A Case Note: Potential Tax Strategies for a Debtor Trying to Avoid Bankruptcy

Date01 September 2017
Published date01 September 2017
AuthorSia Nassiripour,Valeriya Avdeev
DOIhttp://doi.org/10.1002/jcaf.22292
41
© 2017 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI 10.1002/jcaf.22292
f
e
a
t
u
r
e
a
r
t
i
c
l
e
A Case Note: Potential Tax
Strategies for a Debtor Trying to
Avoid Bankruptcy
Valeriya Avdeev and Sia Nassiripour
INTRODUCTION
Although bank-
ruptcy petitions have
been decreasing in
recent years, they are
still a going concern
if our economy is to
recover at a steady
pace. Most of the
bankruptcy peti-
tions are filed by
individual debtors,
not by businesses.
For example, in 2014,
there were a total of
963,739 bankruptcy
cases filed in the
bankruptcy court.
Out of that total,
935,420 or 97% were
nonbusiness or indi-
vidual filings.1 Also,
in 2014, 642,366 or
66.7% were Chapter
7 filings, 313,262 or
32.5% were Chapter
13 filings, and 7,658 or 0.8%
were Chapter 11 and Chap-
ter 12 filings.2 However, even
though most of the cases are
filed by individual nonbusiness
debtors, a typical Chapter 7
debtor will not appear in court
and will have a very limited
interaction with the
bankruptcy judge.3
Chapter 7
debtors will not see
a judge unless an
objection is raised
in a case.4 Chapter
13 debtors might
appear before the
judge only at the end
of the proceeding at
the time of a plan
confirmation hear-
ing.5 However, the
debtor is required to
meet with creditors
during a section 341
meeting.6
In the state of
New Jersey alone,
there were 31,534
bankruptcy petitions
filed in the 2012 cal-
endar year. Similarly,
as of September
30, 2013, there were
28,882 bankruptcy
petitions filed in the state of
New Jersey.7 A typical debtor
who is forced into bankruptcy
has substantial credit card debt
In the State of New Jersey alone, there were
31,534 bankruptcy petitions filed in 2012 cal-
endar year. Similarly, as of September 30, 2013,
there were 28,882 bankruptcy petitions filed in the
state of New Jersey. A typical debtor who is forced
into bankruptcy has substantial credit card debt
and one or several mortgage liabilities. Unable to
pay on the obligations as they become due, the
debtor defaults. Once in default and the liability
on the debts are over $14,425, creditors can file
an involuntary bankruptcy petition and foreclose
on the existing properties. New Jersey remains
the state with the second-highest foreclosure
rate behind Florida, according to CoreLogic’s
monthly National Foreclosure Review. Nationwide,
5.55 percent of homes are late on their mortgage
payments. Moreover, if any portion of the mort-
gage debt is forgiven as part of the foreclosure
process, it could trigger tax consequences. This
paper examines what choices does a debtor
have when faced with multiple delinquencies.
© 2017 Wiley Periodicals, Inc.
Editorial Review

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT