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Posted on in Tax Debts

Try to file bankruptcy before a tax lien gets recorded. But if you can’t, here are the effects of a tax lien under Chapter 7 and 13.

This blog post continues a series about the smart timing of your bankruptcy filing. (It was interrupted by two blog posts updating federal unemployment benefits.) The last in this series was about how good bankruptcy timing prevents you paying certain income tax interest and penalties. We ended with this: “The effect of a tax lien depends on whether the tax at issue qualifies for discharge, and whether you file a Chapter 7 or 13 case.” That’s today’s important topic.

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Texas chapter 7 lawyer, Texas chapter 13 attorneyBankruptcy is often seen as a last-ditch effort to overcome the financial burden that you may be experiencing. While this is typically the case, the level of debt that one may be in can vary greatly depending on their circumstances. Some may have no income and are struggling to pay basic bills, while others may have a steady income but have found themselves buried by exponential medical or credit card expenses. There are two common ways that Texans can file for bankruptcy: Chapter 7 and Chapter 13 bankruptcy. By looking at your unique circumstances, you can determine what type of bankruptcy filing is appropriate.

Chapter 7

When imagining what filing for bankruptcy looks like, people often imagine something along the lines of Chapter 7 bankruptcy. Also known as “liquidation bankruptcy”, this form of bankruptcy has the trustee sell the debtor's property and use the money collected to pay off their debts, as close to the total amount as possible - all remaining debts will be forgotten. This form of bankruptcy may seem preferable to some, since the process only takes about six months and some debts may be forgotten, but it is not available to all debtors. If the debtor’s income falls below the state’s median household income, which in Texas is $59,570, he or she is eligible to file for Chapter 7 bankruptcy. The debtor will not lose all of his or her assets during the bankruptcy process, since some personal property can be claimed exempt from the process.

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How are states responding to Trump’s Memorandum providing $400 (or maybe $300?) weekly extended unemployment benefits? It varies widely.

Last week we explained the President’s Memorandum of August 8 which extended reduced federal unemployment benefits. The $600 weekly benefit had expired on July 31. The House of Representatives had previously passed a bill extending the $600 benefits into early next year. The Senate had proposed to extend the benefits but at only $200 weekly. The two Houses of Congress were not resolving their differences. Then the Memorandum directed the Federal Emergency Management Agency (FEMA) to fund supplemental unemployment benefits out of its Disaster Relief Fund. This was to cover $300 of a $400 weekly benefit. The remaining $100 weekly was to come from the states.

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Trump’s Memorandum Providing $400 Weekly Unemployment Benefits from August to December Is Complicated.

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TX bankruptcy attorney, Texas chapter 7 lawyerYou have likely seen TV commercials about the numerous credit cards available or regarding where you can go to calculate your credit score. These shiny advertisements can leave many young adults applying for credit cards without knowing the impact that this can have on their spending habits. Receiving your first colorful card in the mail can quickly lead to two or three more, each with their own amount of debt steadily piling up. While these bills may seem harmless as a young, single college graduate, the debt enclosed with these credit cards can burden you for years to come. As the debt continues to increase, you may be wondering where you can turn for help. Bankruptcy is a valid option; however, its negative impact on credit scores can have most people seeking out financial alternatives first.

Sell Some Assets

The best way to get rid of debt? Pay it off. If you have any assets that you can spare, the money that you can gain from selling these valuables can help alleviate you from the lump sum sitting on your credit cards. Take to digital marketplaces, such as eBay or Craigslist, if you have any jewelry, furniture, or electronics that you are willing to part with. If you have multiple TVs, laptops, antique furniture that you have tucked away in storage, or an old necklace that you never wear, it may be best to see how much money you can earn by selling them to a new owner.

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