The contributor who previously answered your question re bankruptcy is not permitted, under current website policies, to answer bankruptcy law questions at justanswer.com. I'm happy that you are satisfied with the contributor's previous answer (which I have not reviewed, so I take no position on its legal accuracy -- as long as your satisfied, that's all that matters). I shall try to provide a similarly satisfying answer for you in this Q&A session. That said, you asked:
We are currently behind on our mortgage about 20 months. Can we roll that amount into a newly filed personal Chapter 13 and pick up paying the payments ourselves from that point forward?
A: The bankruptcy code
permits a debtor to "catch up" on mortgage payments, in addition to making current payments. However, in Chapter 13, the debtor must have sufficient income to satisfy the plan, which would mean paying those 20 months in full over the 5 years of the Chapter 13 plan duration.
Many debtors find this to be an impossible task, because in effect, the debtor is paying double: the past due payment and the new payment as it comes due. Nevertheless, you are legally entitled to try to create a bankruptcy plan that you can pay.
Some debtors create a "balloon payment" that comes due at the end of the bankruptcy plan. Their hope is usually that the real estate market will have rebounded and they can sell their property for enough money to pay off the mortgage and the balloon, while making smaller payments over the 5 year plan. If your property happens to be in a very hot real estate market, then you may succeed with this type of plan. However, if you cannot pay the balloon at the close of the bankruptcy, then your case will be dismissed and you will be left at the mercy of all of your creditor's -- no different than had you never filed bankruptcy at all. So, there is a risk associated with this strategy. Is there a limit to how many past due payments you can roll into a monthly payment to the Chapter 13 trustees?
A: No. The only limit is the debtor's ability to make plan payments -- the greater your plan payments, the more income is required. What about a 2006 Income Tax payment? Should we try to work out a settlement on that one?
A: Federal Income Tax due more than three years before the date of bankruptcy petition
filing is dischargeable as part of the Chapter 13 plan. So, you don't need to settle, because you can discharge the liability in Chapter 13.And you suggested filing Chapter 7 for our business, which I like. Question to be sure I understand it correctly - a person can file Chapter 13 for their personal debts and Chapter 7 for their business to get rid of that incorporated company and start another company?
A: If your business is incorporated, you may not need to file bankruptcy -- you may be able to simply close the doors and pay your unsecured creditors whatever is left in the business. The reason is that you are not personally liable for debts incurred by a corporation in which you are a shareholder. The exception is where you personally guarantee a corporate debt, or where, for example you have violated a public policy which creates personal liability. Example: If your business becomes insolvent and you cannot pay your employees' last paycheck, you are not personally liable. However, if you do not remit to the IRS
the employees' payroll withholding (FICA, FUTA, Medicare, etc.) on employee wages
already earned, then you are not only personally liable for that failure -- you are also liable for a 100% penalty for the failure. This is called the federal Trust Fund Recovery Penalty (TFRP), and you do not want to get caught in this federal tax law trap.
Filing a Chapter 7 on your business does wrap up the business so that you can dissolve and unregister the corporation with the state. So, if you can afford the extra filing and legal fees, it's a good idea. But, it's not always absolutely required. I appreciate your help so much. Depending on your answer this offers a solution to our problems.
A: I hope I have been able to provide you with an answer which is at least as helpful, if not more so than the answer you previously received. Please let me know if I can clarify anything or further assist.
Hope this helps.