background: companies we both worked for went bankrupt. Husband had about $20,000 in wages, benefits and court-ordered severance due and his employer wiped it out in bankruptcy in 1999. We're both in our 50's and couldn't find work anywhere near what we made before. We both became self-employed and did OK until about a year ago when the ecomony went in the dumper. He finally found a job @ $8/hour about a month ago, I'm still trying to make my business go on a shoestring budget, since the best i can do in the job market is $6.00. We have 3 kids at home and are living at poverty levels (no health insurance) and struggling to avoid bankruptcy, in hopes things will improve and we can begin paying off the debts. We owned a home for a few years about 10 years ago and sold it when we moved here. We lost money on it and went back to renting. Our savings is long gone. At the time we lost our jobs, we had 8 credits cards we were paying off - the lowest bal was $1300, the highest $5000 at the time of chargeoff during 2000. We're paying the IRS off monthly for taxes on 401K withdrawl when the employer went bankrupt. LTD/Advantage Assest in Houston has been harrassing us (the others honored the C&D letter) and recently began sending monthly bills for $100. I told them we are self employed and living below the poverty level but I'm worried enough about the judgement that i'm afraid to go to the FTC or threaten LTD with legal action, out of fear it will p*ss them off and they will surely sue. The card they are collecting on (they say they bought it but have yet to prove it) was obtained when we lived in another state. Where would they sue? Here or in that state? If they win (and i expect they will, although i dispute some of the information they have) can they enforce the judgement? I've seen reports that since we are in poverty they can't and also that unsecured creditors can't go for wages. True? Can they take the car or take our household possessions? (Total value of both is about $12,000.) I know the IRS can do all of the above and as long as we pay them monthly, we don't have a worry. What are the chances the judge will lower the amount due to settle the judgement? If they get a judgment, will it be wiped out in bankruptcy? Can they go after my business? It's incorporated, has it's own EIN and bank accounts. I tried my best to keep my SS# off the bank records, but the account is at the same bank as our checking account. The business has about $2000 in assets (computer equipment mostly, no cash) right now and may get a large contract. I'll hire 2-3 people to fill the contract and am worried the creditor will take money needed to pay the employees. (I'll get little from the contract, not anyhere near enough to pay off new creditors and old ones, the skills needed are more than I have and I need to hire the others. I'm planning on keeping most of my share in my business bank account to use for business expenses - I've lost a couple of good contracts due to lack of funds to run the business until the first payment arrives.) More general question: Do most credit card charge offs go into judgement?
too_poor, That is really a tough story to even read...in answer to some of your questions...no most credit card companies don't get judgments but they can. Once a creditor gets a judgment they can send you an interrogatory about how much you make, where are your accounts etc...so if they know where you live they can come after you. There is no law reoverty level...they can and will empty your bank accounts. Maybe bk might be an option for you...it is the court of last resort but it sounds like you and your family need some well deserved breathing room to get back on your feet. If you would like to email me you can: sealeighsea@hotmail.com...and I can answer some bk questions for you. This is not advice to bk just a thought. clc
We're saving bk as an option of last resort, either if the creditors force us into it because of judgments or because of medical expenses (no insurance). The way my luck is going, as soon as we'd file, one of us would need hospitalized and we couldn't write off that debt. Then we'd be back where we are now. We also can't get rid of the back taxes in bk yet, they are from 2000. I figure that's an ace in the hole, I can always call the irs and tell we can't pay them because an unsecured creditor took the money instead. They'll put a lien on us and stop the creditor from collecting more on the judgement. (Would the IRS recover funds from a creditor who cleaned out our accounts? That would make it all worthwhile. <g>) I know a tax lien is bad on cr, but i think it would give us more power against the CAs if our payment agreement to the IRS was on them. Our scores are just under 600, so it's not completely shot yet, maybe i'm better off without the IRS listed on the report. <g> I'm debating whether to send a copy of the IRS payment agreement to LTD to get them off our back. i figure if they know we owe the IRS, it lessens their chances of collecting until the IRS is paid off. But I hate to give them any information they may not already have, especially since they are scums, but someone on another board said CAs have access to IRS records already. I really would like to know what the chances are of LTD and the others seeking a judgement. I know they have the right to, but do most excerise that option? Some people say nearly 100% seek judgements, especially if they know where to find you. Others say very few CA do, so the odds are with us that they won't. (We could be the unlucky person they choose...) If very few CAs sue, I'll sleep easier, with one less thing to worry about.
