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Politician tests debt limits of Chapter 13 bankruptcy

A politician recently had a second bankruptcy dismissed after a bankruptcy judge had determined he had filed the petition "in bad faith." This is the man's second Chapter 13 bankruptcy petition; he had his first Chapter 13 dismissed after the IRS successfully argued that he had too much debt to qualify for a Chapter 13.

The IRS seeks to foreclose on the politician's home. On the eve of his deposition, the politician filed bankruptcy (for the first time) to stop foreclosure proceedings, claiming he needed Chapter 13 debt relief. He had previously been entangled in a lawsuit with the IRS during which he claimed that the federal income tax is unconstitutional. After he lost his lawsuit, the IRS billed him for over half a million dollars in back taxes.

The court dismissed this first bankruptcy about three months after the man filed it. He then turned around and filed bankruptcy again, which eventually resulted in the "bad faith" dismissal.

Although this politician lives in a state other than Massachusetts, local residents interested in Chapter 13 need to understand that a Chapter 13 bankruptcy require that those seeking it have only a certain amount of debt and no more. While for most people in financial struggles this is not an issue, it may be for those who, for example, own a business that is in distress or have other substantial financial obligations.

Further, to follow up somewhat on last week's post, the bankruptcy laws require honesty and fair dealing from those who wish to reduce debt through a bankruptcy. Not meeting these requirements can lead to a person's bankruptcy getting dismissed, or worse....

Chapter 13 is useful tool for debt relief, but a debtor must be willing and able to follow all of the applicable laws and rules.

Source: The Spokesman-Review, "Hart grilled over bankruptcy filing," Scott Maben, Dec. 1, 2012

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