Author Archives: Ryan C. Wood

About Ryan C. Wood

Ryan C. Wood is a California attorney practicing primarily in the areas of Bankruptcy Law, Business Law and generally seeking justice for under represented clients in the Bay Area.

Can the IRS Levy my Social Security Income and 401k?

By Ryan C. Wood

There are certain income streams and assets that are protected from creditors and their collection activity. Things like income from Social Security or your ERISA (Employee Retirement Income Security Act) qualified retirement accounts are normally exempt from collection activity. However, you need to be careful because there is an exception for the Internal Revenue Service (IRS).

Once the IRS files a lien against you they can do what most creditors can do: garnish your wages, levy bank accounts, or place liens against any of your property. If that is not enough to cover the debt owed to the IRS the IRS can then go ahead and levy your federal payments (up to 15%) such as Social Security benefits and benefits that are administered by the Office of Personnel Management. The IRS will cannot levy income from unemployment benefits, special pensions for Medal of Honor winners, workers compensation, certain public assistance payments, and court-ordered child support payments. This is not a comprehensive list. For more information on what can or cannot be levied you can view IRS Publication 594 and other forms and publications from the IRS website.

In addition to being able to levy your federal income payments the IRS can also levy against your income received from pensions and retirement plans such as 401ks, Stock Bonus Plans, Profit Sharing, IRAs, SEP-IRAs and Keogh Plans. The important thing to note is that the IRS stands in your shoes. They can only receive what you would be able to receive at the time of the levy. If you cannot withdraw any funds from the retirement account until you retire the IRS cannot levy those funds until you retire. If you can withdraw funds from your retirement account like a 401k but will be penalized 10% for the early withdrawal the IRS gives you a break. They will levy your 401k but they will not tax you for the 10% early withdrawal. Sometimes people find that that is an easier way to get the IRS off their back and request that the IRS do so. Of course that would still sting and would set you back quite a bit on your 401k, but it may be a better solution than having the IRS constantly after you and accruing interest and penalties at the same time.

You can of course dispute the levy with the IRS if you believe you do not owe the amount the IRS says you owe. If it is determined that you actually owe the amount you can try to do an Offer in Compromise or do an Installment Agreement. Additionally, before the IRS decides to levy on your retirement assets they have to determine if you depend on the retirement account for necessary living expenses. If you can prove to them you need all of your retirement income to live each month they may hold off on levying your retirement assets.

Another alternative is to file for bankruptcy. Contact a bankruptcy lawyer in your area to see the bankruptcy can help. If your tax debt is more than three years old, filed more than two years ago, assessed more than 240 days ago and not filed fraudulently, your tax debts may be dischargeable in bankruptcy. The key is to try to file your bankruptcy case BEFORE there is a lien on your property. If you file your bankruptcy case after there is a lien on your property the IRS may still be entitled to the retirement assets you had at the time you filed for bankruptcy. They cannot attach to any after-acquired property but they can still get to your retirement account, especially if you will be retiring soon and will be able to access your retirement funds. You should contact an experienced CPA or bankruptcy attorney if you believe you will be receiving a notice from the IRS that they will be filing a lien against you soon. Do not ignore the IRS.

Can I File a Joint Bankruptcy Petition with my Same Sex Spouse?

By Ryan C. Wood


Under 11 U.S.C. §302, if you are legally married, both you and your spouse will be able to file a joint bankruptcy petition and receive the benefits provided under the Bankruptcy Code. The Defense of Marriage Act (DOMA) that was signed into law on September 21, 1996, defines marriage as a legal union between one man and one woman and therefore prohibits the federal government from recognizing legal marriages of same sex couples. Bankruptcy court falls under federal jurisdiction. What does this mean? It means that bankruptcy courts will not recognize same sex couples as legally married and could potentially deny a same sex couple to file a bankruptcy together. This would mean higher costs for a same sex couple as they may potentially need to file two separate petitions and pay two separate filing fees.

All is not lost, however. On February 21, 2011, President Obama declared that the Defense of Marriage Act should be repealed and Attorney General Eric Holder indicated that the Obama Administration will no longer assert the constitutionality of the DOMA in Court. Prior to this, the U.S. Trustees or the Trustees administrating the individual cases would raise the objection in court and seek to dismiss the case if a same sex couple filed a joint bankruptcy petition. It would have been up to the individual judges who may dismiss the case for cause. The courts look at each case on a case-by-case basis and makes a decision based on the circumstances including what is the best interest of the debtors and creditors.

