On May 21, 2012, the IRS announced new guidelines that will increase the number of taxpayers who will be able to qualify for an Offer in Compromise. (IR-2012-53.)

The announcement reflects a “Fresh Start” initiative of the IRS to help struggling taxpayers.

In general, an Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount that he or she owes.

The amount of an Offer in Compromise has always been determined by the reasonable collection potential of the taxpayer: Adding the taxpayer’s “future income” to the “realizable value” of his or her assets (i.e., liquidation value of equity in assets).

“Future income” is an estimate of a taxpayer’s ability to pay based on an analysis of his or her “monthly available income” measured over a specific number of months into the future.

In the past, a taxpayer who could pay the Offer amount in five monthly installments was required to multiply his “monthly available income” by 48 months to arrive at “future income.” A taxpayer who wanted to pay the Offer in 24 monthly installments was required to multiply his “monthly available income” by 60 months to arrive at his future income.

Now, under the revised guidelines, “future income” is determined by multiplying the “monthly available income” by 12, if the Offer can be paid in 5 monthly payments or less or, by 24, if the taxpayer needs 24 months to pay the Offer amount in full.

One huge change to the guidelines is that the IRS now allows a deduction in determining “monthly available income,” for payments for: (A) loans guaranteed by the federal government for the taxpayer’s post-high school education; and (B) delinquent state and local taxes based on a percentage basis of tax owed to the state and IRS.

These deductions are available in the calculation if the taxpayer verifies that the loan is guaranteed and substantiates that the state and local tax payments are being made.

Taxpayers with student loan debt, but who have not yet made arrangements to repay the loan, will be allowed 10 days to set up a payment plan for the student loan and provide verification to the IRS. If there are extenuating circumstances, additional time may be allowed.

You should note, however, that an Offer in Compromise will not be accepted if the IRS believes that the liability can be paid in full through an installment payment agreement or in a lump sum, unless unique circumstances exist (e.g., illness or some other severe hardship).

Nevertheless, if a taxpayer does not qualify for an Offer in Compromise, a taxpayer may consider an installment payment arrangement to avoid IRS collection action.

The IRS’s new “Fresh Start” initiative affords streamlined installment agreements for more taxpayers. In the past, the IRS generally was required to enter into installment agreements requested by individuals whose aggregate tax liability did not exceed $10,000, if the IRS determined that the taxpayer was financially unable to pay the tax liability in full within two years. Now, the IRS allows taxpayers who owe up to $50,000 in back taxes to enter into streamlined agreements that stretch out the payments over a series of months or years. The IRS also increased the maximum term for streamlined installment agreements to 72 months from the previous 60-month maximum.

If you have any questions, please call me at (570) 823-9400 or send an e-mail to me at davidharrisesq@epix.net.

My colleague, Jay Fleischman, a member of the National Association of Consumer Bankruptcy Attorneys, posted a list of great bankruptcy law resources for consumers.

See Jay’s post at by cutting and pasting the following: http://tinyurl.com/d4b2hml

If you have not found the answer to the issue for which you were searching, please feel free to call me at (570) 823-9400 or write to me at davidharrisesq@epix.net.

When a dispute arises, an aggrieved person or business can sue another in court and, if the aggrieved party is victorious, the court will issue a judgment in the aggrieved party’s favor. The court will also issue a judgment in the aggrieved party’s favor if the party being sued fails to timely file an answer to the aggrieved party’s complaint.

Under Pennsylvania law, a judgment will act as a lien or charge on all real estate owned by the losing party in the county where the judgment is recorded with the county clerk of court (known as the Prothonotary in most counties in Pennsylvania, including Luzerne County, Lackawanna County, Columbia County, Wyoming County and Monroe County).

Under Pennsylvania law, a judgment does not act as a lien or charge on the losing party’s non-real estate assets, such as a bank account, furniture and other household goods or business equipment, until the winning party directs a sheriff to levy on those assets. The sheriff accomplishes this by going to the losing party’s residence or business and taking an inventory of the assets.

The party, in whose favor the judgment is awarded, can either:

(A) Execute on the judgment by seeking to force the sale of the losing party’s assets through a court order, paying off any prior or senior liens (i.e., mortgages or judgments that were recorded first) and then keeping the sales proceeds that remain; or

(B) Simply sit tight until the losing party is ready to sell the assets, in which case, the winning party will have to be paid in order for the sale to go through.

