Can I Sell My Personal Property to Someone for $1 Before I File Bankruptcy?

Occasionally, someone facing bankruptcy will transfer ownership of property to someone else (usually a friend or family member) for less than fair market value under the assumption that this transfer will protect the property during bankruptcy.  However, if the transfer is done within a certain amount of time from the bankruptcy filing, not only does it not protect the property, such a transfer can be a reason not to grant a discharge in bankruptcy entirely.

Section 548 of the Bankruptcy Code allows trustees to recover property that was transferred for less than fair market value in the two years prior to filing.  Additionally, Section 727 denies a Chapter 7 discharge to an individual who transferred property with the intent to hinder, delay or defraud creditors within one year of filing.  If you are considering filing for bankruptcy, you should consult with an attorney before transferring or selling any property to make sure that your actions don’t bring about the results you were trying to avoid.

Should I Repay the Loan from My Parents Before I File?

Bankruptcy is based on the proposition that all similarly situated creditors are (or should be) treated equally.  In the eyes of bankruptcy, unsecured loans from friends and family members are viewed in the same manner as unsecured loans from credit-granting agencies (such as credit cards).  Friends and family members are viewed as “insiders” and any more than nominal payments made to them in the year prior to filing for bankruptcy must be disclosed during the case as a preferential transfer.  In that case, the trustee has the option of bringing suit against the insider who received the repayment in order to recover the payment for equal distribution among all your creditors.  So, while repaying your family before filing may feel like the right thing to do, it could be the worst thing you can do for them!  Please contact our office for more information about preferential transfers or to speak with an attorney about your specific circumstances.

Can Income Tax Debt Be Discharged in Chapter 7 Bankruptcy?

You may be able to discharge federal income tax in a Chapter 7 bankruptcy case if the tax debt meets certain criteria:

• You must have filed a tax return for the years in question at least 2 years before you file for bankruptcy
• Your tax return must have been originally due at least 3 years before you file for bankruptcy
• The IRS assessed the income tax debt at least 240 days prior to your bankruptcy filing (with certain exceptions)
• Your tax return was not fraudulent
• You did not attempt to willfully evade taxes

Discharging tax debt is a complex area with many rules surrounding it.  If you are burdened with federal income tax debts, you should consult with a bankruptcy attorney to determine whether, and to what extent, the debt would be dischargeable in bankruptcy.

Are Student Loans Dischargeable in Bankruptcy?

Generally, student loans are not dischargeable in bankruptcy, unless repaying the student loan causes an “undue hardship”.  Unfortunately, meeting the standard of undue hardship can be very difficult.  Most courts use a three-part test to determine whether an undue hardship exists:

1. Whether the debtor could maintain a minimal standard of living for self and dependents if loans were required to be repaid;
2. If a minimal standard of living cannot be maintained, whether that circumstance is likely to continue for an extended amount of time; and
3. Whether a good faith effort to repay the loan has been made

Please contact our office to discuss your specific circumstances or to receive additional information about your options under bankruptcy.

Requirements for Citizenship by Naturalization

According to the United States Citizenship and Immigration Services (USCIS), the number of applications for naturalization received by the USCIS has significantly increased in recent years.  In order to gain U.S. Citizenship by the naturalization process, individuals must meet numerous requirements.

Generally, the requirements for an applicant to become a U.S. Citizen by naturalization include:

• Must be at least 18 years of age
• Must be lawfully admitted to the U.S. for permanent residence
• Must have resided continuously (no single absence from the U.S. of more than 1 year) as a lawful permanent resident in the U.S. for at least 5 years prior to filing
• Must have been physically present in the U.S. for at least 30 months out of the previous 5 years
• Must show attachment to the principals of the U.S. Constitution
• Must be able to read, write, speak, and understand English (with some exemptions)
• Must demonstrate a knowledge and understanding of the fundamentals of history and of the principles and form of the U.S. government (some exemptions apply)
• Must take the oath of allegiance
• Must show that he/she has been a person of good moral character for the statutory period (usually 5 years)

While “person of good moral character” is not specifically defined, there are numerous actions that preclude an applicant from meeting this requirement including:

• Being convicted of murder
• Being convicted of an aggravated felony as defined in section 101(a)(43)
• Being convicted of crime(s) involving moral turpitude
• Being convicted of 2 or more offenses for which the total sentence imposed was 5 or more years
• Being convicted of any controlled substance law (except a single offense of simple possession of 30 grams or less of marijuana)
• Being convicted of 2 or more gambling offenses
• Practicing polygamy
• Willfully failing or refusing to support dependents

As noted above, some exemptions can apply to certain requirements.  Additionally, in other special circumstances, certain individuals may become a citizen through naturalization without meeting the basic requirements.  Before applying for naturalization, individuals should consult with an immigration attorney to ensure that all the requirements applicable to their specific circumstances have been met.

