If you have past-due tax debt that you owe to the Internal Revenue Service (IRS), New York State Department of Taxation & Finance (NYS Tax), and/or New York City Department of Taxation (NYC Tax) you know that the government authorities can be very aggressive in enforcing back due taxes.

1. Problems & Risk of Owing Past-Due Tax Debts.

If you have past-due taxes the balances continue to grow over time because of interest and penalties. The government can intercept any tax refunds that you are entitled to receive from them and apply the money against your past-due taxes. They can garnish your wages. They can put a lien on your assets. They can seize your bank accounts, car, house and other properties.

2. Bankruptcy Solutions to Tax Problems.

For many people with past-due taxes bankruptcy may be a way to either (a) get their finances affairs in order so they have money to deal with the taxes, or (b) a way to wipe out the taxes.

a) Chapter 7 Bankruptcy Solutions.

In the Frequently Asked Questions (FAQs) on our website Will all my debts get discharged (wiped out) in bankruptcy?) we have provided a general overview of the rules regarding discharging debt in a personal bankruptcy filing. For some people filing a chapter 7 bankruptcy will be a way that they can permanently eliminate their past-due taxes without having to pay them. To figure our whether or not your taxes can be wiped out in bankruptcy you will need to know exactly what taxes you owe and for what years. You can contact the IRS, NYS Tax and NYC Tax and follow their procedures to order copies of your “tax transcript” for each tax year you have an unpaid balance. We have successfully used chapter 7 bankruptcy to help many of our clients permanently eliminate their taxes.
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As a result of the current economic conditions many business owners in New York City have decided that they will need to shut down their businesses. They are faced with the decision of how to best do this. Essentially, the options are to liquidate the business in chapter 7 bankruptcy, to liquidate the business by an assignment for the benefit of creditors in state court, or to liquidate the business outside of bankruptcy. For businesses with greater resources another option is liquidating the business in chapter 11 bankruptcy.

1. Chapter 7 Business Liquidation
This involves filing a chapter 7 bankruptcy petition, with supporting schedules of assets, debts and other information with the Bankruptcy Court. A chapter 7 trustee is then appointed to administer the assets of the business and liquidate them to raise cash to pay creditors’ claims.

One major benefit of a chapter 7 bankruptcy is that, immediately upon filing of the bankruptcy case, the automatic stay goes into effect. This stops all further collection activity against the debtor, as well as any pending litigation, foreclosures or judgment enforcement.

Another positive of a chapter 7 bankruptcy for a business is it is a fairly straightforward process to prepare the bankruptcy papers. Our law firm handles these types of cases on a flat fee basis so the business owners know in advance what their legal fees will be.

One of the negatives is that a trustee is appointed to liquidate the assets of the company, and he or she has the ability to investigate financial transactions involving the company and bring lawsuits against insiders to seek to avoid or recover certain transactions. This topic is discussed further in the Frequently
Asked Questions (FAQs) on our website.
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The purpose of this blog post is to provide information about bankruptcy to the gay and lesbian community in New York City that uniquely affects them.

As a result of the 2005 changes to the Bankruptcy Code, for gays and lesbians considering filing for personal bankruptcy there are certain things they will need to consider. In addition, there are certain provisions of the Bankruptcy Code that may affect the rights of gays and lesbians differently than heterosexuals.

First of all, for consumer debtors (i.e., debtors whose debts are primarily for personal, family or household debts and not for a business), the 2005 amendments to the Bankruptcy Code established means testing (see the Frequently Asked Questions (FAQs) of the Starr & Starr, PLLC website: What is the “means test” for chapter 7 and why is it important? ).
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Student Loans Problems in New York City

Many people in New York, and particularly in Manhattan, have large student loans for undergraduate and graduate college education. A student loan debtor (person who owes money for a student loan) can often obtain deferment or consolidation of his or her student loans to delay making payment or lower the payments. However, for people with very large student loans and income that is lower than they had anticipated, student loans can be an enormous problem. This is especially the case for someone who never finished his or her course of study or obtained a degree, or obtained a degree for which there is not much demand in the marketplace. In addition, if someone obtained an expensive graduate degree, such as medicine or law, but but is working in a lower paying field than his or her field of study this is particularly a problem. Finally, the cost of living in New York is one of the highest in the country and people living here have a significantly higher cost of living than in many other states.

Due to changes in the law regarding student loans, there is no statute of limitation for student loans — meaning the loans do not become unenforceable by the passage of time. This means that long after someone is out of school he or she can still be saddled with high student loans.
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People are often scared about what will happen to their car if they file bankruptcy and whether they will lose their car. This is question we get asked very often by clients in the Staten Island, Brooklyn, Queens, Westchester and Long Island.

In a prior post ( What Happens to My Car in Bankruptcy ) we covered what happens if the car is paid for. In another post ( What Happens If I Am Financing a Car and I File Bankruptcy? ) we covered what happens if a car is being financed,
In this post we cover what happens if the car is being leased.

