Do My Taxes Have To Be Filed Before Filing for Bankruptcy?

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Filing Taxes Before BankruptcyYou will notice when you are filling out your paperwork that the court asks you for what seems to be a billion pieces of documentation ranging from copies of bills, papers from purchases, income advices and federal and state taxes.  These documents are asked for to verify information you are providing is true and accurate.

However, what happens if you haven’t filed your taxes?  Can you still go through the bankruptcy process or must your taxes be done beforehand?  The answer is you must have all prior tax years filed and received by the IRS and state in order to file the bankruptcy. There are several reasons why taxes are required to be filed and received before filing your bankruptcy.

The Bankruptcy Trustee, Bankruptcy Court and Bankruptcy Administrator Require It

As your attorney, are required to send a copy of your most recent tax year to the bankruptcy Trustee.  If they do not get the taxes before the 341 creditor’s meeting then they technically has the right to dismiss your case.  When April 15th (or the appropriate deadline depending on the year) hits, the bankruptcy Trustee will expect taxes to be filed as completed. What if you’ve received an extension?  Even if you have received an extension, if you are filing bankruptcy you need to file the taxes before filing for bankruptcy. This does not mean you have to pay on taxes owed but they at least need to be filed.

The Bankruptcy Administrator’s office randomly elects cases to audit. They do this to ensure bankruptcy lawyers are performing their duties but also to ensure clients are providing accurate information. It is similar to being audited by a taxing agency. If your case is randomly selected to be audited then we are required to provide those documents.

Taxing Agencies Want to Ensure Taxes Are Completed

In addition to the bankruptcy Trustee and bankruptcy court needing to see evidence of your tax filings – the taxing agencies, the Internal Revenue Service and the North Carolina Department of Revenue, also will receive notice of your bankruptcy filing and want to make sure information you are reporting is accurate.  Once they have word that you have filed a bankruptcy they will reassess your prior year’s taxes to make sure they are completed.  If they are not, they can object to your discharge until they have been completed.  If a creditor, such as a taxing agency, objects to your discharge it means your case will be held open longer.  The longer your case is open, the longer it takes to get your financial freedom.

Filing Taxes Allows You to Accurately Budget Repayments

Just like any other debt you have in your bankruptcy – the amount owed for taxes has an impact on your bankruptcy filing.  If you have not filed your taxes, and you are filing a Chapter 7 bankruptcy, then you have no way of knowing what you owe, and cannot go ahead and budget a repayment plan going forward.  If you file a Chapter 13 bankruptcy, and you have not filed taxes yet, then the IRS or NCDOR is going to estimate what you will owe them and file a Proof of Claim for un-assessed returns.  Oftentimes, the taxing agencies file the proof of claim as a worst-case scenario on your taxes, which typically, means the amount is overstated which can cause an increase in your Chapter 13 plan payment. If you file your taxes then the IRS can use the amount of taxes owed to file a more accurate proof of claim, which may increase your chances of success in a Chapter 13 bankruptcy.

The bottom line is, yes you have to file your taxes before filing your bankruptcy. We understand that it’s a pain to have to dig through your paperwork, retrieve the documents, make copies and bring them to us, but the government requires it as part of your bankruptcy documentation.

What Is A Summary Judgment?

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Is Emotional Distress From Being Robbed On the Job Covered by Workers’ Compensation?

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Family Walking Holding Hands | PTSD Workers' CompensationEmotional distress caused by being robbed on the job is covered under the Workers Compensation Act in North Carolina. Under North Carolina law, mental as well as physical injuries sustained on the job are a compensable injury.  The “injured worked” must provided evidence, usually medical evidence, he or she is unable to work due to the traumatic psychological injuries they sustained during the robbery. However, the psychological injury sustained may not be permanent disability.

For example, the person may be robbed at a fast food restaurant late one night.  This traumatic event may not preclude her from working in the future in a factory during the daytime. The environment in each of the jobs is completely different.  The job in the factory does not have her working late at night with the chances of being robbed on the job again.  However, having the worker go back to a job late at night in another restaurant could cause the psychological issues to resurface precluding the worker from maintaining a job.

The workers’ compensation insurance company will send the worker suffering from the post-traumatic stress disorder to a medical professional or psychologist to diagnose the worker.  To receive compensation, the worker must have a diagnosis.  The worker cannot just claim they have psychological injuries; a professional must substantiate the injury.

One major focus in post-traumatic stress disorder situations is whether other reasonable employment exists.  If the worker could be trained (vocational rehabilitation) for another job in which they would not be under the psychological stress then workers’ compensation will not continue to pay indemnity benefits going forward.

What Is Abandonment In Bankruptcy?

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Foreclosure Sign in Front of HouseProperty that is surrendered or was not protected under the bankruptcy code exemptions is fair game for the bankruptcy Trustee.  Once a debtor has filed bankruptcy, his estate becomes that of the bankruptcy court and the bankruptcy Trustee.