In summary, a judgment is a public declaration by a court that one party has a claim against another. The judgment can become a lien on the losing party’s assets to secure the claim of the winning party. In other words, it becomes a secured debt.

A bankruptcy filing can often void a judgment or the effect of the lien that it creates. Depending on a host of factors that will be discussed in later posts, the most common situations where this can be accomplished is where: (A)  the judgment impairs an exemption afforded to the bankruptcy debtor under the Bankruptcy Code; (B) the judgment was recorded against one spouse and all of the debtor’s assets are jointly held with his or her spouse; (C) the judgment was entered within 90 days of the bankruptcy filing; or (D) the value of the assets are already fully encumbered by prior (or earlier recorded) liens.

If you have been sued and a judgment has been, or is about to be, entered against you or levy action has been, or is about to be, taken against you, please feel free to call me to discuss your options. I can be reached at (570) 823-9400 or at my e-mail address at davidharrisesq@epix.net.

Please also visit MY HOME PAGE to learn more about my law practice and me.

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In Luzerne County and other parts of Pennsylvania, including neighboring Lackawanna, Columbia, Monroe, Wayne and Pike Counties, banks will not take formal mortgage foreclosure action against a homeowner until he or she is several months behind with his or her mortgage payments.

If the homeowner fails to respond to the bank’s initial informal notice, the bank will issue Act 6 and Act 91 letters as required by Pennsylvania law, to notify the homeowner of: (A) his or her right to bring the mortgage arrearage current within 30 days to avoid attorney’s fees and costs; and  (B)  the availability of assistance from the Pennsylvania Housing Finance Authority.

If the arrearage is not then cured or Act 91 assistance is not applied for within the 30-day period, or the Act 91 application is rejected, the bank will file and serve a mortgage foreclosure complaint upon the homeowner.

The homeowner will then have 20 days to answer the complaint to raise any defenses he or she may have.

If the complaint is not answered, the bank will issue another ten day notice of its intention to file a judgment.

If the complaint is then not answered, a judgment is entered. If the complaint is answered, a hearing or trial on the issues raised will be held several months later.

If the complaint is not answered or the homeowner is not successful at the hearing or trial, a judgment in mortgage foreclosure will be entered of record, after which the bank will file a series of documents with the court to notify other mortgage or judgment holders of its judgment and to set a sheriff’s sale date for the auction of the homeowner’s property.

The homeowner must get at least 30 days advanced notice of the actual date for the sheriff’s sale.

As a practical matter, it takes at least 6 months or more from the date that the homeowner stops paying his or her mortgage until the date of the sheriff’s sale in Luzerne County.

In my next post, I will describe how a sheriff’s sale is conducted in Luzerne County and its neighboring counties. Until then, please feel free to call me at (570) 823-9400 or send an e-mail at davidharrisesq@epix.net with any questions regarding the mortgage foreclosure process in Luzerne County and neighboring Lackawanna, Columbia, Monroe, Wayne and Pike Counties and whether a Chapter 13 bankruptcy filing may be a solution to resolving your foreclosure problem.

Please also visit MY HOME PAGE to learn more about my law practice and me.

Mortgage foreclosures continue to rise in Wilkes-Barre, Scranton and Stroudsburg, and in all other parts of Luzerne County, Lackawanna County, Monroe County and Pike County, in Northeastern Pennsylvania.

Many who have visited my web site and my blog in the past know that I, with a group of 60 attorneys from coast to coast, lobbied members of Congress in February 2008 to enact mortgage modification legislation that would empower judges to modify the terms of mortgages based on the appraised values of the mortgaged properties so that the escalation of mortgage foreclosures would cease.

Based on our day-to-day experiences in the trenches, we believed that the effect of the enactment of the legislation would result in people being able to stay in their homes and resume affordable mortgage payments, while enabling banks to get at least, if not more, than what they would have gotten had they foreclosed instead.

Real estate values would then become more predictable than they are today and banks could then make loans with less fear of risk, knowing the value of their security was more predictable.

