5 things you shouldn't forget to ask when you file bankruptcy

If you have too much of debt and there's no income as such to support your debt payments, bankruptcy filing may be the only option for you.

However, you need to get an idea as to what bankruptcy is all about and how it can affect you once you file it. Given below are the 5 things you should surely ask before you file bankruptcy.

1.Find out if you're eligible to file: If you have more than enough income and asset limit, you may not be allowed to file Chapter 7. In such a case, the court may ask you to file Chapter 13 which is basically a repayment plan developed in order to help you pay off debt within a period of 3-5 years. So, it's important for you to know under what conditions bankruptcy filings are possible.

2.Know what debts won't be wiped out: It's essential to find out those debts which cannot be canceled or wiped out through bankruptcy filing. There are certain debts such as student loans, child support, back taxes, alimony etc which cannot be discharged or wiped out in bankruptcy. So, it's no use including such debts into your filing.

Credit cards and personal loans are debts, which can be discharged through bankruptcy filings. But if they are fraudulent debts (for example: you have lied on your credit application), then you will not be able to include them in your bankruptcy filing.

3.Effect on your spouse or cosigner: Bankruptcy filing won't affect your spouse unless his/her name is on the debt account. If you've filed Chapter 7, your spouse's credit will get tarnished along with yours. But Chapter 13 will protect your spouse or cosigner as it is a sort of repayment plan that allows you to reorganize your debts.

4.You may be able to keep your home/car: Chapter 13 bankruptcy filing will help you to keep your home or car as you're making payments under a court-approved payment plan. But if you file Chapter 7, chances are that you may lose your home or car if your home equity is more than the Federal or State exemptions applicable in your state of residence.

5.Know if your 401k plan and insurance policies are safe: Retirement plans such as 401k, 403b etc and pension are protected under the Federal law. As such, they won't be affected by bankruptcy filings. However, IRAs and Keogh plans may not be entirely protected, but they do have exemptions (for example: creditors cannot take up to the first $1 million of your funds in an IRA) defined under the bankruptcy laws.

Bankruptcy filings can help you get out of debt or restructure payments depending upon whether you qualify for Chapter 7 or Chapter 13. However, just make sure you're quite comfortable with disclosing your financial details to your creditors as well as the bankruptcy court.



About the Author
Jessica Bennet is an experienced financial writer associated with Mortgage Fit Community. She has been guiding the Community through her writings on bankruptcy, filing bankruptcy, bankruptcy filing mortgage, loan modification and related financial topics. Her views and opinions shared in the forums have helped community members and guests get over problems in their mortgage.

Confusing "Use Tax" Exemption Requirement "First Functional Use" Explained

The article written last month titled "Proper Delivery Outside of California Begins the "Use Tax" Exemption Process" explained the importance of, and how to, properly take delivery of an aircraft outside the state, which is the first step in the California sales and use tax exemption process. If you didn't get a chance to read that article you can contact Aero-tax Compliance Experts, LLC (ACE) for a copy or visit www.aero-tax.com.

Many aircraft owners and potential owners have contacted us for an explanation on California's "first functional use" requirement. We have learned that there is a lot of mis-information and confusion on this issue. Our attempt is to clarify some of the confusion that exists and eliminate the mis-information with the "first functional use" requirement for the California use tax exemption process.

"First functional use" is a critical component of the California use tax exemption process. California Sales and Use Tax Regulation 1620 defines first functional use as "use for which the property was designed." An aircraft is defined in Law section 6274 as "any contrivance designed for powered navigation in the air except a rocket or missile." Logically, one would conclude that first functional use of an aircraft is flight because aircraft are designed to fly; right? Not necessarily. In my experience with the sales and use tax law, one can not rely upon logic.

The California State Board of Equalization (BOE) has effectively confused the term "for which the property was designed" with "how big it is," or "how is it configured." I'll explain; in May of 2002 a staff member of the BOE's tax counsel (writer) drafted a memorandum to another staff member explaining to them the writer's interpretation of first functional use. Somehow, the writer deduced a formula, or justification, to distinguish between aircraft designed for personal purposes and aircraft designed for commercial purposes. Simply put, the writer concluded in the memorandum that an aircraft with 6 or fewer seats was an aircraft designed for personal purposes, and an aircraft with 7 or more seats was designed for commercial purposes.

