Bankruptcy Lawyer Indiana

Income from the cancellation of debt is a problem for many taxpayers because the volume of defaulted debt continues to increase. The current economic downturn was triggered by an unprecedented number of defaulted subprime home mortgages. Home prices have fallen nationwide for the first time since the 1930’s.

The applicable Internal Revenue Code section provides that gross income includes income from whatever source it is derived, including income from forgiveness of debt. Certain cancellation of debt income, however , is excluded from taxation such as, among other things,:
1. discharge of debt under the federal bankruptcy laws;
2. discharge of debt when the taxpayer is insolvent;
3. discharge of debt that is qualified farm indebtedness.

Who benefits from a so-called short sale on real estate? The lender whose debt is being partially satisfied, the municipality whose property taxes are being paid, and the realtor whose commission is being paid.

What’s the benefit for the homeowner/debtor who receives nothing from the sale?

That’s a rhetorical question. In fact, often, the homeowner/debtor who is talked into this short sale believes he is “doing the right thing.” In reality, the homeowner may be creating nondischargeable tax liability due to the “phantom” income he is receiving by virtue of the sale; income on which he is taxed on.The difference between what he owes on the real estate mortgage loan(s) and the amount the lender(s) are actually being paid from the short sale is taxable income under applicable tax law.

We as lawyers, who concentrate our practice in debtor/creditor law, bankruptcy, insolvency and business reorganization rarely advise a client to enter into a short sale arrangement. Why should a debtor, who already can not pay his bills, assist in such a transaction only to receive a mandated 1099 statement evidencing income on which he will be taxed? There are better solutions including allowing the lender to foreclose its mortgage and the debtor exercising his rights under the federal bankruptcy laws.

Feel free to call our office to obtain more information on cancellation of debt and how, in the long run, it may hurt you, not help you.

What is worst than declaring bankruptcy? Hiring the wrong lawyer for the job. Nobody wants an incompetent attorney, especially when it’s your financial future that hangs in the balance.

Here are some tips to help you find the best attorney to handle your bankruptcy case.

1. Do not dawdle. Contemplating hiring a bankruptcy attorney has all the allure of selecting a mortician. Waiting until the last minute will not give you the time you need to find a good lawyer. And, it will not give a good lawyer enough time to adequately prepare your case.

2. Don’t ask friends for referrals unless they too have filed for bankruptcy relief. Unless your fellow churchgoer or golf buddy has gone through a bankruptcy, he or she will not have any meaningful leads for you.

3. Rather, ask for suggestions from non-biased legal professionals. Consider who among your circle of acquaintances might know a bankruptcy lawyer. If you have a personal attorney, start there but keep in mind that bankruptcy law is a specialty. If your personal lawyer also handles divorces, criminal defense, personal injury cases, etc., and he/she offers to handle your bankruptcy case, he/she probably is not the right one.

4. Investigate experience. Attorneys who are experienced have been bankruptcy trustees themselves. See if your prospective attorney has been a bankruptcy trustee.

5. Spend a day at creditors meetings. Observing attorneys in action can give you an idea of the lawyer you want representing you. At a creditors meeting, the only statutory required appearance by all debtors, you can get a chance to talk to the debtors and ask them whether they felt their lawyer did a good job. These meetings often are held at the bankruptcy court.

6. Check out the law firm’s offices. You are not looking for how tastefully a lawyer’s office is decorated. Rather, you need to assess how well organized an office is, as well as its general environment. Are the staff friendly, courteous, and professional? Does the lawyer make a good appearance? Does he answer your questions in layman’s terms or is he confusing because he’s speaking in “Legalese?” This office appraisal can give you vital clues as to how a lawyer will handle your case. If you don’t understand what he’s saying, chances are that a trustee or judge won’t understand him either.

We have other suggestions on how to choose the right Indiana bankruptcy attorney as well which will be the subject of future blogs.

In the meantime, we invite you to navigate our website, www.schreiblaw.com, to learn about our law firm, our lawyers, their backgrounds, and the professional services offered by the firm.

This blog is authored by Jeffrey A. Schreiber, the founding lawyer of the firm. For over 26 years, Mr. Schreiber has concentrated his law practice in bankruptcy and business reorganization. He was appointed by the U.S. Department of Justice as a private panel Chapter 7 bankruptcy trustee and served in that capacity from 1987-2004.

Unfortunately, it looks like the foreclosure crisis will get worse before it gets better.

Six million loans are either past due or in foreclosure in the second quarter of 2009, the highest level ever recorded. Worse, loan defaults are not the only cause of foreclosures. In some areas, unpaid property taxes are triggering foreclosures, even for homeowners who are otherwise current on their payments.

In recent years, some cities and counties that are strapped for cash have sold their delinquent tax bills to private firms. The firms, which typically charge double-digit interest rates and steep fees, get to keep what they collect. They also succeed to the right to foreclose liens encumbering property, taking priority over mortgage holderss.

Local government cannot undo their previous tax lien sales. But changes in federal policy can reduce the foreclosure risk from unpaid property taxes. This is an issue with which Congress will have to grapple.