Bankruptcy

Does bankruptcy cause divorce?

Improved communication can break as well as strengthen relationships.  As Rachel Lynn Foley noted in her Bankruptcy Law Network post – Does Bankruptcy Cause Divorce? – it is not rare for couples to file for divorce after having gone through bankruptcy.  One cause is undoubtedly a continued failure to communicate about financial matters, perpetuating poor budgeting decisions.  Sometimes, however, improved communication reveals fundamental incompatibilities in the way husbands and wives handle money.  This can also lead to divorce.

While volunteering as a substance abuse counselor I have observed this phenomenon among recovering alcoholics.  As long as one member of the couple is chronically drunk or stoned, there is little cooperative decision-making, and both the substance abuser and the partner blame the substance for conflicts that do occur.  This state of affairs can persist for years. Sobriety removes that excuse, forcing people to communicate honestly about money, time management, emotional needs, and strategies for child rearing. Reconciling different approaches on all these fronts often seems overwhelming.

Debt has many characteristics of a drug.  Typically it begins as a voluntary commitment bringing clear-cut rewards, but unless the debtor is able to limit his usage, the debt escalates to the point where liabilities eclipse any positive effect. Debt allows people to avoid dealing with financial realities.

Bankruptcy is analogous to withdrawal. The person who emerges from a detoxification facility or a Chapter 7 bankruptcy, receiving at most a few general educational counseling sessions as a follow-up, is poorly-equipped to avoid relapse.  Ongoing regular support greatly improves the odds.  For people whose finances do not allow for professional counseling, there is a 12-step program, Debtor’s Anonymous, which has proven helpful to many people.  Information about how to get involved can be found on their website. Many social service agencies also provide budget counseling for low income people.

Recognizing that recovery from debt is a difficult and long-term process, and making full use of available resources, can save a marriage, or at least postpone the decision to divorce until the parties are better prepared financially and emotionally to make a fresh start on life.

By |Mar 29, 2008|Categories: Bankruptcy|Tags: , , , , |

Bankruptcy is A Christian Idea

Bankruptcy in many ways is a Christian concept.  American bankruptcy laws have Biblical roots.  The seven-year waiting period between personal bankruptcies that was the law until 2005, for example, is based upon Deuteronomy 15:1-2

At the end of every seven-year period you shall have a relaxation of debts, which shall be observed as follows. Every creditor shall relax his claim on what he has loaned his neighbor; he must not press his neighbor, his kinsman, because a relaxation in honor of the LORD has been proclaimed

and Leviticus 25, which describes the regulations both for a seventh year Sabbath and a fiftieth year of jubilee.

By |Dec 12, 2007|Categories: Bankruptcy|Tags: , , , , , , , , |

Earned Income Credit Fully Exempt in Oregon

As explained in Dana Wilkinson’s article arguing in favor of a federal exemption for the Earned Income Credit, the federal credit, created by 26 U.S.C. §32 (1994), is a refundable tax credit provided for low income workers who have dependent children and who maintain a household. A low income taxpayer can get the credit, in the form of a check or automatic deposit into a bank account, even if the amount of the refund is larger than the amount of tax paid that year.

In Oregon we have an exemption specifically protecting the Earned Income Credit and keeping it entirely exempt from exectution by a debt collector with a judgment.  This exemption also applies to the trustee in a bankruptcy case. 

By |Nov 15, 2007|Categories: Bankruptcy, Tax Law|Tags: , |

Highway Use Tax

Are Oregon highway use taxes dischargeable in bankruptcy?  Yes, if certain conditions are met, a debtor in bankruptcy can discharge taxes incurred in Oregon for use of the highways.  Claims for state and federal highway use taxes levied against truckers based on the weights of vehicles turn up frequently in Oregon bankruptcy cases.  The state is aggressive in enforcing the tax required by ORS Chapter 825.

I recently had a new client bring in collection notices for nearly $250,000 in tax assessed by the Oregon Department of Transportation as the result of a an audit of the company books.  The client had failed to properly respond to the audit notices and to pursue all of his administrative remedies.  He later spent over $25,000 in attorney fees to no avail when he tried to get a new hearing.  It is unable to continue operating trucks and has had to close his business.