Guess what? Our convictions about the enactment of mortgage modification legislation are stronger than ever, particularly in light of the banks’ failed efforts to engage in “self modification,” the failure of the HAMP program, and the exposure of the bogus mortgage assignment debacle. Thus, we are going back to lobby Congress in April of this year and, in the interim, I thought that you might like to read a good article to bring you up to date on the status of the mortgage modification legislation issue. Please click the link here: http://tinyurl.com/4edk2j8

Please let me know your thoughts or, if you wish to discuss this issue or learn more, you may call me or send an e-mail. Also, please feel free to log onto my blog from time-to-time, as I will be sending out regular posts to keep you apprised of our efforts.

If you are confronted with a mortgage foreclosure in Wilkes-Barre, Scranton or Stroudsburg, or in Luzerne, Lackawanna or Monroe Counties or anywhere else in Pennsylvania, a filing under Chapter 13 of the Bankruptcy Code may provide you with relief by allowing you to formulate a plan to “cure” the past due amounts owed on your mortgage over a 3-5 year period, while at the same time allowing you to make your regular monthly mortgage payments directly to your bank or mortgage lender.

The filing of a Chapter 13 petition will immediately cause the foreclosure proceeding to stop and the successful implementation of a plan will enable you to catch up on your mortgage obligation and may even enable you to discharge credit card and other debts, including some types of tax debts.

If you are interested in learning more about whether Chapter 13 will afford you benefits, please feel free to call me to discuss your options or to schedule a free consultation. At your request, I will also provide you with my biography, with a listing of my credentials as well as some free informational materials about Chapter 13 and the bankruptcy process.

Please note that the Chapter 13 option will be effective to stop a sheriff’s sale only if a bankruptcy petition is filed prior to the date of the foreclosure sale. As the law requires the gathering of a significant amount of paperwork, it is best not to address the Chapter 13 option at the last minute. Time is also of the essence as the bank’s costs in pursuing the foreclosure increase as each day passes.

If you and your spouse are on the mortgage that is being foreclosed, you may also have the option of having only one spouse file a petition under Chapter 13 to stop the sheriff’s sale and cure the mortgage arrearages.

Please visit MY HOME PAGE to learn more about my law practice and me.

If you file a Chapter 7 bankruptcy case and have an outstanding car loan, you have the option of doing any one of the following:

A.    Surrender your car;

B.    Reaffirm your car loan;  or

C.    Redeem your car from the debt.

These options exist for all bankruptcy filings in Northeastern Pennsylvania and Central Pennsylvania, including Luzerne County, Lackawanna County, Monroe County and Lycoming County:  From Wilkes-Barre to Scranton to Hazleton to Stroudsburg to Willliamsport.

Surrendering your car involves returning the car back to the lender, after which you will have no further personal liability to the lender.

Reaffirming your car loan involves your agreement to continue to be personally liable on the car loan in order to keep the car.  There is more detail involved with this choice, which you can read by clicking here: Reaffirming Car Loans.

Redeeming the car involves paying a lump sum amount to the car lender that is equal to the value of the car in order the keep the car loan. This option is best when your car is worth less that the balance that you owe on your car loan. You can read more about this option by clicking here:  Redeeming Car Loans.

If you have any questions about these options, please call me or send an me an e-mail.

Please also visit MY HOME PAGE to learn more about my law practice and me.

Throughout most of the country, including Northeastern Pennsylvania, Luzerne County, Wilkes-Barre, Scranton, Hazleton and Stroudsburg, employment is considered to be “at will,” meaning that, without a written agreement, employers may hire and fire employees at whim, and employees may quit their employment, with or without any notice. However, employers may not terminate an employee or take any other negative employment action based upon the employee’s age, disability, gender, martial status, national origin, race, religion and sexual orientation.

The Bankruptcy Code also protects against employment discrimination, to some extent.

Under a provision of the Code, a private employer cannot terminate or discriminate against an employee who files for bankruptcy, who is insolvent, or who fails to pay a debt. A governmental employer cannot do so either and cannot discriminate in hiring because the candidate files for bankruptcy, is insolvent, or  fails to pay a debt. The prohibition against discriminating in hiring does not apply to a private employer.

This provision of the Bankruptcy Code was added to codify a Supreme Court decision which held that bankruptcy discrimination would frustrate the purpose of the bankruptcy law itself. Insuring that people going through the bankruptcy process are able to maintain employment–and thereby avoid future bankruptcy–was considered very important.

