Bankruptcy: High Income Individuals
Problems with managing financial obligations strike individuals across the income spectrum. Indeed, many famous, and famously rich, successful people have filed for bankruptcy. These people include: Mark Twain, Walt Disney, Kim Basinger, Henry Ford, M.C. Hammer, Meat Loaf, Don Johnson, Abraham Lincoln, Willie Nelson (a celebrity with famous tax problems), Mike Tyson, Johnny Unitas, Larry King and many others. Many of them filed for bankruptcy before they accumulated income and assets, while others filed after they accumulated income and assets. Our bankruptcy attorneys have the experience in representing many high-income individuals in Chapter 7 or Chapter 13 bankruptcies.
Chapter 7 vs. Chapter 13 Bankruptcy
A filing under Chapter 7 is often called a liquidation or straight bankruptcy and is the most common type of bankruptcy proceeding. In a Chapter 7 case, a debtor is allowed to exempt (keep) all or a certain portion of his or her property. In most cases, the debtor keeps all property. However, each person and situation is different, and the actual amount that can be retained (the “exempt” amount) by a specific debtor is determined by the market value of the debtor’s property in terms of dollars, the type of the property owned by the debtor (for example, a retirement account), and/or the manner in which the property is owned by the debtor (for example, whether the property is owned individually by the debtor or jointly by the debtor and a spouse). Property that a debtor is entitled to keep is called “exempt property” and property that the debtor is not entitled to keep is considered “non-exempt property.” A Chapter 7 Trustee is appointed by the bankruptcy court to collect the non-exempt property of the debtor, sell it, and distribute the sale proceeds to creditors. However, the vast majority of Chapter 7 bankruptcies are “no-asset” bankruptcies, meaning cases in which the debtor is permitted to keep all of his or her property and nothing is distributed to creditors.
A filing under Chapter 13 is technically referred to as “individual reorganization.” It is a way for people to “reorganize” their liability into a manageable, monthly payment plan that is fair for the individual’s creditors. A Chapter 13 Plan must pay out the greater of the individual’s monthly disposable income aggregated over a certain period or the amount creditors would have received in a Chapter 7 bankruptcy if the individual’s property were liquidated. As in a Chapter 7, an individual in a Chapter 13 Plan gets to exempt a certain amount of property.
Choosing the Right Chapter for a High-Income Client
The first problem for many high-income individuals when filing for bankruptcy is that many bankruptcy professionals presume that such an individual’s income precludes the filing of a Chapter 7 bankruptcy or would require a Chapter 13 bankruptcy plan that is too expensive for the individual to handle. In many cases that is simply not true. Another problem high-income clients face is understanding how to protect their assets in a bankruptcy case. For some portion of clients, a Chapter 7 or 13 bankruptcy might make sense, but for others, the presence of assets could cause problems for the client. With some analysis and planning, these issues may be resolved, setting the stage for an effective Chapter 7 or 13 bankruptcy case.
Daniel Rosefelt Attorney & CPA has over 20 years of experience representing high-income individuals in connection with all types of bankruptcy cases, including Chapter 7 and Chapter 13 bankruptcies. We have extensive experience in guiding high-income individuals through the bankruptcy process, beginning with various types of income and asset planning associated with filing a bankruptcy through the preparation of the documents to the ultimate discharge of liabilities or confirmation of a reorganization plan with the court.
Daniel Rosefelt Attorney & CPA has extensive experience in guiding individuals and businesses through bankruptcy minefields. Daniel Rosefelt, Attorney & CPA has also helped many taxpayers solve both their tax and financial problems through the bankruptcy process. In addition to his law degree, Mr. Rosefelt is a Certified Public Accountant, former Adjunct Professor of Law, and has published articles concerning bankruptcy tax relief in national tax journals. Mr. Rosefelt has also spoken to a variety of professional tax and accounting organizations nationally about the discharge of taxes in bankruptcy and the treatment of federal tax liens and levies in the bankruptcy process.
Looking for a Maryland, Washington DC or Florida bankruptcy attorney? With offices in Bethesda, Maryland and Saint Petersburg, Florida, Rosefelt Tax Law routinely helps clients in Maryland, Washington, DC and Florida. Contact Rosefelt Tax Law to learn more about our services and for an initial case review. Contact us by calling our offices at 866-995-0061 or completing the interactive Contact Form contained on this website.