The discussion regarding the debtor’s equity in the car in our earlier post ( What Happens to My Car in Bankruptcy ) still applies to the equity in a car being leased (if any, such as if there is a $1 buyout option).
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People are concerned about what will happen to their car if they file bankruptcy. Clients in the Bronx, Queens, Brooklyn, Long Island and Westchester ask us this all the time.

In a prior post ( What Happens to My Car in Bankruptcy ) we covered what happens if the car is paid for. In this post we cover what happens if the car is being financed. In a later post we will cover what happens if the car is being leased.

What Happens If My Car Is Being Financed?

The discussion regarding the debtor’s equity in the car in our earlier post ( What Happens to My Car in Bankruptcy ) still applies to the equity in a car being financed.

With that in mind there are basically three options available to a debtor under the Bankruptcy Code, and fourth option not mentioned in the Bankruptcy Code that may also be possible. The options are:

1. Surrender Option (Give the Car Back). One option is to “surrender” or give the car back to the finance company. The debtor has the option to give back the car and discharge the debt (i.e., wipe out the debt in bankruptcy). Now days, however, many car finance companies are willing to try to restructure the loan with the debtor (see Reaffirmation Option below) because they don’t want the car back.
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This is a very common question we get from clients and prospective clients in Brooklyn, Queens, Staten Island and Westchester (car ownership seems to be lower among our Manhattan clients). The answer, like many things, involving the law, is that “that depends”. Is the car paid for, being financed, or is it being leased?

This is part of a three part series. In the first part we will address what happens if the car is paid for, in the second part what happens if the car is being financed, and in the third part what happens if the car is leased.

What Happens If My Car Is Paid For?

If someone files bankruptcy in New York and he or she owns a car outright the answer is pretty simple. They get to claim an “exemption” in the equity in the car (which currently is limited to $2,400). If the value of the car is Continue reading

A recent article on MSNBC (NYC restaurants slammed by financial crisis) details the problems currently faced by NYC restaurants. NYC restaurant owners are reporting a significant drop in business in wake of the recent financial crisis. They also have some of the highest rent in the country for space, and face high food, employee, and insurance costs. Faced with a significant drop in revenue, restaurant owners may not survive if they continue to do “business as usual” and will need to adapt to changing market conditions. In exploring their options, restaurant owners and investors should consider all available options, including the bankruptcy restructuring options that are the focus of this blog post. Bankruptcy is not a panacea and is something to consider when other options (such as obtaining additional investment, consolidation of space, altering menus and pricing, etc.) have been fully explored. However, bankruptcy presents some useful tools to NYC restaurant owners and investors that need to be understood.

1. Ability to Sell Below Market Lease Without Landlord Consent.

Often a below market lease in New York City may be one of a restaurant’s most valuable tangible assets. Most commercial leases in NY contain extensive restrictions on a tenant’s ability to sell or sublet space. In bankruptcy, however, a debtor in possession (in a chapter 11 reorganization or liquidation case) or trustee in a (chapter 7 liquidation case) has the ability to “assume and assign” a lease even though the landlord does not agree. The right to do this is not absolute and the replacement tenant must be able to establish an adequate ability to perform under the lease. In addition, defaults under the lease must be cured (or adequate assurance of prompt cure provided) in connection with any sale of the lease. The key point is that in a bankruptcy it may be possible for the value in the lease to be realized even if the tenant is in default under the lease and has been sued for nonpayment of rent (as long as the lease has not yet been terminated). Utilizing this option may allow an unprofitable restaurant to move to another location with cheaper rent where is could be profitable.
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We often receive inquiries from people living in New York, Queens, Bronx, and Brooklyn that a collector or collection agency has frozen their bank account, and wondering what they should do.

Collectors and collection agencies can’t freeze bank accounts. They have only two tools in their tool belts: letters and calls. However, in New York lawyers can and do freeze bank accounts. The way they do that is to get a judgment on behalf of their creditor client and then issue a restraining notice. Large collection law firms routinely issue restraining notices electronically to all the major banks.
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A common question I get asked by people from the Bronx, Queens, Staten Island, Brooklyn and Manhattan considering filing for personal bankruptcy is whether they should file chapter 7 or chapter 13.

Chapter 13 bankruptcy is typically used to preserve a valuable asset, such as a house, car, or rental apartment when the debtor is past due on payment and facing a foreclosure, repo, or eviction lawsuit. In chapter 13 bankruptcy the debtor keeps making current payments as they become due and cures the past due portion over time through the chapter 13 plan.

For a debtor with no valuable asset to protect, unless his/her income is above the level where he/she fails the means test , or he/she would like to repay his/her creditors over time, it may make more sense to to file chapter 7 bankruptcy. The means test is based on average income and family size. In a prior blog post we discussed eligilibilty requirements for chapter 13 and issues and in a separate blog post discussed commonly encountered problems in NY chapter 13 cases.

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