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Kristine L. Prati Elected to North Carolina Association of Defense Attorneys Board of Directors

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We are proud to announce that the North Carolina Association of Defense Attorneys (NCADA) selected Attorney Kristine L. Prati to serve a three-year term on its Board of Directors.  Ms. Prati assumed her new role at the close of the NCADA’s business meeting of the 46th Annual Conference on June 10, 2023.  She is completing service as the 2022-2023 Chair of the Workers’ Compensation Practice Group of the North Carolina Association of Defense Attorneys, and previously served as the 2021-2022 Vice-Chair of the Workers’ Compensation Practice Group of the North Carolina Association of Defense Attorneys.

Read the entire press release here.

The NCADA was founded in 1977 and is a resource for education, networking, and information sharing for defense counsels.  The organization is committed to enhancing the skills, effectiveness, and professionalism of civil trial lawyers, as well as anticipating and addressing issues relevant to defense lawyers and the civil justice system.  As a board member, Ms. Prati will add insight, experience, and knowledge from her defense practice to assist the organization in its mission.

Can a Bankruptcy Filing Be Used To Eliminate Tax Debt?

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A bankruptcy filing can solve a variety of debt-related problems. But, it can’t solve every debt-related problem, and bankruptcy isn’t always a wise choice when it comes to dealing with tax debt.

What Is Bankruptcy?

Bankruptcy is a process that allows individuals and organizations to discharge their debts. By filing for bankruptcy, an individual can discharge the debts they currently possess and cannot pay off.

Outside of allowing individuals and organizations to discharge their debts, bankruptcy will also enable creditors to obtain some form of repayment, often through liquidating certain assets.

Even though bankruptcy can be ideal – and, in some cases, necessary – filing for bankruptcy and going through the processes that this entails is often quite challenging.

What Are The Benefits Of Filing For Bankruptcy?

The act of filing for bankruptcy offers a variety of benefits. Some of the most notable benefits that can arise by filing for bankruptcy are as follows:

  • No further legal proceedings arising from the debt can be filed against the individual who filed for bankruptcy.
  • The debt that was owed to creditors will no longer be owed, even if this debt was not paid off in full.
  • Many of the goods that were about to be seized – or, in some cases, have already been captured – can be retained to pay off this debt.

Outside of these benefits, bankruptcy does come with a number of consequences. Some of the most notable consequences that can arise from filing for bankruptcy are as follows:

  • A bankruptcy will show up on one’s credit report.
  • A bankruptcy can make it challenging to obtain a business license.
  • A bankruptcy will affect any business that one owns.

Someone who wishes to file for bankruptcy in North Carolina due to their tax debt should first speak with a tax planning lawyer. By doing so, they can determine if this is, in fact, the right choice for their situation.

What Types Of Debt Can Filing For Bankruptcy Eliminate?

A bankruptcy filing can eliminate many different types of debt. Some of the most common types of debt that bankruptcy can be, and often is, used to eliminate are as follows:

  • Repossession deficiency balances.
  • Credit card debt.
  • Medical bills.
  • Business debt.
  • Unpaid utility bills.
  • Personal loans.
  • Unpaid rent.
  • Overpayments from government programs.
  • Collection agency accounts.

Every single one of the above can be eliminated by filing for bankruptcy. But, with that being said, there are a variety of different types of debt that cannot be eliminated through filing for bankruptcy.

Some of the most notable types of debt that cannot be eliminated through filing for bankruptcy are as follows:

  • Child support. 
  • Alimony.
  • Debts obtained through fraud.
  • Student loans.
  • Mortgages.
  • Car loans.
  • Debts obtained through other criminal acts.
  • Certain types of tax debt.

Our focus is on the latter item within that list.

Can A Bankruptcy Filing Be Used To Eliminate Tax Debt?

The simple answer to this question is “Yes.” But, while that answer is technically accurate, it fails to paint a complete picture of the ways in which bankruptcy can affect tax debt.

A bankruptcy filing can be used to eliminate one type of tax debt: income tax debt. Someone who files for bankruptcy due to their income tax debt may be able to eliminate the income tax they owe to their state and to the federal government.

Someone who owes tax debt unrelated to their income – payroll taxes, for example – will not be able to discharge this debt in a bankruptcy filing.

Outside of this fact, the following requirements must be met in order to allow an individual to eliminate their tax debt by filing for bankruptcy:

  • The tax debt must be older than three years.
  • For this debt, a tax return must have been filed a minimum of at least two years before filing for bankruptcy.
  • The return must have been filed on time and in an honest manner.
  • The IRS must assess the debt before bankruptcy can be granted.

Assuming all of these requirements are met, an individual can file for bankruptcy and eliminate their income tax debt. But, if they have other types of debt they wish to eliminate, they will be unable to do so.

