At Hayward, Parker & O’Leary Esqs., our attorneys have explained the consequences of bankruptcy to many Ulster, Dutchess and other mid-Hudson County residents. One of the chief concerns of many is the impact the bankruptcy has on credit reports. Many people assume that credit agencies are a governmental body with direct access to all of your financial records. In reality, this far from the truth. Credit reporting agencies are:
While creditors are supposed to report to the credit reporting agencies when their debts are discharged, many do not. Therefore, it is not uncommon for your discharged debts to remain open in your credit report. To ensure that your credit report accurately reflects your bankruptcy discharge, you should send the following to the three (3) major credit reporting agencies:
Most people are aware that when debts are canceled you may be required to report part or all of the amount as income for tax purposes. However, the bankruptcy code excludes debts discharged by bankruptcy from counting as income. Rather, a debt discharged by bankruptcy has no income tax consequences. If you mistakenly receive a an inquiry from the IRS about the cancelled debt, simply file IRS form 982 to advise the IRS that the debt was discharged through bankruptcy.
The bankruptcy code establishes protections against discriminatory treatment based on the person being a debtor in bankruptcy, being insolvent prior to or during the bankruptcy case, or not paying a debt that is dischargeable or was discharged in bankruptcy. The government may not discriminate in granting a “license, permit, charter, franchise, or other similar grant” in employment matters or in approving a student loan. Additionally, private employers may not discriminate based on bankruptcy or debtor status.
A preferential transfer is a transfer where the debtor selects certain creditors to pay over others and the creditor ends up receiving a greater percentage of the debt than they otherwise would have under bankruptcy. While in normal dealings there is nothing wrong with preferential treatment of creditors, they are discouraged by bankruptcy law and a trustee may recapture payments made while insolvent or within 90 days before the bankruptcy filing.
A fraudulent transfer is another type of property transfer that is discouraged by the bankruptcy code. A fraudulent transfer is an attempt by a debtor to transfer property in a way the puts it out of the reach of creditors. Examples of fraudulent transfers include:
To determine whether the transfer was fraudulent New York courts look to six “badges” of fraud:
One major feature of the automatic stay is that a bankruptcy filing immediately stops all wage garnishments and bank account restraints.
Bankruptcy is a powerful tool to eliminate debt. However, it can have wide-reaching consequences. For your free consultation at our Middletown office, call Hayward, Parker & O’Leary Esqs. at 845-343-6227 or contact us online today.