At that time, the Trustee determines if there is any value or potential value in any of the assets of a bankruptcy case.  If the property proves to be worthless, with no beneficial value, or the value is not worth the hassle of selling the property, the Trustee will submit a motion to abandon the property.  Once an asset is abandoned in bankruptcy, it is released from the protection of the bankruptcy automatic stay.  At this point, the property may be sold, transferred, or used by the debtor or other parties of interest, such as the mortgage company.  Abandonment can be automatic if a Final Decree is issued on a case which officially closes a bankruptcy (this is after the discharge is issued.)  A final decree labels the property for abandonment because the case has been closed and the Trustee has issued a non-distribution of assets.

To better illustrate, lets take a look at a common example. A debtor surrenders a home in bankruptcy and must forfeit a piece of land that he was not able to protect with his exemptions.  The Trustee reviews the estate and decides to hire a real estate agent.  The real estate agent explains that due to the market’s condition, the land would take over a year to sell, but the house may sell in 6 months.  The Trustee decides to put both on the market for 6 months.  Debtor receives a discharge but not a Final Decree.  The time passes and the Trustee has not even received an offer on the land or house.  To cut his losses, he decides to file a Motion to Abandon on the land and notifies the creditors there are no assets to be disbursed.  The debtor receives a Final Decree a month later.  The house is considered abandoned by the receipt of the Final Decree and the land becomes the debtor’s once again.  The mortgage company sets up foreclosing proceedings on the home and months later, the home forecloses and the debtor’s name is removed from the deed.

The bottom line is, when a Trustee abandons property they are notifying the bankruptcy court, creditors and the bankruptcy debtors that they no longer have an interest in the property.

What Does “Bad Faith” Mean in Bankruptcy?

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Bankruptcy QuestionsAs it sounds, this is not a term you care to associate yourself with if you can help it.  Bad faith refers to certain actions and circumstances that cover fraudulent bankruptcy filings.  In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was legislated to define and outline situations associated with bad faith bankruptcy filing.

One of the roles of the bankruptcy court and bankruptcy Trustee is to protect creditors from debtors who are maliciously trying to defraud the system.  Most debtors are really struggling under the weight of their debt without much hope of ever breaking even, but unfortunately, there are people who are just trying to stall or manipulate creditors.  There are 5 situations in which a debtor is considered to act in bad faith.

First, if there is evidence that a debtor is trying to unfairly thwart a creditor’s efforts to collect on a debt, this is considered a bad faith filing.  For example, a client files bankruptcy in order to stall a foreclosure with no intention of ever completing the bankruptcy.  Bad faith is relevant when a client files bankruptcy to save a home, then does not make any of the required plan payments and is dismissed.  This of course can be a very fine line and cannot always be proved; especially if a client has a very tight budget and unforeseen circumstances arise.  Most Chapter 13 bankruptcy clients are in this position and have every intention of completing their bankruptcy.  This is why bankruptcy is a very involved process and should be taken seriously by all potential debtors.

Another bad faith filing revolves around a debtor filing a bankruptcy while already in an active one.  How does this happen?  Most commonly, a debtor is dismissed from a bankruptcy and files before they have received a Final Decree that officially releases them from the first bankruptcy.  Or, a Chapter 13 client cares to convert to a Chapter 7 bankruptcy and files a Chapter 7 while still in the Chapter 13 without permission from the court.  Or a debtor tries to file bankruptcy within the time limitations, such as with 8 years of previously filing a Chapter 7 bankruptcy or 4 years for a Chapter 13 bankruptcy.

The third example would be prevalent among the debtors who care to file pro se or without an attorney.  There are certain documents and motions that must be filed with the court.  Two very important documents are the financial management certification and the motion for discharge.  Don’t know what these are?  That is why an attorney comes in handy!  A bankruptcy case may be dismissed under bad faith if required documents are not filed or presented to the bankruptcy court or bankruptcy Trustee.

Fourth, if a debtor is continually filing and being dismissed from a Chapter 13 due to non-payment, the bankruptcy Trustee may reject the case due to bad faith.  If you are dismissed from a Chapter 13 you may turn around after the final decree and file again as long as the court has not placed some limitation on your ability to file again like dismissing your case with prejudice. The big question to determine bad faith is “why do you keep being dismissed?  And what is different about your situation from your previous filings?”  Usually, this is just a due diligence question, but it is very important.

Lastly, if you fail to make adequate protection payments, your bankruptcy is automatically noted as being filed in bad faith.  Adequate protection is rather loosely defined as the initial payments in a Chapter 13 bankruptcy.  On the other hand, in a Chapter 7 bankruptcy, unprotected equity must be compensated to the Trustee in order for the debtor to keep the non-exempted asset.  If this adequate protection payment is not made to the Trustee in the mandated time frame, your case can be dismissed.