To confuse the issue even further, the writer decided that all jet aircraft were designed for commercial purposes, and "personal" aircraft could be "configured" for commercial purposes. Additionally, the writer added that it was possible for someone to justify a large jet as a personal use aircraft.

Now that the writer made a distinction between personal and commercial aircraft, the writer defined the "first functional use" for each. Aircraft that are designed for personal purposes were first functionally used when flown, and aircraft designed for commercial purposes were first functionally used when flown with a passenger or cargo onboard.

We have researched and reviewed several thousand legal opinions and rulings from the BOE on this issue. The BOE had interpreted first functional use as flight, up until this memorandum was drafted and distributed throughout the agency. After the distribution its effect was immediate, and in some cases a retroactive application of the new formula. During our research, we developed the industries most successful approach to complete the first functional use requirements pursuant to the current standards, and have projected other items that may be required in the future.

As a standard practice, Aero-tax advises that the purchaser bring someone, to the out of state delivery location, to act as a true passenger (not a pilot, co-pilot, flight crew, CFI, etc.) onboard a flight (or two) outside of California before proceeding with their specific exemption. In addition, this flight must begin in one state, country, territory, etc. (not California), and end in a separate state, country, territory, etc. (not California). For example, this flight may depart from the out of state delivery location (Oregon), to another state (not within California or Oregon). Depending on the "design/size" of the aircraft and for those who are claiming the commercial interstate or foreign commerce exemption, they must conduct business at the location they travel to. In addition, documentation must be obtained to support the business purpose (i.e., meeting notes, invoices, proposals, etc.) of the flight.

After the first functional use flight has been made, and prior to departing that location, fuel must be purchased, ideally using a credit card. This will generate a fuel receipt that will contain documentary evidence that the aircraft was at this location on a specific date. Additionally, a statement will be needed from the passenger onboard the aircraft during the "first functional use" flight. Depending upon the type of exemption you are claiming the aircraft may or may not be allowed into California.

If the foregoing process and documentation are properly completed and collected, the "first functional use" requirement should be adequately fulfilled. The smallest variation could mean disaster for the tax exemption.

The "first functional use" is only one of the small, yet critical, parts of the California use tax exemption process. There are many aspects which must be completed successfully and documented in order to secure the exemption. ACE will guide the purchaser through the process and ensure the success by monitoring each aspect of the exemption requirements.

Unless otherwise expressly indicated, any advice contained herein was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any sales or use tax, interest or penalty that may be imposed. To be certain the exemption requirements are accurate for your specific situation, call one of our tax experts to discuss.

Other articles will be coming out periodically to explain other aspects of the California sales and use tax laws, regulations, legal decisions, exemptions, or other related matters. If you have a specific sales and use tax topic that you would like discussed or explained please send us an email to joe@aero-tax.com.



About the Author
This article was written by Joe Micallef, CEO of Aero-tax Compliance Experts, LLC (ACE). Don't wait until it's too late, let the professional staff at Aero-tax Compliance Experts, LLC show you how to ACE Your Exemption, Refund or Appeal! If you have any questions, contact our tax experts at (916) 647-6407 for your FREE CONSULTATION, or visit us on the web at www.Aero-tax.com.

A Roth IRA's Contribution Limit

What is a Roth IRA's contribution limit?

For the 2009 tax year, individuals can make maximum annual contributions equal to the dollar amounts which follow. These contribution limits vary depending on the current income and age of the Roth IRA account holder.

Since the IRS doesn't impose age limits on who can have and maintain a Roth IRA account, the only variable effecting your eligibility is your dollar amount of your taxable earned income. This is also known as your Modified Adjusted Gross Income (MAGI).

Roth IRA Contribution Income Limits

The amount you can or can not contribute to a Roth IRA is totally dependent on the amount of earned income you have.

