Payroll (Business) Taxes.   Managers in charge of a company’s payroll are responsible for withholding payroll taxes of the employees.  The portion paid by the employees are considered to have been paid in trust and must be repaid by the managers in charge.  These taxes are never dischargeable. Bankruptcy will afford no relief from this responsibility. 

Home Equity lines which are set up as first mortgages on a debtor’s primary home are treated the same as other first mortgages.   However, second and third mortgages, or Home Equity Lines operating as second or third mortgages, may be treated completely differently.   If the value of the debtor’s home sinks below the value of the first mortgage, (no equity), then the second and third mortgage liens may be “stripped” out and the related debt treated as unsecured.  The stripping, however,  is only available in a Chapter 13, not a Chapter 7. 

 If  debtor is a co-signer, co-maker or guarantor  for a loan with debtor’s children, friends, spouse or debtor’s business,  debtor is liable to pay the debt if the primary debtor does not pay.   If the primary debtor  cannot pay and files for bankruptcy protection under Chapter 7,  collection activity will stop for the primary debtor, but not for the co-signer.   In other words, creditors can go around the bankruptcy proceedings and come after the co-signer personally.   If either the debtor or the primary debtor files a Chapter 13 bankruptcy petition,  the automatic stay of the bankruptcy court will protect both the debtor and the co-signer from further activity by the creditors.  Again, however, under Chapter 7,  the co-signer or guarantor does not  get the protection of the automatic stay and can be pursued by the creditor immediately.

 If the co-signer used the equity in his own home to secure the debt of another person, the creditor can sue the so-signer for the  possible repossession of  his home.

If the debtor 1) rejects the lease, the debtor has no further rights or liability pertaining to the lease and must leave the premises.   The Landlord may, however, have a claim against the estate for back rent owed  and  any holdover rent.  If  debtor  2) assumes the lease and remains on premises, the debtor’s estate must make all payments under the lease on time.  If back rent is owing, it can be paid under a Chapter 13 plan, if the debtor qualifies for a Chapter 13 filing.  If the debtor does not qualify to fund a Chapter 13 payment plan, and must consequently file under Chapter 7, the debtor will not be able to remain on the rented premises unless all rent is current.   If the debtor is allowed by Landlord to 3) transfer the lease to another and does so, then Landlord must look to that third person—not the debtor in bankruptcy—for any further collection of rent.

 Under Chapter 7, individuals may file petitions which, in effect, ask the Bankruptcy court to sell off their assets and pay their creditors out of the proceeds.  What usually happens, however,  is that debtors get to keep their homes and cars while getting their unsecured debt (i.e. credit cards, hospital bills, etc.) discharged.  (Homes, cars, clothes, and cash on hand, are protected as “exempt” property) up to a certain amount.   All debtors cannot get Chapter 7 protection, however.  Debtors  whose disposable income is above average may be forced to file under Chapter 13, where they must  endeavor to pay back at least part of their delinquent debts under a court-approved plan.    Chapter 7 protection is also available to businesses. 

Persons who co-sign on loans for their children, friends, spouses or businesses always bear the risk that creditors will come after them if the primary Debtors do not pay.  If the primary debtor files for protection under Chapter 7,  collection activity will stop for the primary debtor, but not for the co-signer.  In other words, creditors can go around the bankruptcy proceedings and come after the co-signer personally.  By contrast, collection activity, under Chapter 13,  stops for both the primary debtor as well as the co-signer. It must be remembered, however, that only consumers, not businesses, are eligible for bankruptcy protection under Chapter 13.   It should also be noted that for co-signers as well as for primary debtors, the filing of any kind of bankruptcy will be reported to the credit bureaus for a period up to ten years.

             If the debtor owns her home outright and finds herself in bankruptcy court because she still cannot pay other obligations, she still may be able to keep the home as “exempt” property under the bankruptcy laws.  Under Chapter 13, the debtor may be able to keep the house even she’s behind on the notes,  but must qualify (with enough income) to enter into a plan (three-to-five years) to pay the arrearage.   A Chapter 13 plan that is approved by the court and complied with by the debtor will prevent foreclosure.

If there is no mortgage and the debtor own her home outright and finds herself in bankruptcy court because she still cannot pay her other bills, the debtor’s house may be  “exempted” but only up to about $30,000.  The bankruptcy could sell the house, pay the debtor the $30,000 and pay the creditors.

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Bankruptcy is generally defined as the inability of an individual or an organization to pay its debts.  Relief begins with the filing of a petition by the debtor in federal court.  Typically a court-appointed Trustee evaluates the debtor’s estate (all assets and income sources) to determine the extent to which outstanding debts can be paid.  Often, under Chapter 7, the Debtor is discharged because nothing remains after the “exempt” assets are protected.  Under Chapter 13,  a payment plan is designed to pay off arrearages and whatever portion of unsecured debts the Debtor can afford to pay over a  five-year period, and then the Debtor is discharged.

People, both rich and working-class, and companies of all sizes fall victim to bankruptcy, for a variety of reasons:  the loss of a job, excessive medical bills, divorce, death of a spouse, poor financial management, economic downturn, etc.  If your debts are piling up and you are considering bankruptcy, call Atlanta Bankruptcy.

Under Chapter 7, you may be able to be discharged from your debts completely and get a new start.  Or, Chapter 13 may provide a way to pay off your arrearages (or a portion of your debt) under a reduced payment plan.  For small business, Chapter 11 may afford the opportunity to get a “breathing spell” while you reorganize your company.