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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1905
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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I need to file bankruptcy.I am currently paying child support

Customer Question

I need to file bankruptcy.

I am currently paying child support to my ex-spouse and have been doing so for 5 years.

I am currently in child support arrears (due to a court order).

My ex-spouse gets child support, the child support arrears through a garnishment, and should be getting my tax returns. Is it legal for me to have less taxes withheld from my paycheck, thus diminishing the amount of a return I get. For instance, if I reduce the taxes by $20 per week, then I will likely get around $1000 less back (52 weeks at $20) at the end of the year. I would like to do this so I have a little more in my pocket as I am being killed by the courts.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Brent Blanchard replied 1 year ago.
Thank you for your question.

Bankruptcy is mostly federal law, but those laws let each state set some of the dollar values we work with.

No one is legally obligated to give the Treasury Department interest-free loan of income tax withholding funds (unless they've shorted the government in the past and are therefore risky). The W-4 form is supposed to allow an accurate estimate of the tax loan, resulting in neither a shortfall nor a really excessive surplus at the end of the year.

Support arrears still need to be paid, so unless there is something very specific in a court order saying "you MUST have excess funds withheld by the feds", reducing the refund amount is not a legal problem.

The arrears will not be discharged under bankruptcy law.

The monthly budget (including withholding) is more important in a Chapter 13 than a 7. Housing expenses in one of the Trump Towers, for example, it not likely to be considered reasonable. People with extravagant living expenses often need to scale a few things back if they file a 13...or an 11 if their debts are too large for a 13.

Thank you.

BAB.
Customer: replied 1 year ago.

Your reply is appreciated.


 


I don't own anything, and make $66,000 per year. I am being financially murdered by an ex-spouse. I am left unable to pay my bills and am stuck borrowing money.


 


I have substantial student loan debt.


 


Should I do a 7 or 13? I know the student loan debt can't be discharged. But really, if I do a 13, I am not paying anyone anything anyway, because outside of my normal expenses, everything else goes to my ex-wife.

Expert:  Brent Blanchard replied 1 year ago.
Thank you.

I'm going off-line in a minute, so please don't panic if I'm not back for a while.

A single person earning that much would be "presumed" to be "abusing" the BK system if filing a Chapter 7. A good BK attorney can walk you through your specifics and tell whether that presumption can be overcome (that must be done within 30 days of filing).

Otherwise, a Chapter 13 puts you on a budget for up to five years. What remains unpaid at the end generally gets discharged--a larger list than is available in a 7. Student loans and support debts, though, still stick.

Thank you.

BAB.
Customer: replied 1 year ago.

Thank you. But my biggest fear in doing a 13 is that there is no money to pay anything. For instance, what money is there in the plan to pay? After my expenses, and I pay my ex-wife child support and the arrears garnishment, there is nothing left. So why then do I want to run this through a 13, which I would pay everything outside the 13 anyway? Does this make sense or am I thinking illogically? Shouldn't I then just try to do a 7?


 


I live in downstate NY. My commute to work is 2 hours each way. $66,000 is PEANUTS here.

Expert:  Brent Blanchard replied 1 year ago.
We can't give legal advice of that sort here, and trying to do so without reviewing full financials would be irresponsible anyway.

This much I can tell you about the law:

1. A Chapter 13 requires regular monthly income. A Plan is an essential part, and a Plan is a payoff plan. Funds make that happen.

2. For a Chapter 13 Plan to be "Approved" by the Court, it must be "feasible" and it must give the creditors more money than they would have gotten from a "hypothetical Chapter 7 case" filed by the Debtor as of the original date of filing.

3. Some situations call for what is called a "Chapter 20" (no such section of the law exists), that being a Chapter 7 filed first to get a quick discharge of the most troublesome debts, then almost immediately after that case is closed, a Chapter 13 is filed to get what it can give, like forcing modifications of leases or stripping second-mortgage liens on properties or other things...or even getting a discharge of things like a punitive damages award debt which cannot be discharged in a Chapter 7.

Chapter 13 Plans are based on a budget that must fall within allowable limits. The left-over money is what gets paid to the Trustee and then to the creditors.

We really cannot tell what type of filing works best before looking at the financial details, AND considering the debtor's goals and priorities.

Thank you.

BAB.
Customer: replied 1 year ago.

the answer is appreciated. my query at this point is more hypothetical in nature.


 


i don't have any property. i rent. i have nothing that can be taken.


 


i can do a 13, but when all is said and done, there is no money left to pay anyone back - the unsecured creditors. so they wouldn't get anything in a 7 or 13 (all my assets are exempt - don't have anything, really).


 


so logically, a 13 can't be done, since no money can be paid thru the plan, because all the money goes to normal expenses, the garnishment, etc. so then if i qualify, a 7 would make sense, and then i'd continue to pay on the garnishment.


 


im more asking if the line of thinking there is logical, not for advice


 


i appreciated your responses to this point as theyve helped me understand quite a bit

Expert:  Brent Blanchard replied 1 year ago.
A debtor who is essentially "judgment-proof" can save the rest of the world a lot of trouble and wasted attorney's fees by filing bankruptcy and letting the dischargeable creditors know there is nothing there to collect from.

And if non-dischargeable debt obligations leave not enough budget "surplus" for creditors to get more than they would have in the "hypothetical chapter 7 case" which is analyzed as part of determining chapter 13 Plan feasibility, then that same analysis should overcome the "presumption of abuse" that Congress put into the 2005 amendments to the bankruptcy code.

But to be sure, you need to run the numbers. There might be some do-it-yourself online service/software options that could run the numbers for something like $69-$199 or so. It has been a few years since I looked them up for anyone.

Thank you.

Please do not forget to leave a positive rating, so I can receive credit for my work.

BAB.

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