy instead of a 7.  Many great things about the bankruptcy code were eviscerated in 2005 when republicans and democrats who had taken hundreds of millions of dollars in lobby money over the course a decade finally gave us bankruptcy reform.  Conveniently this happened right at the start of the economic downturn. Literally, the housing market went flat one month before the bankruptcy reforms went into effect. Hmm, I wonder how the banks knew it was finally time to get the bankruptcy reforms passed? Bottom line is, if you owe federal or state income taxes in California and you haven’t filed your returns, your bankruptcy is not going to help you get out of paying your taxes.  So file your tax returns, make sure you get proof that they received them, and call back in two years.  DISCLAIMER: Make sure that you speak with an attorney now and get this advice from an attorney as bona fide legal advice before you make your decision.  This article is not your legal advice.
  3. The tax return’s due date must have been more than 3 years prior to the filing date of your bankruptcy petition.  Notice it says “Return’s Due Date”. Commonly called the 3 year rule, this is where most people stumble and file their bankruptcy petition too early.  Tax Returns are due in April!  On top of that, if you got an extension to August, then they were due to be filed in August.  What if you extended to October?  If you cannot remember if you extended, contact the IRS and get an IRS Transcript for the tax year or years in question.  You can download the Transcript request from the IRS website. Alternatively if there is nothing else pressuring you to file you could just wait until October 20th to file.  I assume you can get a tax transcript from the Franchise Tax Board or Board of Equalization if you need one.
  4. If you filed your tax returns late, your returns had to have been filed with the IRS or other taxing agency at least 2 years prior to filing your case.  This is true whether you owe income taxes to the IRS or the State of California or whatever state you owe taxes too.
  5. Assuming you have beaten the 3 year rule, and the late filing rule, you still have to have beat this one.  The tax must be assessed at least 240 days prior to filing your bankruptcy petition. That’s about 9 months. Assessed means that they have decided you owe, how much and told you so.  In California, you get a letter that says: Notice of tax due.  It won’t say “assessment” and probably won’t say “assessed” either.  California’s notice of tax due is a weird animal, it does not become effective until 60 days after they send it.  So, in California, it’s a 300 day rule from the first letter.  Our Franchise Tax Board will send a 2nd letter stating that the notice is “final” and from there your 240 days starts. At this point people often ask the IRS, Franchise Tax Board or Board of Equalization if they will take less, give them a break.  Called an offer to compromise, if you’re going to file a bankruptcy, DON’T DO IT.  An offer to compromise delays the 240 day rule.  Sort of like the extensions on filing your tax returns under the 3 year rule.  You have to add 60 days to the time that your offer is pending plus the time that your offer is pending to the 240 days.  That can extend your 240 days automatically by 60 days even if you withdraw the offer to compromise the tax debt on the same day as you make the offer.  If you filed a bankruptcy previously during the 240 day period and it was dismissed and now you have to refile, you must add the amount of time your bankruptcy was pending to the 240 days plus another 90 days.  So, even if your previous bankruptcy was dismissed after a month you must add 4 months to the 9 months.  That’s an overdue baby.

A client, and no kidding his real name was Groucho Marx, (the names were changed to protect the innocent) owed $50,000 to the Board of Equalization, and $250,000 to the IRS. And no kidding, his rich uncle, (it wasn’t his uncle) died and left him some money, 15% of the total taxes owing.  After calling the IRS and talking them into taking a 15% pay off, the IRS put a condition on the deal, he had to get the State of California’s Board of Equalization to take the same deal.  Stupid condition but that’s what they told him.  So, he calls the BOE and says hey they’ll take 15% if you do, what do you say?  Unfortunately, they said, “we’ll get back to you.”  A week later they answered by taking all of his money out of his bank account.

The Board of Equalization and Franchise Tax Board in California are a bunch of rats clamoring over a cadaver with very little meat left on it’s bones.  If you ever make an offer to compromise a debt, never have the money in an account with your name on it.  Never have it in your wife’s account.  Never have it in your S Corp’s or your LLC’s name.  In fact, you might want to have it in a hole in your back yard before you make the call.

Chapter 13

The rules are nearly the same but you get to put the taxes you owe into a payment plan.  Plan details can be tricky but you no longer get the good benefits such as discharging taxes without filing the returns and so on.  Good luck to you.

Disclaimer: Nothing in this article may be mistaken as legal advice. Attorney David Nelson, is licensed only in California, and this article is intended only for readers in California. This article is for entertainment, educational, extra-curricular, and medical purposes only. If you decide to rely on this, heaven help you.