Should I Have an Egg Donor Contract?

Whether you are the donor or the donee, it is highly advisable that you execute a contract between the parties involved in the donor process.

State law determines the rights of parties for reproduction assistance technologies/procedures.  However, where state law has not defined the rights, the courts will look at the intentions of those involved and a contract can detail those intentions.

An example of this would be the rights/responsibilities of a sperm donor.  In Illinois, a man who donates semen to a licensed physician for the purpose of artificially inseminating a woman other than his wife will not legally be considered as the natural father of any child conceived by the artificial insemination.

On the other hand, there is currently no law in Illinois that applies the principles above to egg donation.  Any issues that arise during or after an egg donation are governed by the intention of the parties to the transaction.

Therefore, it is essential that a comprehensive, written contract be executed to explicitly state each party’s intentions and anyone considering using donor eggs should work with an attorney familiar with these laws to ensure their rights have the maximum protection available under the law.

Can I File Bankruptcy Without My Spouse Filing Bankruptcy?

Yes, one spouse can file for bankruptcy protection without bringing the other spouse into the bankruptcy action.

However, an additional question that should be considered is “Should I file bankruptcy without my spouse filing?”  In answering this question, there are some issues you should consider before moving forward, including, the fact that:

• Both spouses’ incomes are included in the required means test, and
• The non-filing spouse could still be liable to creditors for any joint debts.

Everyone’s situation is unique and should be treated as such.  Because of this, unfortunately, there is no “one-size-fits-all” answer to filing bankruptcy.

Just because it is possible to do something doesn’t mean that it is a good idea to do it.  Consulting with a bankruptcy attorney can provide guidance on what avenue is best for your particular situation.

Should We Consider Second Parent Adoption?

Illinois is one of a handful of states that allows for second parent, or co-parent adoption.  Second parent adoption permits 2 unmarried people to both be the legal parents of a child(ren).  Second parent adoptions are utilized by gay or lesbian couples, as well as heterosexual couples who are unmarried.

If only one of the partners is either the biological parent or the legal parent through adoption, the other partner can face numerous hurdles because s/he does not have legal rights to the child(ren).  For example, authorization for medical treatment, custody and visitation, and decision-making powers about schooling are a few areas that only the “legal” parent has the ability to handle, unless specific, advance authorization is provided.

Many of these problems may be resolved through various other means such as authorization forms, wills, and custody agreements.  However, second parent adoption resolves almost all of them in one process, instead of numerous transactions and forms that require anticipating every future eventuality in advance.  Additionally, should the unthinkable happen and the relationship between partners ends, through second parent adoption, both partners would have the same legal rights to the child(ren).  Please contact our office for more information or to speak with an attorney regarding your situation.

IRS Tax Relief – Innocent Spouse Protection

Married couples who file their tax returns as “Married – Filing Jointly” can avail themselves of numerous tax benefits.  However, in doing so, they also agree that they are jointly and severally liable for any tax due.  This means that each spouse is individually responsible for the correctness of the filed tax return.  So what happens if one spouse submits false information on the joint tax return without the other spouse’s knowledge?

The IRS allows for protection for “innocent spouses” and can relieve the burden of taxes, as well as the interest and penalties associated with the tax debt.  In order to claim the protection of the innocent spouse defense, a taxpayer must satisfy several requirements, including:

• The liability arises from an understatement on a joint tax return that has erroneous information reported by the taxpayer’s spouse.
• The taxpayer did not know or did not have reason to know of the understatement.
• That it would be unjust to hold the taxpayer liable based on the facts and circumstances surrounding the situation.
• The taxpayer properly requests the protection of the innocent spouse defense within the applicable timeframe.

Relief from tax burden is available to “innocent spouses”, however, the IRS is strict in its application of the protection.  Taxpayers who could qualify for relief should consult with an attorney to review their situation and the remedies that might be available to them.  Please contact our office for additional information or to discuss your situation with an attorney.