To bring a bankruptcy retaliation claim, the debtor must have sufficient evidence to show that the sole reason for the adverse employment action was his or her bankruptcy status. This is an important distinction between this and other discrimination laws requiring only that the protected classifications be a motivating factor for the negative employment action.

Individuals who have been the victim of unlawful bankruptcy discrimination may receive back pay, including fringe benefits and reinstatement, They may also recover damages for emotional distress. However, unlike other discrimination laws, they cannot recover attorney’s fees or other costs. This can be a significant deterrent to pursuing such a claim.

If you have confronted discriminatory treatment or wish to discuss your rights under the bankruptcy laws, please feel free to call me at (570) 823-9400 or send an e-mail to me at davidharrisesq@epix.net.

Please also visit MY HOME PAGE to learn more about my law practice and me.

If you are considering filing for bankruptcy but are unsure whether you should do so, you should consider the following.

First, you should meet with an experienced bankruptcy lawyer who will determine your objectives and evaluate whether there are alternatives to filing bankruptcy and, if bankruptcy is the best option, how to go about doing so.

A skilled bankruptcy lawyer will have a proven track record of negotiating mortgage, student loan, and tax obligations and a proven track record of litigating challenges against mortgage companies, student loan agencies and federal, state and local tax agencies.

If a bankruptcy filing is necessary, the skilled bankruptcy lawyer will explain the bankruptcy process to you in an understandable manner and will assist you in preparing a bankruptcy petition, numerous schedules that list all your assets, debts, monthly income and expenses, and a statement of your financial history.  The petition, schedules and statement will be filed with the bankruptcy court and will allow the court, a trustee, and your creditors to determine if you qualify for rights that you seek.

To locate a skilled bankruptcy lawyer, you should conduct research by Internet and make inquires of lawyers that you know who may not practice in the bankruptcy arena. You should focus your search for bankruptcy lawyers in the geographic area where you reside.

You should also investigate the lawyer’s credentials, including the number of years he or she has been in practice and whether he or she has significant trial experience, as a lawyer’s experience level will will often impact the extent of the benefits that you will get by filing for bankruptcy.

Specifically, you should investigate non-biased peer and client reviews of the lawyer on Internet sites such as Avvo.com or Martindale Hubbell.

Once you have located an experienced bankruptcy lawyer in your geographic area, you should meet with the lawyer to determine that you are comfortable with him or her.  Most lawyers will not charge for the initial consultation.

You should not use the services of an attorney who will not meet with you face-to-face or who has limited experience exploring and pursuing non-bankruptcy alternatives or who has limited trial experience.

I have engaged in practice for 27 years and have extensive experience in negotiating non-bankruptcy and bankruptcy solutions. I also have extensive trial experience, as shown by the reported cases on this Web Site.  While I practice throughout Pennsylvania,  my home base is in Northeastern Pennsylvania, including Luzerne, Lackawanna and Monroe Counties, and the Cities of Wilkes-Barre, Scranton and Stroudsburg.

If you wish to discuss non-bankruptcy and bankruptcy solutions that may be helpful to you, please call me at (570) 823-9400 or send an e-mail at davidharrisesq@epix.net.

Please also visit MY HOME PAGE to learn more about my law practice and me.

On March 24, 2010, the United States Treasury released the “New HAMP Borrower Outreach and Communication Guidelines.”

These guidelines contain new protections for borrowers facing foreclosure, as well as protections for bankruptcy debtors. No longer will HAMP servicers and lenders be able to discriminate against bankruptcy debtors. Now servicers and lenders will be permitted to accept bankruptcy schedules in lieu of the extensive documentation required for non-bankruptcy debtors.

The new rules become effective on June 1, 2010.

On March 26, 2010, Treasury also released rules that are helpful to financially distressed borrowers, including bankruptcy debtors that:

1.  provide a 3-6 month mortgage payment forebearance for unemployed borrowers;

2.  provide for FHA refinancing to reduce total mortgage principal;

3.  provide for voluntary principal reductions; and

4.  provide certain debtors with nominal short-sale and relocation assistance.

If you reside in Wilkes-Barre, Luzerne, Lackawanna or Monroe Counties or anywhere in Northeastern and Central Pennsylvania and are facing a mortgage foreclosure or you have filed for bankruptcy and need to modify your mortgage, please feel free to call me or have your attorney call me to discuss these rules or write to me at davidharrisesq@epix.net.