Texas Bankruptcy Blog : Texas Bankruptcy Lawyer & Attorney : Fears Nachawati law Firm : Chapter 7, Chapter 13, Consumer Bankrutpcy : Dallas, Fort Worth, Austin, Houston, San Antonio

Since 1967 there have been several studies that rank stress due to a traumatic life event.  The studies agree that divorce causes tremendous stress in a person’s life, and is number two in the rankings for most studies, behind death of a spouse or child.

Since divorce is such a stressful time, it is no wonder that people make mistakes with their finances during a divorce.  Many couples either overlook or ignore the economic realities of their changed financial condition.  In some cases financial mistakes made during the divorce can lead to bankruruptcy.  In other situations bankruptcy is simply inevitable.

One financial mistake divorced couples commonly make is a misunderstanding of the family court’s “assignment” of a joint debt to one of the spouses.  The family court has the authority to order one spouse to pay a particular joint debt.  For instance, husband pays the MasterCard; wife pays the car payment and keeps the car.  The court order may contain a “hold harmless” provision that means that if the obligated spouse does not pay the debt, and the other spouse is harmed, the obligated spouse is responsible to repair the harm (usually this means money damages).  This order is enforceable through the court’s contempt power.

Many people mistake this assignment as an alteration of the contract with the creditor.  The family court’s order does not change the couple’s joint obligation on the debt because the creditor was not a party to the couple’s divorce case.  A joint debt remains legally enforceable against both or either party even after the divorce.  If the obligated spouse does not pay pursuant to the family court’s order or the terms of the contract, the only recourse is to cry foul to the family court judge.  The creditor can pursue any legal action to collect on the debt including reporting the delinquent account to the credit bureaus, filing a lawsuit against both spouses, and repossession or foreclosure as authorized by law.

Many couples can benefit from filing bankruptcy before a divorce is final.  In most circumstances property that is owed by a husband and wife receives better protection from creditors than it receives if owned by a single person.  Some debts that are ordered by a family court cannot be discharged by the bankruptcy court, so it is better to discharge those debts prior to a family court order.  In some cases, if one spouse files bankruptcy and discharges a debt, a family court cannot reassign that debt to the discharged debtor.

Divorce can complicate the legal obligations of a divorcing couple’s finances.  If you and your spouse are considering divorce and have significant debt, speak with an experienced bankruptcy attorney and discuss your options before finalizing your divorce.

If a debt collector is harassing you over a debt that you thought was dead and buried, you may be dealing with a zombie debt.  The usual scenario is an unexpected phone call or letter asking for payment on a debt that is either outside the statute of limitations or is in some other way legally uncollectible (e.g. discharged in bankruptcy).  The collector may even offer a “special deal” like a 75% discount for immediate payment.  What the collector will not reveal is that the debt is legally uncollectible – meaning it is unenforceable in a court of law.

Zombie debt collection is big business.  Zombie debt collectors buy old debts for pennies on the dollar, then try to collect as much as possible.  If the zombie debt collector buys an old $1,000 credit card debt for $20, and one phone call settles the debt for $100, the zombie debt collector makes a nice profit.  Since the debt is not legally enforceable, guilt and scare tactics are all the collector has to coerce payment.

Some zombie debt collectors actually violate the law by attempting to collect.  For instance, trying to collect a debt that was discharged in bankruptcy is a serious violation of the federal court discharge injunction.  Threatening a lawsuit for a debt that is past the statute of limitations is a violation of the federal Fair Debt Collections Practices Act (FDCPA).  Zombie collectors not only rely on ignorance of the law, they thrive on it!

Some individuals want to pay these debts.  While admirable in intention, the result may be extremely harmful.  Unpaid debts that have dropped off a credit report may be reported for another seven years after the payment date.  That dead and gone debt may reappear as an entirely new (and legal) negative item on your credit report – and substantially harm your credit score.

So what should you do if you encounter a zombie debt collector?

·                    Know your rights!  Your attorney can explain the statute of limitations or other legal restriction to the collection of an old debt.

·                    Do not give any personal information to a zombie debt collector.  Nothing good can result.

·                    Do not make a payment on an old debt until you learn your rights.  What may seem like an honest act of payment on an old debt may turn into a nightmare on your credit report.

Remember, zombie debt collectors are the bottom feeders of the collection industry.  They have been known to employ the worst ethical practices to obtain payment.  Don’t be haunted by zombie debts.  Contact bankruptcy firm Fears | Nachawati for a free consultation by calling 1.866.705.7584 or by e-mailing info@fnlawfirm.com and chase them back to the grave!  

The answer to that question is yes and no. Yes, the IRS is going to be more flexible regarding your past due tax debt when you file for Chapter 13. They will base their compromise on two factors, either doubtful liability (you don't owe that much tax) or doubtful collection (you don't have resources or assets to pay the tax you owe). 

As for the no part of the answer, this does not mean that you are completely off the hook if you file for a Chapter 13, but a Chapter13 will stop any liens by the IRS on your assets such as your home, bank account or your paycheck. When you file for bankruptcy in Dallas, the IRS becomes just another creditor in your Chapter 13 bankruptcy. Their objections to the repayment plan proposed in your Chapter 13 plan are limited to the same grounds as any other creditor. 

Most of the time the IRS welcomes a Chapter 13 filing since the priority taxes get paid in full with little expenditure of time and energy by the IRS. It all comes down to the fact that the IRS would rather get something than nothing.

If you are facing IRS debt issues, contact bankruptcy law firm, Fears | Nachawati, toll free at 1.866.705.7584 or via e-mail at info@fnlawfirm.com for a free bankruptcy consultation.