Speak With A North Carolina Tax Planning Lawyer Today

No matter the tax debt you or your business are facing, bankruptcy is likely not the solution you are looking for. But, even so, there is a solution, and we at Wilson Ratledge will help you find it.
Speak with a tax planning attorney at Wilson Ratledge today. We will assist you in finding a way to eliminate the tax debt you are facing.

Kristine L. Prati to Speak at the NCADA’s 46th Annual Meeting

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The North Carolina Association of Defense Attorneys 46th Annual Meeting will be held in Hilton Head Island, South Carolina, June 8, 2023 through June 10, 2023.  Attorney Kristine L. Prati, 2022-2023 Vice-chair of the Workers’ Compensation practice group of the NCADA, will speak before other professionals on the ‘Impact of Recent Opinions in Workers’ Compensation’. This year, her session will provide a summary of the recent decisions in the first extended benefits case, Sturdivant v. N.C. Dept. of Public Safety, and will include in depth discussion on the removal of second opinions from the fee schedule, lack of definition of “usual and customary” fees, and ongoing pre-payment issues.

How Do You Set Up A Living Trust In North Carolina?

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Setting up a living trust in the state of North Carolina can be tricky. But, with the right team on your side to help, the estate planning process in North Carolina becomes much more manageable. Our North Carolina estate planning and trusts attorneys at Wilson Ratledge can help you craft that plan.

What Is A Living Trust?

A living trust is defined as the following: a trust in which the person who creates the trust can alter it at any time or, if they are so inclined, to end the trust altogether.

The opposite of a living trust is an “irrevocable trust.” By setting up an irrevocable trust, you do not have the ability to alter or end the trust at any time.

Many people refer to a living trust as a “revocable trust.” So, if you hear that particular phrase mentioned, know that it refers to a living trust.

What Are The Advantages Of Setting Up A Living Trust?

Setting up a living trust offers a wide assortment of advantages. Some of the most notable benefits that can come from setting up a living trust are as follows:

  1. Probate avoidance: Assets placed in a revocable trust typically do not need to go through probate, which can save your beneficiaries time, legal fees, and court costs.
  2. Privacy: Unlike a will, a revocable trust does not become part of the public record upon your death. This means that the details of your trust and the assets it holds remain private.
  3. Control and flexibility: With a revocable trust, you can maintain control over your assets during your lifetime and make changes to the trust, including amending or revoking it, as your circumstances or wishes change.
  4. Incapacity planning: A revocable trust can include provisions that allow a designated trustee to manage your assets in the event of your incapacity. This can help avoid the need for a court-appointed guardian or conservator.
  5. Asset management: A revocable trust allows you to appoint a professional trustee to manage your assets, which can be beneficial if you lack the time, interest, or expertise to manage them yourself.
  6. Potential tax benefits: While a revocable trust generally does not provide significant tax benefits during your lifetime, it can be structured to minimize estate taxes for your beneficiaries, depending on your specific situation.
  7. Protection for beneficiaries: A revocable trust can provide protection for your beneficiaries, such as by including spendthrift provisions that prevent creditors from reaching a beneficiary’s interest in the trust.

Given the benefits outlined above, a living trust is easily the best option for you if you are seeking flexibility. 

How Do You Set Up A Living Trust In North Carolina?

The process of setting up a living trust can be complicated. Understanding what goes into creating a living trust, along with working with an experienced legal partner who can make sure the trust aligns with your needs, can make the process much smoother.

Some things you can do in advance to make the process smoother can include the following:

  1. Inventory your assets: Make a comprehensive list of all your assets, including real estate, bank accounts, investments, retirement accounts, life insurance policies, vehicles, and valuable personal property. Note the estimated value of each asset and gather documentation, such as account statements, deeds, and titles.
  2. Identify your beneficiaries: Decide who you would like to receive your assets after your death. This may include family members, friends, or charitable organizations. Consider alternate beneficiaries in case your primary beneficiaries predecease you or are unable to inherit.
  3. Choose a trustee: The trustee is responsible for managing the trust according to your instructions. This person or entity should be trustworthy, responsible, and capable of managing financial matters. Consider who you want to serve as the initial trustee, as well as any successor trustees.
  4. Define your objectives: Consider your goals and objectives for creating the trust, such as avoiding probate, protecting assets, providing for minor children, or addressing concerns about your own incapacity. Be prepared to discuss these goals with your lawyer.
  5. Outline specific instructions: Think about any specific instructions you may want to include in your trust, such as when and how assets should be distributed to beneficiaries, or how assets should be used for their benefit (e.g., education, healthcare, or living expenses).
  6. Review existing estate planning documents: If you already have estate planning documents, such as a will or power of attorney, gather them for review. Your lawyer will need to consider these documents to ensure that your new living trust coordinates properly with your existing plan.

