Chapter 7 Bankruptcy Eligibility

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Chapter 7 Bankruptcy

Most people I speak with want to file a Chapter 7 Bankruptcy which discharges debt without a payment plan. It’s a fairly fast and inexpensive way to shed debt and get a fresh start. In most cases, it takes about three or four months from filing to finish and a lot of this time is spent waiting for the discharge order to come in the mail. 

Eligibility for consumer bankruptcy filers is initially determined by how much money is earned in the household. For a single filer (as of November 2016), if you are under $46,501 annually, you are eligible. For a house hold size of two, it is $56,651. Add a kid and its $67,342. If you have twins, the median income for a household size of four is $81,951. Add $8,400 for each additional person. To figure out your income, we will need your last six months of pay stubs and we will double it. If your income is less than the median income for your household size you can file a Chapter 7. 

Chapter 7 Means Test

If your income for your household size is greater than your median income level, it does not automatically mean that you have to file a Chapter 13. Instead,  you will do what is called the “means test.” This allows you to deduct certain expenses from your gross wages to get you under the median income. If you have enough exemptions, you  can file a Chapter 7. If not, then you will need to file a Chapter 13.

I would like to stress that not every bankruptcy lawyer knows how to do the means test properly. If you are over income and would like to file a Chapter 7, it is critical that your lawyer knows exactly how to deduct every allowable expense. 

Any questions? Give us a call at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, family law, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City,  Canton and the Downriver, Michigan area.

Top Three Michigan Probate Myths

Three Michigan Probate Myths Explained

There are a lot of myths and misunderstandings about probate in Michigan. I have heard them all and, while there is a grain in truth in some, they are rarely correct. These are the top three myths about probate that I hear all the time.

1. Wills avoid probate.

Nope. It’s the opposite. Wills guarantee probate. Consider a Last Will and Testament as an instruction letter to the Probate Court as to whom inherits your stuff. A Will also allows you to name who will be in charge of carrying out your final wishes (Personal Representative) and also allow you to name someone to care for your minor children (Guardian nomination). Every adult should have one.

2. Probate takes most of the assets

This isn’t true at all but there is a grain of truth. Probate Court charges a fee to open an Estate which is currently $150.00. At some point, the Personal Representative will file an Inventory listing all the property in the estate that needs to be administered. The Court charges a percentage of the value based on the inventory but it’s not very much at all. There are inventory calculators to quickly figure out the inventory filing fee. For example, an Estate valued at $500,000 will have a inventory fee of $863. That’s less than 1%.  It’s actually .00173 which is much less than the dreaded, and incorrect, belief the Probate Court takes everything.

3. If you die without a Will, the State of Michigan takes everything.

This is also not true. If you die without a Will, then the State of Michigan has a default inheritance distribution plan that does not put Michigan at the top of the list. Basically, everything goes, in order of survivors, to your spouse, children, parents, siblings, etc. The State of Michigan will only receive property if there are no living family members which is quite rare.

Any questions? Give us a call at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, family law, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City,  Canton and the Downriver, Michigan area.

Picking The Personal Representative In Michigan

 

Pick Personal Representative

What is a Personal Representative?

The personal representative in Michigan, also known as an executor, is the person qualified by the probate court to administer the estate of a decedent. The personal representative hires the probate lawyer, signs all probate court documents, gathers assets, pays final bills, files final tax returns, and distributes any inheritance or property to the heirs and devisees. Think of the personal representative as the CEO of a business.

Who gets to be the Personal Representative?

Michigan’s probate code has a batting order for picking the Personal Representative. From first to last it starts with:

  • The person named in the decedent’s Will as the executor
  • The decedent’s surviving spouse if also receiving property in the Will
  • Any person who is to inherit property
  • The decedent’s surviving spouse
  • Any other heir
  • Someone nominated by a creditor of the decedent
  • A public administrator appointed by the court if there is no one else to do it

Do you have to serve as a Personal Representative?

Nope. You can decline and the person with the next highest priority will serve.

What if I don’t have priority?

You can serve as Personal Representative only if every single person with greater or equal priority agrees in writing. Please note, probate is driven by court approved court forms. I am not suggesting they can write a letter. It has to be on the right form and filed properly with the court.

