Income taxes are discharged unless any one of the following apply:
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Even though our representation is technically with the business, it would be silly to disregard those personal guaranties namely for the reason that the person calling all the shots for the small business is also that person guarantor. That often poses some conflict because in some instances, the best direction for the small business may not be the best direction for the owner/personal guarantor.
An all too scary concept in bankruptcy is that the small business’ Chapter 11 WILL NOT protect a personal guarantor from those same debts of the small business. In other words, the automatic stay that goes into effect upon filing bankruptcy won’t extend to the owner/personal guarantor.
What can be exempted in bankruptcy?Bankruptcy exemptions actually vary by State, but North Carolina exemptions like most States protect “normal” lifestyles. Therefore, is it normal for someone to have average furniture in their house? Is it normal for someone to have a 2004 automobile that’s paid off? Is it normal to have a retirement account? Is it normal to have a house with a mortgage on it, with a fair amount of equity in it? The answer to all these questions is “yes”. And accordingly, the laws in North Carolina generally state that you can file bankruptcy and keep all these things. In essence, it’s a normal life and North Carolina protects normal lifestyles.
Conversely, North Carolina’s exemption laws don’t protect luxury, which I define as properties and belongings that are not normal. For instance, is it normal for someone to have an entire household of antique furniture and Picasso paintings? Is it normal to have a new BMW paid off? Is it normal to have a house or beach condo that’s completely paid off? Is it normal to have your yacht docked up at Lake Norman?? Of course not! And North Carolina law does not attempt to protect property that is not normal; it does not protect luxury. For the vast majority of prospective clients, their lives are simply normal. They have a normal life and normal stuff. While all this is ‘generally speaking’ and deserves a more in depth conversation with an attorney, I can safely say that most people that look toward bankruptcy as a means to relieve their debt issue will not lose a single thing by filing bankruptcy….except debt and stress.
As I mentioned earlier some clients come in and the question of whether to file clearly points to yes or no. One client wanted to file because she was being sued for $500 in small claims court. She did not have the money and simply wanted to file bankruptcy. After learning the bankruptcy filing fee was $335 and credit counseling fee was $42 she quickly saw the logic in not filing. Many others have come in owing more in credit card debt than they make in an entire year. Some clients don’t even know how much they owe. Everyone should run a free credit report once a year at www.annualcreditreport.com to monitor their credit and ensure they are not a victim of identity theft. One question I pose to everyone who asks me if they should file bankruptcy is the following:
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