Below is a list of the income limits and contribution guidelines for a Roth IRA account:

a) $169,000 is the cut-off for making a Roth IRA contribution if you're married and file a joint tax return.
b) $10,000 is the cut-off for making a Roth IRA contribution if you're married and file a separate tax return but lived with your spouse at any time during the course of the tax year.
c) $116,000 is the cut-off for making a Roth IRA contribution if you're filing as one of the following:

1) Single
2) Head of household
3) Married filing separately but did NOT live with your spouse at any time during the course of the tax year.

Unfortunately, if your modified adjusted gross income is higher than these maximum thresholds, you can NOT contribute to your Roth IRA...

For a more detailed look at what you can contribute, read the information below which matches your IRS filing status.

Married Filing Jointly

If married filing jointly is your IRS tax filing status, you can contribute a maximum of...

• $5,000 as long as you're under 50 and your earned income is $159,000 or less
• $6,000 as long as you're over 50 and your earned income is $159,000 or less
• $0 no matter your age if your earned income is $169,000 or more

If your modified adjusted gross income is between $159,000 and $169,000, your maximum contribution amount is gradually phased out to zero.

In such a case, you need to consult with an accountant to determine the exact amount you're able to contribute.

Single, Head of Household, or Married Filing Separately

If single, head of household, or married filing separately is your IRS tax filing status, you can contribute a maximum of...

• $5,000 as long as you're under 50 and your earned income is $101,000 or less
• $6,000 as long as you're over 50 and your earned income is $101,000 or less
• $0 no matter your age if your earned income is $116,000 or more

If your modified adjusted gross income is between $101,000 and $116,000, your maximum contribution amount is gradually phased out to zero.

In such a case, you need to consult with an accountant to determine the exact amount you can contribute.

Married Filing Separately

If you're filing status is married filing separately, and...

You lived with your spouse at any time during the year, then you can contribute a maximum of...

• $5,000 if you're under 50 and your earned income is $0
• $6,000 if you're over 50 and your earned income is $0
• $0 regardless of age if your earned income is $10,000 or more If your earned income is between $1 and $10,000, your maximum contribution amount is gradually phased out to zero.

If this is the case, you need to consult with your accountant in order to determine the exact amount you can legally contribute.

Special Exemptions

If you participated in a 401(k) plan maintained by an employer who went into bankruptcy in an earlier year, you may qualify to make a catch-up contribution of as much as $8,000.

If you think you might qualify for this special exemption, make an appointment with an accountant to review your situation.



About the Author
Britt Gillette is the author of Your-Roth-IRA.com, where you can find tips and information for your self-directed Roth IRA. Visit the Your Roth IRA site for more articles on a Roth IRA's contribution limit and Roth IRAs.

Commonly Asked Questions About Bankruptcy

Bankruptcy is a state where a person or company may have limited or no means to pay obligations and debts to other people or institutions. There are two kinds of bankruptcy states and these are chapter 7 and chapter 13. There are a lot of questions that people like to ask but are afraid to do so. The following clarifies and explains some of the more commonly asked bankruptcy questions around.

Chapter 7 Bankruptcy

This kind is where a person undergoes a liquidation proceeding. This type of bankruptcy is where the debtor hands control and ownership of non-exempt property to a trustee. The trustee, in turn, will liquidate the different properties into cash and distribute this to those whom the debtor owes credit to. In some cases, creditors are not fully compensated of the debt but some part may be paid. In most cases of this kind of bankruptcy, the debtor is debt free and can start anew with another form of business or life.

Chapter 13 Bankruptcy

This form of bankruptcy is one where reorganization is done in order to accommodate the debts of the person in coordination of his or her predictable income. Cases like these are where the person may have non exempt property which he or she wishes to keep and if their income can cover the debt as well as meet the needs of reasonable expenses.

Questions

Common bankruptcy questions include whether the person spouse or family will be included in the liquidation or the reorganization of income and property. In many cases of debt, the spouse or family of the debtor is excluded from the debt as long as the spouse did not sign any document o contract stating otherwise. Other people also want to know if they are eligible to file for bankruptcy. People who have large medical bills, overextended credit cards and other financial difficulties may apply for bankruptcy. Bankruptcy questions regarding credit standing and whether credit will be granted again are also commonly asked. Credit standing will be restored as soon as the outstanding debts are paid and settled while credit can be granted again depending on which banks to approach. There may be some difficulty in establishing credit for some people but there are no laws saying that those who have filed being bankrupt should not be given credit after clearing or settling their debts.