Taking the time to do this due diligence in advance can ensure that the resulting plan takes into account your preferences and protects your family and legacy.

Speak With Our North Carolina Trust Administration Lawyers

Setting up a living trust isn’t always easy. Still, by speaking with a North Carolina trust administration lawyer at  Wilson Ratledge today, the process can and will become much easier and much more pleasant.

Get The Legal Help You Deserve When Facing Commercial Bankruptcy In North Carolina

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Going through commercial bankruptcy in North Carolina is a trying time for any business. When starting a company, the end goal is not to have financial struggles but quite the opposite, to flourish and be successful. However, if bankruptcy is on the table, working with a commercial bankruptcy litigation lawyer at Wilson Ratledge can make the overall process much easier.

What Is Commercial Bankruptcy?

Commercial bankruptcy refers to a legal process that allows businesses in financial distress to reorganize, discharge, or repay their debts under the protection of the bankruptcy court. In the United States, the federal Bankruptcy Code governs bankruptcy proceedings, but state laws can also impact the process.

In North Carolina, as in other states, businesses can file for bankruptcy under several different chapters of the Bankruptcy Code, depending on their circumstances:

  1. Chapter 7: This is often referred to as “liquidation” bankruptcy. In this process, a trustee is appointed to sell the business’s non-exempt assets, and the proceeds are used to pay off creditors. Any remaining debts are usually discharged. Chapter 7 is typically used by businesses that cannot continue operating and have no feasible way to restructure their debts.
  2. Chapter 11: This is commonly known as “reorganization” bankruptcy. It allows businesses to restructure their debts while continuing to operate. The debtor proposes a plan to repay all or part of its debts over time, usually by modifying payment terms, interest rates, and other obligations. Creditors and the bankruptcy court must approve the reorganization plan. Chapter 11 is often used by larger businesses or those with complex debt structures.
  3. Chapter 13: This type of bankruptcy is typically used by individuals and sole proprietorships with regular income. It allows debtors to reorganize their debts and create a repayment plan that lasts three to five years. Like Chapter 11, the debtor’s proposed plan must be approved by creditors and the bankruptcy court.

What Are The Effects Of Commercial Bankruptcy?

Commercial bankruptcy can provide businesses with protection against certain actions by creditors. Once a business files for bankruptcy under any chapter, an “automatic stay” is typically put into effect. The automatic stay is a court order that temporarily halts most collection efforts and other legal actions against the debtor, including lawsuits, foreclosures, and repossessions.

The purpose of the automatic stay is to give the debtor breathing room to develop a plan to address their financial situation without the constant pressure from creditors.

It’s important to note, however, that the automatic stay does not stop all legal actions. Some exceptions to the automatic stay can include:

  1. Criminal proceedings: The automatic stay does not halt criminal prosecutions against the debtor or their business.
  2. Certain tax proceedings: The stay may not prevent some tax-related actions by government authorities, such as tax audits, deficiency notices, or tax liens.
  3. Domestic support obligations: The automatic stay does not apply to the collection of child support or alimony payments.
  4. Evictions: In some cases, the automatic stay may not prevent an eviction if the landlord has already obtained a judgment for possession before the bankruptcy filing or if the eviction is based on endangerment of property or the illegal use of controlled substances.
  5. Multiple bankruptcy filings: If the debtor has filed for bankruptcy multiple times within a certain time frame, the automatic stay may be limited in duration or may not apply at all.

Creditors can also request the bankruptcy court to lift the automatic stay under very specific circumstances, which your commercial bankruptcy attorney will discuss with you.

What Are The Long-Term Consequences Of Commercial Bankruptcy?

Commercial bankruptcy comes with several long-term consequences. Some of the most notable long-term consequences that commercial bankruptcy can engender are as follows:

  • A bankruptcy will show up on your credit report.
  • Obtaining a new business loan may be challenging due to the bankruptcy.
  • Many of the business’ assets could be sold off, which would change the valuation and potential future prospects of your business.
  • You may be forced to go through layoffs if the business’ finances are unable to support your current employees.
  • Depending on the equity structure of your company, there is the potential for adverse effects from a funding standpoint with investors.

None of these consequences are desirable, as they affect you, the people who work for or with your business, as well as your ability to develop another business.

What Should You Do When Facing Commercial Bankruptcy In North Carolina?

No matter the circumstances that are underlying your commercial bankruptcy, in the state of North Carolina, there is one thing that you must do: have an experienced commercial bankruptcy litigation lawyer on your side.

Every commercial bankruptcy situation is unique and different. Working with the team at Wilson Ratledge can help you understand your options, and come up with a plan to give you the best short-term and long-term outcomes.