So if the United State Trustee, an arm of the Department of Justice, no longer defends the DOMA in court and defending DOMA to dismiss a case based on the marriage of a same sex couple, does that mean you now get to file a joint bankruptcy petition with your same sex spouse? That is most likely the case. If the trustee doesn’t object based on this issue the only other parties in interest that may have standing to object to your petition would be the creditors in your case. They would most likely not object due to the costs involved in hiring a bankruptcy attorney and the fact that it may also benefit the creditors to have the case be jointly administered if the debts were jointly incurred. Additionally, the creditor may receive a lot of negative publicity if they were to object to a joint case based on a same sex marriage. But ultimately the classic answers many bankruptcy lawyers give to questions is it depends upon the circumstances.

The Supreme Court is set to hear two same sex marriage cases. California’s Proposition 8 case will be heard on March 26, 2013 in Hollingsworth v. Perry. Windsor v. United States will be heard on March 27, 2013. We will wait and see what the Supreme Court has to say about same sex marriages and the constitutionality of DOMA.

Can I Buy A House After Bankruptcy?

By Ryan C. Wood


The question of whether you can buy a house after bankruptcy is one of the most frequently asked questions. Most bankruptcy lawyers give the somewhat helpful answer that “it depends.” A lot of people think that they will be automatically denied a loan after filing bankruptcy, but that is not true. Banks look at a lot of different factors when they are deciding whether to extend credit to you. They look at your credit score, your income, how long you have been employed, how much debt you have, how big of a down payment you are putting down, and many other factors. If you have filed for bankruptcy already you will not have any debt weighing you down. If you add in the fact that you have been steadily employed making decent money and you have been saving all your money (since all your unsecured debt was discharged in your bankruptcy case), it may be possible that a bank would extend credit to you to buy a home.

Whether the bank is willing to extend credit to you also depends on the economy and the credit situation at that time. When the real estate market was on the rise people were able to buy a house a couple years after filing bankruptcy. Right after the real estate market came crashing down even people that had perfect credit were not able to obtain loans because the banks were really tight with their money. An example of this is a self-employed individual with a credit score in the 800s. She was willing to put a 50% down payment on the home. The banks refused to lend her credit because she was self-employed and therefore, according to the banks, higher risk that the business would fail and she would be unable to repay the mortgage.

Even if a bank is willing to extend credit to you to buy a home one factor you need to look at is what interest rate you will be charged. If you have filed for bankruptcy recently the interest rate may be higher. One possible way that your interest may be lower is if you have a co-signer that has a great credit to buy the home with you. You need to be sure you can afford to repay the loan with the interest included before you sign on the dotted line and incur more debt or you may need the services of a bankruptcy lawyer. You may potentially be able to refinance the home at a lower rate in the future if your house has equity and you have been steadily maintaining your credit, but that is not something you should be banking on when you are incurring the debt because it may never happen.

Bottom line: it is very possible to obtain credit to buy a house even after filing for bankruptcy depending on what the economic situation is like.

What are the Consequences if I am Caught Intentionally Lying on my Bankruptcy Petition?

By Ryan C. Wood

The entire bankruptcy process is designed to allow an honest person who needs help cleaning up their financial situation to get a fresh start free from creditor harassment and oppressive debt. Unfortunately some people try to have their cake and eat it too. They try to hide their assets so that creditors cannot get to the assets while at the same time trying to get their debts discharged. If the trustee assigned to the case, a creditor or U.S. Trustee finds these hidden assets they are jeopardizing their bankruptcy case and may even have criminal charges against them. To avoid this you should hire a bankruptcy attorney from the start of the bankruptcy process. Your bankruptcy lawyer can guide you and prepare your bankruptcy petition the right way. You need to be honest with your attorney and tell your attorney all the assets that you have. If all of your assets cannot be protected at least they can let you know what would be the best course of action for you to take.

If you lie to your attorney, fail to answer their questions honestly and leave out major assets your attorney will not be able to protect you or your assets. If you file a bankruptcy case yourself and then hire an attorney later on once things go south your attorney may try to help you as much as he or she can, but it may be too little too late. It is harder to try to clean up the mess once things go bad than to have it be prepared correctly in the first place. Most cases go smoothly even if there are some issues. If the trustee, creditor or U.S. Trustee does find hidden assets, here are some of the consequences that may occur.

Dismissal of Bankruptcy Case

A motion to dismiss the case with prejudice could be filed with the court. Not only will your current case be dismissed, but your debts could be determined nondischargeable and bar you from filing again for many years. If your bankruptcy case is dismissed your debts will not be discharged even though your credit report will indicate that you have filed for bankruptcy previously.