too_poor- First of all do not let the irs get a lien on anything if possible. Irs liens are powerful instruments of collection for the irs and are hard to get off your report even when they are satisfied. Plus liens survive bankruptcy especially if they are attached to real property or pensions. You mentioned you don't own property or pensions at this time so it might not be a concern. You are right about discharging taxes in bk....the taxes have to be 3 years old and 240 days past assessment to discharge. So right now you cannot get them discharged in a 7 or "crammed down" in a 13. Some people in your situation do what is known as a chapter 20...where you file a 7 first....discharge what you can and then immediately file a 13 to force the remaining creditors to accept a payment plan you can afford which many times is less than what you're paying now. If you want to hold your breathe until the taxes due are dischargeable...my advice would be to wait and see. If someone files an action against you....go to court. When you show up the creditor will try and talk a settlement with you. If that isn't possible at least you can go in front of the judge and say your piece. But before going try and make yourself judgment proof. Put your personal accounts in joint accounts with your children, transfer your cars to their names etc...if your business is a corporation or LLC then its accounts should be protected by the corporate veil...and therefore protected from the "taking" of a personal creditor. A creditor cannot access your irs info unless it is a public record such as a lien or a levy....do not send any personal tax info to anyone! unless it is your atty. Hope this helps, clc PS another problem is the Bankruptcy Reform Act...when this passes everyone's bk options will change drastically...so keep that in mind when making your decisions.
If your husband lost $20000 in back pay and severance, that is a "capital loss" and can be used to reduce your fed tax liability. You need to call an accountant.
SCmomof5, Unfortunately it is not a capital loss...the definition of a capital loss is: The loss incurred when a capital asset (investment or real estate) decreases in value. The loss is not realized until the asset is sold for a lower price than the purchase price. Here is the site I pulled the definition from: http://www.investopedia.com/terms/c/capitalloss.asp The sad thing for this family is that the employer was able to discharge these wages. In bks the ex-employees of a bked company are treated as general unsecured creditors. So much like cc debt...they are discharged without receiving a dime in compensation. The only thing tax-wise they could do was for the tax year this was realized (the lost wages, that is) is file for what they received not what they should have received. In other words, if their w-2 reflected the owed but as yet unpaid wages...they could discard those numbers and file with the real numbers. The trust fund taxes that the ex-employer owed could not have been discharged...so those had to have been paid (this includes the FICA and taxes withheld from employees salaries). I think the decision here is "who is more bothersome and makes me more anxious?"...the cc debt or the tax debt. It seems that the tax liability came from cashing in pension funds...that is a 10% of gross amount penalty...plus taxed at income level. Since too_poor didn't mention any amounts it is hard to discern what the best way to go is...to pay the irs and discharge cc debt...or to wait with bated breathe until the owed taxes are beyond the 3 yr, 240 days assessment and discharge them all. But as I mentioned earlier...waiting is a gambler's game because BK Reform will change the rules substantially and what is available now as choices will not be available in the future. clc
My business is an LLC, as long as it's safe from personal creditors, I have less to worry about. The taxes currently due are just under $8,000. We're paying monthly on them and the screwy rebate brought them down a little last fall, but cost us another $600 in taxes due last April. The tax bill was from 401k money and a 1099 on a settled debt, plus self-employment taxes. (Chase offered 25% settlement if we paid in a lump sum, I figured giving more to the goverment was worth getting out from under the debt.) Should I send proof of the IRS payments to the CA that is harrassing us?
Oh... on the money lost when the employer went bankrupt, the bank who was the sercured creditor offered each of the four officers of the company 100,000 each as a stay bonus, yet they couldn't pay the other employees a cent. My only regret is that we didn't have a huge cc debt to that bank. It would be one debt I'd never pay back.
too_poor, I would not advise sending any personal irs info to a CA....what would it benefit you?? nada....they don't care what your other payments are. It seems like you want to sit and wait this out...so the best advice I can give is to get judgment proof. Since you seem to bk adverse that is all you can do at this point it seems. clc
I wasn't promised $100,000 just $500.00 to stay for the last two weeks at the GAS STATION...when pay day came...I said what about the $500.00 STAY MONEY...he said "WHAT STAY MONEY"??? I SAID BUH BYE...I WAS THE ONLY ONE LEFT...SO I LEFT HIM "HIGH AND DRY"!!!
