Hackettstown New Jersey Legal Blog

Many individuals in New Jersey and around the country who had some of their mortgage debt cancelled or forgiven after losing their homes due to a foreclosure or short sale now find themselves owing tens of thousands of dollars in taxes. For the last 10 years, up to $2 million in forgiven or cancelled mortgage debt was deductible thanks to provisions introduced in the wake of the 2008 financial crisis, but those tax breaks expired at the end of 2017.

Hopes that Congress would act to extend the tax breaks are dwindling as lawmakers turn their attention to impeachment proceedings and other matters, but relief is available under other parts of the U.S. tax code for individuals who are insolvent or going through a bankruptcy. However, individuals who hope to avoid tens of thousands of dollars in taxes by filing for bankruptcy may be wise to act quickly as the rules for discharging these obligations become far more complex once taxes have been assessed.

One of the more common questions that those seeking Chapter 7 bankruptcy protection in Hackettstown have is whether o not filing for bankruptcy will force them to forfeit their personal assets. For those facing seemingly insurmountable debts, the appeal of bankruptcy comes from not having to worry about creditors continuing to seek action against them (thus driving them further and further into debt). Yet when faced with the prospect of potentially losing their homes and/or other valuable assets, many might choose to abandon the idea of bankruptcy altogether. 

Whether one will be forced to part with any of their personal property in a bankruptcy case depends on the bankruptcy exemptions available to them. The law allows debtors to exempt a certain portion of the equity they have in their property from being seized by creditors. For example, if a person has $12,000 of equity in their home, and the law allows them to exempt up to $15,000, then that means that their home cannot be sold to repay creditors as part of a bankruptcy case. However, if the law only allows them to exempt $10,000, then they will be given that $10,000 by their bankruptcy trustee, and then the house will be sold. 

For some people, the decision to file for bankruptcy (as well as the entire process) may be somewhat straightforward and free of concern. Others may have a very hard time due to bankruptcy, whether they are facing uncertainty over their decision to file a bankruptcy petition or they face various difficulties in the midst of a bankruptcy case. Moreover, some of these challenges can be especially difficult for those who are going through different hardships in life, such as a divorce, the loss of a loved one or serious issues involving children and other family members.

If you are facing major hardships in your life that are interfering with your daily schedule and ability to concentrate, it may be smart to postpone bankruptcy for a short period of time. However, you should not procrastinate or become complacent, especially since debt and other financial issues can spiral out of control when left unaddressed. We know that bankruptcy can be a very complex and challenging process for people who are going through certain challenges in life, but you may be able to make your circumstances easier by carefully concentrating on your options and approaching your bankruptcy.

Chapter 13 bankruptcy allows you to get control of your finances once again. Budgeting is crucial in this case, as you must adhere to the repayment plan provided by the court or your bankruptcy may be revoked. Because sticking with a budget can be difficult for even the most well-intentioned people, The Balance offers the following helpful tips to ensure a bright financial future ahead of you. 

If your budget is too strict you may be setting yourself up for failure. It's unrealistic to say that you're going to stop all non-essential spending, as very few people can actually live a life of such austere means. Instead, occasionally treat yourself to things like dining out or going to the movies as a reward for keeping to your budget. Just make sure that you're not constantly spending money on non-essential purchases, such as a daily cup of coffee.