Our North Carolina Commercial Bankruptcy Lawyers Can Help

A commercial bankruptcy litigation lawyer can help you with every facet of commercial bankruptcy. Some of the most notable things a commercial bankruptcy litigation lawyer can assist you with are as follows:

  • Determining whether or not commercial bankruptcy is the most appropriate option for your business.
  • Going over the other options available to you outside of filing for commercial bankruptcy.
  • Assessing which form of commercial bankruptcy you should consider and which one is right for you.
  • Dealing with litigation that arises as a result of debt or filing for commercial bankruptcy.
  • Reorganizing your business, and its assets, in accordance with current bankruptcy laws.
  • Conducting the commercial bankruptcy process in a way that is efficient and effective.

Commercial bankruptcy is complex and difficult. The team at Wilson Ratledge can help you navigate the process. Contact us today to schedule a consultation!

What Can You Do If The IRS Has Revoked Your Passport Because Of A Tax Debt?

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As a taxpayer, it is essential to remain compliant with the Internal Revenue Service (IRS) to avoid potential penalties or legal consequences. While many individuals might be aware of some tax-related consequences, not everyone knows that a significant tax debt or issue can lead to the revocation of their passport. This article will delve into the circumstances under which the IRS can revoke a passport and offer guidance for resolving tax issues.

The IRS and Passport Revocation

The IRS has the authority to revoke a passport under a provision of the Fixing America’s Surface Transportation (FAST) Act, which was enacted in December 2015. This law mandates the IRS to work in coordination with the State Department to deny, revoke, or limit the passport of any individual with a ‘seriously delinquent tax debt.’

What Constitutes a Seriously Delinquent Tax Debt?

A seriously delinquent tax debt is an individual’s unpaid, legally enforceable federal tax debt, including penalties and interest, totaling more than $59,000 (as of 2023, adjusted for inflation). The following conditions must also apply:

  1. A notice of federal tax lien has been filed, and all administrative remedies have been exhausted or lapsed.
  2. A levy has been issued by the IRS.

Exceptions and Exclusions

There are specific situations in which a taxpayer with a seriously delinquent tax debt might not face passport revocation:

  1. The taxpayer is in the process of disputing the tax liability in question through an IRS administrative appeal or in court.
  2. The taxpayer has requested innocent spouse relief under the IRS provisions.
  3. The tax debt is under consideration for an installment agreement, offer in compromise, or suspension of collection due to a collection due process hearing.

Moreover, passport revocation may not apply to taxpayers in a federally declared disaster area, victims of tax-related identity theft, those currently in bankruptcy, or those living in a combat zone.

How Does the Process Work?

If an individual meets the criteria for passport revocation, the IRS will send a certification of the seriously delinquent tax debt to the State Department. Before the certification, the IRS will mail a Notice CP508C to the taxpayer’s last known address, informing them of their tax debt and the possible passport consequences. The State Department may then revoke the passport or limit it to return travel to the United States.

Reversing the Revocation

To reverse the passport revocation, the taxpayer must resolve their tax debt through one of the following methods:

  1. Pay the tax debt in full.
  2. Enter into an installment agreement with the IRS.
  3. Settle the tax debt through an offer in compromise or another IRS-approved method.
  4. Request innocent spouse relief.
  5. Have the tax debt suspended due to a collection due process hearing or another valid reason.

Once the tax debt is resolved, the IRS will send a reversal certification to the State Department, typically within 30 days. The State Department will then reinstate the individual’s passport privileges.

Preventive Measures

To avoid the risk of passport revocation, it is crucial to stay proactive with your tax obligations. Here are some tips to help you stay compliant:

  1. File your taxes on time and accurately to avoid penalties and interest.
  2. If you cannot pay your tax debt in full, consider setting up an installment agreement or apply for an offer in compromise.
  3. Consult a tax professional or tax attorney if you have any concerns or require assistance in resolving tax issues.

Our Raleigh Tax Controversy Attorneys Can Help

While the IRS can revoke a passport due to a seriously delinquent tax debt, there are steps that taxpayers can take to prevent this from happening or to resolve their tax issues. By staying proactive and addressing any tax concerns with the assistance of a knowledgeable tax attorney, taxpayers can minimize the risk of passport revocation and navigate the complexities of tax compliance. 

In cases where the revocation has already occurred, it is essential to act quickly and work closely with the IRS to settle the tax debt and reinstate passport privileges. By staying informed and taking appropriate measures, taxpayers can avoid the serious consequences of passport revocation and maintain their ability to travel internationally without restrictions.

Don’t let tax issues jeopardize your freedom to travel; contact the experienced tax attorneys at Wilson Ratledge today for expert guidance and personalized solutions to resolve your tax concerns. Let us help you protect your passport and your financial future.