I thought if my name was on the kids savings accounts creditors could take them? Will it really help to put their names on our personal accounts? Not that we have any money in the accounts... the car is the only thing we can't afford to lose. It's 5 years old but reliable transportation, which we need. I'm not so much bk adverse, but at this point, it won't gain us much. We could protect most of our assets from the creditors, except the IRS. We're stuck with that for 2 more years at least. Our credit is mostly shot, although with a score of between 576 and 600, it's not hopeless. If we can wait out the creditors, they'll fall off in 2006-07. If our finances improve, I'll pay them off. If we file bk now, we add 10 years to our bad credit. I know filing later will mean longer till our credit is clean, but we really should have filed in 2000. Since we've waited this long, i can't see the need to file unless forced into it by a creditor. (I need to read up on the new bk legistation and see how it might affect us if it passes. From what little I've read, it may not matter, we don't have assets or wages to pay the debts.) With the expection of LTD, the others are mostly leaving us alone. LTD has been calling at least 3 times a week for the last 2 months and sent 3 bills in 45 days. It seems like a lot of effort for a 2yr old debt unless they think we can pay it and is the source of my worry, especially since they started sending monthly statements. I sent a C&D about a year ago and may send a second one in the next week or two. In the meantime, i'm letting the answering machine pick up most calls and reminding them of the C&D i sent previously on the calls that get through. I haven't threatened them with legal action yet, but i'm keeping records to use against them. Is the SOL calculated from the state we lived in when the debt was incured or the current state of residency? We're in a 6 yr state but may move if the job market doesn't improve.
too_poor- The SOL on judgments will be on the state you reside in at the time of judgment...in other words...if they want a judgment now they have to file a motion against you in the state you live in now. But if you move and they find you they can refile what is known as a "foreign" judgment...they do not have to go back to court to do this. AS for accounts....if they are in a joint account with a non-debtor the creditor cannot sweep them. Unless you live in a community property state and the non debtor is your spouse. I understand your reluctance to file bk...but I think you should do a search here and see that many people 2 years past bk enjoyed credit... even getting house mortgages. You could get the cc's off your back and slowly rebuild your credit after bk...just because it stays on your credit for 10 yrs (a 7...13s stay for 7 yrs if they are discharged and not dismissed) doesn't mean no credit. The way things are now you're hiding and stressing until 2006...and if they get judgments...the collection activities can go beyond that. I'm not a bk advocate....but in some cases the "fresh start" of a bk is well warranted....especially in cases like yours where things happened beyond your control. Good luck in whatever you decide to do...and feel free to continue to ask your questions, clc
Thanks... we'll see how this week goes with LTD, maybe bk will be the best. I want to say you guys are the greatest, answering questions without being judgmental, unlike on many on other credit boards where the members seem overly concerned about paying back all money borrowed and are opposed to bk. As much as I'd love to start paying off my debts, it's not going to happen in the foreseeable future... and it's nice to be able to ask questions without being verbally assulted.
too_poor, This board is here to support people not to judge people. Your ex-employer didn't lose any sleep over what he did to you! He is probably living in a mansion in Fla enjoying the multi-jillion dollar homestead exemption like O.J.! As I said in my earlier post...if you have any bk specific questions you might want to ask....feel free to email me sealeighsea@hotmail.com. I would be happy to answer as many questions as you would want to throw at me! You didn't abuse credit you got screwed by unfortunate life circumstances. That doesn't mean you have to live the life of a fugitive. If companies like Enron can be afforded bk protection when what they did was criminal...then why should schmucks like you and I have to live under a rock afraid of creditors.... Please feel free to email me if you want... clc PS I'm a paralegal...if I don't know the answer to your questions I know where to get them quickly! PPS you & I are the same age...young, gorgeous and 50+.... ;=}