How to file for bankruptcy may also be included in some questions that debtor want to ask. There is usually a fee that needs to be paid to file for such a state. A lawyer may also be necessary to help you with the necessary paperwork but consultations fees and attendance fees are sure to reach around $1,000 - $2,000. In spite of these new possibilities of debt, one is obligated to hire lawyers for such a proceeding. Laws require the attendance of the lawyers during most of the meetings with creditors to be able to help the debtor and the creditor reach an agreement. Filing for Chapter 7 bankruptcy costs around $300 around the country, there may be some other smaller fees but these are usually minimal.

Individuals who file for bankruptcy may also be allowed to keep certain assets. Each individual state has its own laws and exemptions regarding which assets can be kept by the debtor and not included in the liquidation or reorganization. Usually, some personal property and some tools of the trade which may help the individual gain income are not included in what the state may seize or liquidate. Other benefits which are allotted to the individual in debt by the state as well as his or her income may not also be include din the liquidation and reorganization bid.



About the Author
Rolf Joho is owner of Internet InfoMedia and writes on a variety of subjects. For more Bankruptcy questions visit: Bankruptcy

How To Qualify For Chapter 7 Bankruptcy

Filing for bankruptcy is considered to be the measure taken when somebody fall into the pits of financial ruin, then falls into that pit's pit - that's how bad it is. Now if you find this concept a little hard to understand, here's what you've got to know: bankruptcy is the state of an individual where he is no longer capable of paying off his debts, so he files for such as to "appease" or settle with the people he owes. Yeah it's as simple as that, but are you aware that there are different chapters that you can be classified under? If you did, then I'll ask you this: which is the worst amongst all of the bankruptcy chapters? To many, it'd be none other than chapter 7 bankruptcy.

The chump having to file under chapter 7 bankruptcy is forced to sell all of his assets (declared and the ones not exempted), which would be real bad for the business, why? Because having to liquidate your goods would mean that there'll be no way for your venture to continue operating you big dummy. Common sense would have told you that, right friend? Anyways, moving forward, let's explore chapter 7 bankruptcy further: first off, matters here are taken into the hands of a bankruptcy court, naturally. A trustee will be needed here, mainly because he's the guy that'll be making the arrangements for the disposition of your assets.

You're left with no choice, since your creditors are pissed, so liquidating would be your only option. The money that is reaped from the "sales" will then be forwarded to the people or lending organizations, or whoever you borrowed from (taken that they're legit) to settle the amounts you owe them. There are some exemptions, in the sense that there are some assets that won't be needed to sell off, but it'll depend on the laws of the state you belong to. The next thing that we need to tackle in regards to chapter 7 bankruptcy is eligibility. You see, not everyone will be given the "privilege" for filing under the said chapter; there is a certain criterion for you to oblige with.

Here it is: the means test. Hold on, what the heck is that, you ask? Well think of it as the "formula" that'll determine whether or not you can qualify for such a state. There are two elements that will be used for computing, namely your income and expenses. What's done here is the expenses are subtracted from the income, and the result will be the one thing that will determine your eligibility. You see, if the result is less than the median income of the state, then you will be more than qualified to file under chapter 7 bankruptcy.

But if the result is greater than the median income of the state, then tough luck, go file under a different chapter. Now you're probably wondering how much the whole procedure of filing under chapter 7 bankruptcy is gonna cost you, right? Taken that you are interested, it's going to cost you anywhere from 250 to 350 bucks, depending on your case. There'll also be a long-term cost, but it'll be thoroughly discussed by your lawyer, unless you already knew that.



About the Author
The author of this article Rick Goldfeller is an underground Financial Analyst who has been successfully running campaigns for several wealthy clients. Rick finally decided to go public and share his knowledge and experience through his website http://www.finanzine.com. You can sign up for his free newsletter and join his coaching program.