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What tax breaks does a creditor get when a debtor files for Chapter 13 Bankruptcy?
Wiki User
∙ 16y ago
Let me start with addressing, and dismissing as foolishness, a weird concept that many people seem to try to suggest in charge offs, bankruptcies and anytime they don't pay the bill: NO, SOMEONE NEVER IS BETTERED BY YOUR TAKING THEIR PRODUCT AND NOT PAYING FOR IT! Certainly, if you just walked in and stole a product off the shelf, the company doesn't make any money and doesn't have to pay any taxes on the money it didn't make. Not what I would call a benefit. And yes, to the degree they had to paid for that product and had other costs that they don't get to recover, they have a loss on that. The way that is done is they get to deduct those expenses/losses against their other income (if they have any) like any other expenses they incurred trying to make an income. Taxes are paid on net income - that is the amount they received above what it cost to get it.
So if they bring in $300, but it cost them $400 to do so, and lose $100 net, they don't pay tax on the net amount they lost. They simply lose $100.
If they bring in $300 and they had no expenses, they would pay $105. (Corp tax Rate is 35%). After tax they earned $195.
But say it cost them $200 (say because someone didn't pay a $200 bill), they make $100 and pay $35 tax. After tax earnings $65. Again, certainly no benefit, in fact a worse result to them by someone not paying what was owed.
I guess some people want to think they did the biz a favor because it got to pay only $35 in tax instead of $105. But really, even then they made $65, not $195! OK, the $200 lost really cost them $130...but it still costs them...a lot...don't expect any thankyous!
More directly: There is no tax break given to someone who looses money by a bankruptcy action. About the most that can happen is, as businesses frequently have to accrue income (that is report and pay tax on it before the cash is received), they very likely paid income tax on that accrued income they reported when the "sale" (or loan, etc.), was made. When that income for that sale isn't actually received, they may be able to get the income tax they paid on the previously accrued but now unrealized income back.
Wiki User
∙ 16y ago
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What is a stipulation in bankruptcy?
It's basically an agreement between the debtor and creditor on how the debtor is to pay the creditor that arises when debtor has filed bankruptcy.
Can the debtor file for bankruptcy after a creditor is awarded a default judgment because the debtor did not make a court appearance?
Yes, most judgments can be discharged in a chapter 7 bankruptcy.
What has the author Arnold B Cohen written?
Arnold B. Cohen has written: 'Guide to secured lending transactions' -- subject(s): Forms, Law and legislation, Loans, Security (Law) 'Bankruptcy, secured transactions, and other debtor-creditor matters' -- subject(s): Bankruptcy, Debtor and creditor, Security (Law) 'Debtor-creditor relations under the Bankruptcy Act of 1978' 'Teaching notes to accompany book 2 of Debtor-creditor relations under the Bankruptcy Act of 1978' -- subject(s): Cases, Debtor and creditor 'Bankruptcy, article 9, and creditors' remedies' -- subject(s): Bankruptcy, Cases, Debtor and creditor
What is the consequence to the debtor if you are an unnamed creditor in a Chapter 7 and should be?
Any creditor not included in a bankruptcy discharge retains the right to continue attempting to collect a debt. That would include using legal remedy in the form of a lawsuit against the debtor.
If my wife filed for personal bankruptcy are you responsible for her debt?
No you are not. When one spouse and not the other files for bankruptcy they are only doing so with regard to their personal debt. A debt is created by contract between a debtor and a creditor - each debtor must sign the contract to be liable for payment. Therefore, the bankruptcy of one spouse does not cause the other to become bankrupt. Debts where spouses are joint and severally liable for payment will remain with the spouse who has not filed for bankruptcy. Under Chapter 7 bankruptcy, where one spouse's debts are wiped clean, the creditor can go after the other spouse. However, a major advantage of Chapter 13 bankruptcy, where the debtor plans to re-pay her debts, is that the creditor will leave the co-debtor alone, as long as bankruptcy plan payments are timely deposited.
How do I convert chapter 13 bankruptcy to chapter 7 myself What should be included in the motion to convert letter?
The debtor (or the debtor's attorney) can do this with a simple filing - usually an "Ex Parte Motion to Convert Chapter 13 to a Chapter 7." Providing the debtor's bankruptcy has not previously been converted already, the debtor/debtor attorney can do this without the permission or advance permission of either the bankruptcy judge or the Chapter 13 trustee that is managing the bankruptcy up until that point (hence, the "Ex Parte" part of the document). There are notice requirements - check with your local bankruptcy district to see who this needs to be mailed out to. Also, there is usually a small fee involved (it usually involves the debtor paying the difference in cost between a Chapter 13 and a Chapter 7 filing, but may be different - again, check with your local bankruptcy court). The debtor will be required to go through another 341 creditor's meeting with the new Chapter 7 trustee.
How do you get an old creditor who was not listed on a chapter 13 bankruptcy to stop bothering you?
Send a letter of "cease and desist". This will not keep a creditor from filing lawsuit to recover the debt. It will only prevent them from contacting the debtor except to inform the debtor that a suit is being filed.
Can only one spouse file bankruptcy when the other one owns the cars and house?
In general, the filing of bankruptcy by one spouse will not affect the other spouse's financial situation. A debt is created by contract between a debtor and a creditor - each debtor must sign the contract to be liable for payment. Therefore, the bankruptcy of one spouse does not cause the other to become bankrupt. Debts where spouses are joint and severally liable for payment will remain with the spouse who has not filed for bankruptcy. Under Chapter 7 bankruptcy, where one spouse's debts are wiped clean, the creditor can go after the other spouse. However, a major advantage of Chapter 13 bankruptcy, where the debtor plans to re-pay her debts, is that the creditor will leave the co-debtor alone, as long as bankruptcy plan payments are timely deposited.
Are there fees involved when you dismiss your bankruptcy?
A debtor can dismiss a Chapter 13 bankruptcy at any time without a fee, except perhaps for any remaining attorney's fees that have not been paid under the Chapter 13 plan. A debtor cannot voluntarily dismiss a Chapter 7 without filing a motion wiht the court. Even then, the debtor must be able to demonstrate that no prejudice to creditor if the Chapter 7 is dismissed. The debtor can convert the 7 to 13 (which does involve a fee) and then dismiss the Chapter 13.
What has the author Luther David Swanstrom written?
Luther David Swanstrom has written: 'Chapter ten' -- subject(s): Bankruptcy, Consolidation and merger of corporations, Debtor and creditor
What has the author Nancy Trejos written?
Nancy Trejos has written: 'Hot (broke) messes' -- subject(s): Compulsive shopping, Debtor and creditor, Personal Finance, Bankruptcy 'Hot (broke) messes' -- subject(s): Compulsive shopping, Debtor and creditor, Personal Finance, Bankruptcy 'Hot (broke) messes' -- subject(s): Compulsive shopping, Debtor and creditor, Personal Finance, Bankruptcy
Can a creditor be excluded from a debtor who filed chapter 11 and wishes to continue to purchase goods and can the goods sold prior to the chapter 11 filing be excluded?
Such decisions as a rule are left to the bankruptcy court. Generally such action is not allowed as it would be viewed as favoritism to one creditor.