Have more questions? Call us at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, family law, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City,  Canton and the Downriver, Michigan area.

 

 

Bankruptcy Discharges Back Taxes.

 

 Monopoly Income Tax Ver1

Discharging Taxes In Bankruptcy.

Contrary to popular opinion of my clients (and even some lawyers), income taxes can be discharged in bankruptcy and your refund can be protected. It’s true. Whether the money is owed to the Internal Revenue Service or the Michigan Department of Treasury, income taxes can be discharged in a Chapter 7 and Chapter 13 bankruptcy. If you meet all  the following  conditions,  you can discharge your back taxes in full.

3 Years Old:   The tax debt has to be at least three years old. More than three years have to pass between the date of filing and the date the tax return was due. Typically, the due date is April 15th of each year. However, if you filed for an extension for the tax year in question, the three years won’t start running until the due date of the extension. The date you actually filed the tax return doesn’t matter when calculating the three years. The due date controls, not the filing date.

2 Year Filing Requirement: The tax return must have been filed within the last two years. If you failed to file the return, even if the tax debt is more than three years old, you cannot discharge it. If the IRS files a tax return for the taxpayer, that doesn’t count. The tax filer must file the return themselves.

Assessed in the last 240 days: The taxes must have been assessed or determined by the IRS more than 240 days before the bankruptcy filing. For example, if your 2007 tax return is audited in 2010, you must wait until 240 days have passed from the latest date that the tax was finally determined. Tax assessments after the date of bankruptcy filing cannot be discharged as they are post-filing debts. Keep in mind that taxes based on fraudulent tax returns, trust fund taxes, or sales taxes are never dischargeable.

Not a tax lien. Once a tax debt becomes a lien on any of your real or personal property, it is a secured debt and cannot be discharged. The IRS will file the notice in either the county the land is or where the debtor lives depending on what property is being attached

Timing is everything. A mistimed filing that does not take into account all of these conditions will fail to discharge your tax debt. Sometimes, if possible given your circumstances, you may want to delay filing if it will insure wiping out old tax debt. Your bankruptcy lawyer should be familiar with these rules and help you maximize your debt relief.

Have more questions? Give us a call at 313-291-0240.

Chris McAvoy is a  Michigan attorney who helps people with bankruptcy, family law, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City,  Canton and the Downriver, Michigan area.

 

Which Parent Gets To Claim The Child On Their Taxes?

Child Tax Deductions

Custodial Parent Gets the Tax Exemption for the Child

Even though your divorce or custody case is in Michigan, IRS regulations control which parent gets to take the children on their taxes as a dependency exemptions after a divorce.  The general rule is that the custodial parent takes the children as exemptions. The custodial parent is the parent with whom the child lives a majority of the year. The other parent is the non-custodial parent.

When Can the Non-Custodial Parent?

Absent an agreement between the parents, the non-custodial parent can claim a child as a tax exemption on their return only if:     

1. The parents:          

     a. Are divorced or legally separated under a decree of divorce or separate maintenance,          

     b. Are separated under a written separation agreement, or          

     c. Lived apart at all times during the last 6 months of the year, whether or not they are or were married.     

2. The child received over half of his or her support for the year from the parents.     

3. The child is in the custody of one or both parents for more than half of the year.     

4. Either of the following statements are true:          

      a. The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984 and before 2009, see Post-1984 and pre-2009 divorce decree or separation agreement , later.          

      b. If the decree or agreement went into effect after 2008, see Post-2008 divorce decree or separation agreement , later.)A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child’s support during the year.

Equally Shared Parenting Time

If the parents equally share the parenting time during the year, the parent with the greater Adjusted Gross Income (AGI) gets the exemption.

Need to talk? Call 313-291-0240 to set up an appointment.

Chris McAvoy is a Michigan attorney who helps people with bankruptcy, family law, and estate planning. To find out more or set up an appointment, click here for contact info. Our attorneys help people in Taylor, Allen Park, Southgate, Lincoln Park, Riverview, Taylor,  Trenton, Flat Rock, Wyandotte, Brownstown, Belleville, Dearborn, Dearborn Heights, Westland, Garden City, Canton and the Downriver, Michigan area.