Laws 2325

Kim Huggins

Module 4

                                                                                                                                      1-15-22

1. See Excel Spreadsheet attached

When it came to reducing or omitting expenses for this budget, below is a list of the changes I made when creating a budget for the McPherson family.

• Jennifer’s 401K Investment – Temporarily suspended this investment at this time – eliminating $250 expense
• Child support for Bethany ($400) – this is a disputed expense – could ask the Court for temporary relief due to financial situation
• Alimony ($1000) – this is a disputed expense – could ask the Court for temporary relief due to financial situation
• Food – reduced expense by $200 to eliminate junk food purchases
• Eric Jr. Allowance – At this time eliminated this $300 monthly expense as it is not necessary
• Eric Jr. Tuition – Seek student loan to eliminate $400 monthly expense
• Irene Tuition – Transfer child to public school to eliminate $150 monthly expense
• Clothing – Reduce expense to $166.66 monthly
• Entertainment – Reduce expense to $100 monthly
• Safe Deposit Box – Eliminate $5 monthly expense
• Newspaper – Eliminate $10 monthly expense
• Church Pledge Building Fund – Eliminate $45 monthly expense
• Church Contributions – Eliminate $100 monthly expense
• Eastside Mini Storage – Eliminate $100 monthly expense
• Cleaning Service – Eliminate $200 monthly expense
• Yard Service – Eliminate $180 monthly expense
• Friendly Finance Co. Loan – Sell Bass Boat and eliminate expense

With the changes above, the McPhersons have a net income of $5,541.00/month (that includes child support received for Irene; and have expenses of $4553.33/month. This gives them a surplus of $64.35 and keeps the family within their budget.

• Both alimony and child support are domestic support obligations (DSO) of the debtor, ordered to be paid as part of a court order, divorce decree, separation agreement, property settlement agreement, or administrative determination. As a result, both alimony and child support are always considered non-dischargeable debts and would not be discharged in a Chapter 7 Bankruptcy filing. DSO is a public policy interest exception when it comes to bankruptcy and is therefore also an exception to the automatic stay. As a family court action, “the establishment or modification of domestic support obligations are allowed to continue even after a bankruptcy case is filed.” What are Non-Dischargeable Debts in a Bankruptcy Filing? (upsolve.org)Links to an external site.

Additionally, in a Chapter 7 Bankruptcy filing any past-due child support or alimony needs to be paid, prior to any other unsecured debts. However, by filing Chapter 7 bankruptcy, with the liquidation of the debtor’s assets, this would aid the debtor when paying off past-due domestic support obligations through two methods:

1. a larger portion of unsecured debts will be discharged to help decrease

overall debt.

1. with the elimination of other debt obligations, it would be easier for the debtor to keep up with DSO obligations. (Maryland Bankruptcy - Can Alimony Be Discharged? - The Burns Law Firm, LLC (burnsbankruptcyfirm.com)Links to an external site.

Like DSO, recent tax obligations cannot be discharged in a Chapter 7 Bankruptcy filing. There are some situations where tax obligations can be erased if the following situations apply: (https://www.nolo.com/legal-encyclopedia/bankruptcy-tax-debts-eliminating-29550.htmlLinks to an external site.)

• Taxes are income-based (federal or state income taxes or taxes on gross receipts
• Tax return was due at least three years ago (including all valid extensions
• Tax return was filed at last two years ago before filing for bankruptcy
• Taxes were assessed at least 240 days ago before filing for bankruptcy
• Tax return must not be fraudulent, and the individual must not be guilty of tax evasion

However, most non-income-related tax debts cannot be discharged in a Chapter 7 bankruptcy, that which includes the following; https://www.nolo.com/legal-encyclopedia/bankruptcy-tax-debts-eliminating-29550.htmlLinks to an external site.

• Tax liens (or secured taxes on real property)
• Recent Property Taxes (incurred before filing for bankruptcy)
• Trust fund taxes (FICA, Medicare, income taxes withheld by employers, etc.)
• Certain Employment Taxes
• Non-punitive tax penalties on non-dischargeable taxes, if prior to three years before filing for bankruptcy
• Erroneous tax refunds (related to non-dischargeable taxes)

Reflection Questions:

1. Working on this week’s discussion project with creating a budget, while challenging was very informative and educational. I used information based on a budget that I created for myself; however, the situation was quite different. I used an Excel spreadsheet which I had used based on my own budget, that helped me when preparing this week’s assignment. While I have not had to experience bankruptcy, my own budget spreadsheet did assist me when working on this week’s assignment. The process of trying to create the budget for this family of four to live within their means was by far one of the more challenging assignments I have worked on as a paralegal student. I took my time to access what expenses could be or should be eliminated and why so. I think this was the most challenging aspect since I kept taking into consideration the financial well-being of the family.
2. The bankruptcy topics discussed through this module was pretty straightforward when it came to social issues. I honestly did not see any issues I would refer to as a social issue. I do sometimes feel as though Chapter 7 Liquidation could be seen as an ethical issue by erasing debt, at least I used to feel that way. However, the more I learn about bankruptcy and how it applies, I can see that for some people this may be their only answer. I do think the bankruptcy option can be abused by some people, and in that instance, I would see that as an ethical issue. However, I do think there are a lot of rules and policies put in place to help prevent that abuse.
3. As a person who struggles when it comes to creating a budget, this chapter has to be the most complicated portion of this class, yet. I understand the budgeting process, its just the matter of figuring up the numbers for each item, especially when it comes to such matters as figuring in taxes, insurance, and liability expenses. No, I did not ask the instructor for help. However, I did admit that this part of the class is not easy for me to work with. Budgeting and dealing with money matters will probably be the most challenging portion of my future work as a paralegal. I have never taken any accounting classes, and always did struggle with math. Therefore, when it comes to completing a budget for a task such as the one assigned above, this is not an easy one. This is not an easy class, probably my most complicated class yet as a paralegal. However, I am trying and will do my best to get a better understanding of how the process works.