Be sure to avoid a situation in which your case may be dismissed for “bad faith.” Contact an experienced bankruptcy lawyer who can help you navigate the, often times, tricky path through bankruptcy.

What Is Discovery In A Lawsuit?

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A lawsuit is crafted of several different stages.  In the civil proceedings there are certain litigation paths that must be taken depending on the route of the case.  Discovery is in the pre-trail phase of a lawsuit and acts as the parties’ opportunity to gather information.

What is discovery in a lawsuit?

Upon the commencement of a civil action by filing a civil summons, the defendant is allowed to file an answer to the complaint, either admitting or denying allegations.

In response to the answer, the plaintiff’s lawyers then put together written questions known as “interrogatories,” which usually mark the beginning of the discovery phase in litigation.  These are a series of questions compiled by the plaintiff’s for the defendant to answer.  However, the defendant may also serve a set of interrogatories on the plaintiff(s).

In addition to interrogatories, the parties may request depositions. A deposition is an examination of a party or witness in a lawsuit. A deposition allow for each side to gather further information and allows opposing counsel the opportunity to know what a witness or party to a case may say at trial by allowing them to question or depose them.

Another tool in the discovery process are the requests for admissions. These are used to determine which issues or facts in a case are really in contention. If a party is willing to admit to something then it is not something that needs to be argued during a potential trial. Requests for admissions are done in writing.

This is just a brief synopsis of the different parts of discovery in a lawsuit. The important thing to remember is discovery is meant to gather or discover information so there are fewer surprises if a case does find its way to court.

What are Requests for Admissions?

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[youtube]http://www.youtube.com/watch?v=8XWkQTbjLJ4[/youtube]
Requests for admissions occur during the discovery process within a lawsuit.  When you are sued you are given a “complaint” which tells the court what the person(s)/company did legally wrong. Example: Sunny Side Up Nursing Home did not provide proper care to John Doe as required by the NC state guidelines for standard care.  The court requires a legal answer (No, we, Sunny Side Up Nursing Home, provided proper care to John Doe as required by the NC state guidelines for standard care). Answers are always legally binding, and must be filed with the court during the allotted timeframe.

Google Search for Request for Admissions

The complaint starts the discovery process in which the court wants to find “facts” regarding the case.  The plaintiff’s attorney, the plaintiff is the person(s)/company who files the lawsuit, will send out interrogatories (questions) in which the defendant is required to answer (responses on whether or not the allegations are true).  Once you respond with your answers, you must file them with the court for them to be valid.  .

Requests for admissions are statements of facts sent to one of the parties of the lawsuit. It is a part of the legal discovery process.  The responding party must either admit or deny the alleged facts sent in the request for admissions. If the responding party does not deny the alleged facts, they are deemed to be admitted after a certain amount of time and are considered a legal fact in the court proceedings.

Request for admissions are often seen in a wide array of legal cases. Whether it is in bankruptcy litigation, workers’ compensation litigation or any other type of civil litigation, request for admissions are a tool used to obtain more information and determine what facts are truly in dispute in a case. If all of the parties to a case can agree certain facts and contentions are true – then it ensures more efficient litigation.

All law can be confusing at times, especially in lawsuits where you have two entities/person(s) involved in a lawsuit. It is imperative that you seek proper legal advice from your attorney.

Is Post Traumatic Stress Disorder (PTSD) Covered by Workers’ Compensation?

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Yes! Post traumatic stress disorder (PTSD) is considered an occupational disease which is covered under the North Carolina Workers’ Compensation Act.The North Carolina Supreme Court has required three elements in order to prove that a injury is an “occupational disease” including PTSD.  They are as follows:

(1)  The disease must be characteristic of and peculiar to the claimant’s particular trade, occupation or employment;

Father Injured at Work with Daughter

(2)  the disease must not be an ordinary disease of life to which the public is equally exposed outside of the employment; and

(3)  there must be proof of causation (proof of a causal connection between the disease and the employment). However, the worker must prove that the mental illness or injury was due to stresses or conditions different from those borne by the general public.

A good example of a post traumatic stress disorder (PTSD) claim is as follows. A worker at a factory is working beside their co-worker.  An explosion takes place in the factory.  A sheet of metal is torn from the ceiling by the explosion and is hurled through the air striking the co-worker in the neck, decapitating the co-worker. The worker watches the head of the co-worker fall to the floor, killing the co-worker. The worker is now terrified from PTSD any time she is in a factory with other co-workers and hears any loud noise similar to an explosion.  This psychological trauma has been verified and diagnosed by competent physicians. We would all agree this meets the criteria for PTSD.

Another example of PTSD in the work setting is a bank tellar who is held at gunpoint during a bank robbery and now suffers from PTSD due to her fear of being robbed and held at gunpoint again.

To qualify for workers’ compensation benefits for a post traumatic stress disorder (PTSD) claim the “three elements” listed earlier must be met. In this event, a worker should be entitled to workers’ compensation benefits in North Carolina.