Loss of Discharge

If the trustee finds that you have lied or perjured yourself in your bankruptcy petition one of the results could be the loss of your bankruptcy discharge. The discharge of your debt is the main reason people file for bankruptcy in the first place. Without the discharge you are still responsible for your debts and your creditors can still collect on that debt.

Loss of Undisclosed or Hidden Asset

If you are in a Chapter 7 bankruptcy case you may lose whatever asset was undisclosed or left out in your bankruptcy petition. The trustee can liquidate that asset and give the proceeds to your creditors in exchange for a discharge of your debt. The trustee is able to liquidate this asset because all assets you own are part of the bankruptcy estate and since it was not listed in your petition it was also not exempted in your Schedule C and therefore not protected. If it is not protected it can be liquidated.

Criminal Charges

Attempting to hide assets falls under the bankruptcy fraud category and it is a federal offense. If found guilty you could be fined up to $250,000 and/or spend up to five years in jail.

If you legitimately forgot to include a debt rather than intentionally hiding your asset in your bankruptcy petition you can try to convince your trustee you acted in good faith and just made a mistake. If the trustee does not believe you all is not lost. The ultimate decision is up to the bankruptcy court and the judge assigned to your case. If you can convince the judge that it was not intentional and the judge believes you, then you can still obtain a discharge of your debts.

What Is Consumer Debt And Why Is It Important In My Bankruptcy Case?

By Ryan C. Wood

You may hear the phrase “consumer debt” a lot when you are looking into bankruptcy. The reason why it is so important that you know what is considered “consumer debt” is because it may determine whether you can qualify for a Chapter 7 discharge in bankruptcy. Pursuant to 11 U.S.C. §101(8) the term “consumer debt” means debt incurred by an individual primarily for a personal, family, or household purpose. Under 11 U.S.C. §707(b), a trustee (or any party in interest) may file a motion with the court to attempt to dismiss your Chapter 7 case if your debts are primarily consumer debts and the court finds that granting the discharge of your debt would be considered an abuse of the bankruptcy process. How does the bankruptcy court determine whether your debts are considered an abuse of the bankruptcy process? They look at the totality of circumstances, but the most important factor is whether you pass what is called the “means test.” The means test takes your income from all sources (except Social Security Act income) and averages it out for the past six months and compares that average income to other households living in your state. Some of your expenses may also be included in the means test, but most of the expenses are already specified for you based on your household size under the National Standards and Local Standards under the IRS Code.

What should you take away from this? You should note that if your debts are primarily non-consumer debts you are not required to complete the means test form. “Primarily” in this scenario means more than half. So if 51% of your debts are non-consumer debts you do not need to fill out the means test form. This makes it very important to discuss your debts with your bankruptcy lawyer to classify your debts correctly into consumer or non-consumer debts.

Non-consumer debt is really any debt that is not used for a personal, family, or household purpose. You make the determination of whether it is consumer debt or non-consumer debt based on your intention at the time the debt was incurred. One of the biggest categories of non-consumer debt is business debt. Business debt is any debt that was incurred for a business purpose, such as to start up, advertise, or maintain a business. Congress wanted to be sure that entrepreneurs are able to take risks in their businesses to hopefully benefit the economy. If the business does not succeed then the entrepreneur will be able to file for bankruptcy. Other types of non-consumer debt could be debt related to auto accidents (since the debt was not incurred for a personal, family, or household purpose) and personal income taxes.

Real estate debt could be both consumer and non-consumer debt. It is normally consumer debt since you are purchasing and incurring debt to purchase a house for your family to live in. Real estate debt may be non-consumer if the purpose at the time of incurring the debt was for investment (profit generating) purposes. A lot of realtors have created LLCs and were purchasing homes, fixing them up, and selling those homes for a profit. This would be considered a non-consumer debt.

Student loans could also be both consumer and non-consumer debt. This is a gray area in the law. It would depend on the purpose at the time the student loans were incurred. If it was for living expenses like room and board, that portion of the student loan debt could be considered consumer debt. The portion of the student loan that is used for things such as tuition could be considered non-consumer debt. It may be very hard to determine how much of the student loans were used for consumer purposes and how much of the student loan were used for non-consumer purposes.

Credit card debt may also be both consumer and non-consumer debt. If most of the debt was incurred for personal purposes like gas, food, utilities, entertainment, and similar endeavors then the credit card debt is considered to be consumer debt. If the credit card was used for business purposes like to advertise or maintain a business it would be considered non-consumer debt.

If you do not know whether your debt is primarily consumer or non-consumer debt or how to relay that in your bankruptcy petition it is advisable that you seek the services of an experienced bankruptcy attorney to review your case.