What Bankruptcy Can’t Do

The ebook What Bankruptcy Can’t Do is available on Kindle here: https://www.amazon.com/dp/B01LYSFMKL.  At only $0.99 it makes a great gift to yourself or your family or friends who might be suffering under the stress of too much debt during the holidays.

800,000 people and businesses per year file for relief under bankruptcy to eliminate or restructure their debt.

But some debts are “immune” from a bankruptcy discharge – the word is “non-dischargeable”. This means that when the smoke clears and the bankruptcy is over, these debts will still have to be paid.

The kinds of debts that survive the bankruptcy depend on the type of bankruptcy you file. A debt may be discharged in a Chapter 7 that may NOT be discharged in a Chapter 13 or the other way around.

If you have debts resulting from a divorce, if you owe taxes or other governmental debt, or if you intentionally injured a person or damaged someone’s property; filing bankruptcy to relieve you of your debt may not help!

This book guides you through those kinds of debts and those kinds of bankruptcies.

I’ll explain the story behind the book next time.

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

  • Bankruptcy
  • Attorney
  • Lawyer
  • Mount Vernon
  • Centralia
  • Fairfield

What Bankruptcy Can Do: the story behind the book!

The Kindle edition of What Bankruptcy Can Do is available at Amazon. https://www.amazon.com/dp/B01LWIDO5U

It is a companion piece to my prior book What Bankruptcy Can’t Do, which is also available as a Kindle through Amazon: https://www.amazon.com/dp/B01LYSFMKL

With the success of What Bankruptcy Can’t Do I wanted to write another guidebook on bankruptcy in general.

Not only what filing bankruptcy is all about but the difference KINDS of relief available, what paperwork and documents a person needs and the specific forms needed in the bankruptcy petition and schedules.

I also discuss the different kinds of debt and how it is affected by the different kinds of bankruptcy.

It is a primer on filing. It doesn’t tell you whether you SHOULD file or the consequences of filing; but it is a good book to read before you make that appointment with a bankruptcy attorney.

I hope to eventually be able to give this away free to all my potential clients (but between you and me Amazon won’t let me do that yet – it will still be a few months before I’m allowed to give it away!).

 

***

 

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 to speak directly with a lawyer and be on your way to Finally Be Financially Free!

Finally Be Financially Free – the story behind the book!

The Kindle edition of Finally Be Financially Free is available at Amazon. https://www.amazon.com/dp/B01KKEFZJQ.

I have been wanting to write a book like this for twenty years.

As an attorney, I helped an individual file for bankruptcy for the first time in 1993. It was a Chapter 7 liquidation. The next year I did my second bankruptcy – this time a Chapter 13. I also appeared before the bankruptcy court representing creditors getting relief from the automatic stay to allow the creditor to collect their collateral (mostly vehicles from a car credit company).

At this time I was working at a general practice firm doing mostly real estate and collections. I was also doing a lot of juvenile defense and getting a good reputation among the parents of the community. I started referring to the teens I represented as “my kids”. Unfortunately I would represent them often enough to know them well.

I went into bankruptcy full time in December 1995. A frequent question asked during the process (and especially when the case was finished) was “How do I prevent coming back?”

I would give them what advice I could, but a small percentage of my clients WOULD come back and refile a bankruptcy.

For some it was not their fault. One person in particular filed numerous Chapter 13s to allow him to keep his house from a particularly aggressive mortgage company. He would do a Chapter 13 – complete it to discharge, be legally contractually current with the mortgage company; but the mortgage company filed foreclosure anyway! It was less expensive for him to do a Chapter 13 and pay through the Trustee than fight the foreclosure. He eventually paid off his mortgage through the bankruptcy courts.

Others refiled because of unexpected medical bills. If not for the accident, they would not have had to refile.

Same with others who lost their jobs.

But a few fell right back into the credit trap. I would help with showing them their budget problems and finding ways they would make ends meet without incurring credit.

I gave lectures on financial budgeting and other issues. I explained ways to save and encouraged others to have the mental stubbornness to put their extra money into paying down their debt rather than buy the latest gadget. For example: instead of a big-screen HDTV, make this Christmas that quiet and intimate family gathering your wish it would always be.

So I put my advice and lecture notes into book form and called it Finally Be Financially Free.

In the book I discuss reviewing your paystub, making up an expense sheet, finding ways to save a little cash every month and how to use that cash to pay down your debt.

The holidays can be a joyous and kind-hearted time, but they can also be a time of great stress, especially if you are in financial trouble.

 

I hope Finally Be Financially Free helps give you or your family or friends the information you need to get through the financial blues during the season! Don’t forget you can also send the Kindle ebook as a gift!

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

  • Bankruptcy
  • Attorney
  • Lawyer
  • Mount Vernon
  • Illinois
  • Centralia
  • Fairfield
  • Carmi

 

Finally Be Financially Free! Ebook available now on Kindle!

My Kindle book Finally Be Financially Free is available at Amazon here: https://www.amazon.com/dp/B01KKEFZJQ.  At only $0.99 it makes a great gift to your family or friends who might be suffering under the stress of too much debt during the holidays.

Debt can cripple you and your family financially, emotionally and physically.

It is hard to break even, let alone get ahead.

Pay rates are low, job security is fragile and health costs continue to rise. Some families are one paycheck away from filing bankruptcy. Most people have no emergency fund.

All it takes is even a temporary layoff or injury to fall into a financial black hole. While waiting for unemployment to start, that settlement to be disbursed, finding that new job or getting your new pay grade up to scale; you still have rent or a mortgage to pay, school costs and supplies to buy, utilities due and other expenses that won’t wait.

Breaking free of the financial black hole takes time and financial resources – things that most individuals and families do not have right now.

Fortunately, there are ways to break free of a financial black hole.

It is possible and you can do it. You can find the time and the financial resources.

Starting now!

I’ll explain the story behind the book next time.

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

Curry Law Office Bankruptcy Attorney Lawyer Mount Vernon Illinois Centralia Fairfield Carmi

What Bankruptcy CAN’T Do: Intents and Purposes, Part Three

Running up the Bill

Bankruptcy helps relieve the burden of credit card and loan debts, medical bills, back utilities and rent, and so forth.

But there are some debts that bankruptcy does not affect; that are “immune” from a bankruptcy discharge – the word is “non-dischargeable”. This means that when the smoke clears and the bankruptcy is over, these debts will still have to be paid.

My previous blogs were about  taxes, traffic fines, speeding tickets and their ilk, student loans and Intentional Debt – that is, lying to get a loan – either by preparing a false financial statement or otherwise.

11 USC 523(a)(2) is the part of the Bankruptcy Code that lists what debts are discharged or not discharged. A debt is presumed to be non-dischargeable in bankruptcy if it is a consumer debt that you owe to a single creditor for more than $500.00 used to by luxury goods or services incurred within ninety days of filing bankruptcy.

Suppose you buy a couch for three thousand dollars. The next week you file bankruptcy. If you used an in-house company card, the debt will likely be secured and you will either have to keep paying for it or let it go back.

If you used your credit card, you might face the kind of non-dischargeability action I am talking about. It was a consumer debt (as opposed to a business debt) for $500.00 or more made within 90 days of filing for bankruptcy.

The only thing that might save you is the “luxury goods” part of the law. A luxury good is defined in this part of the bankruptcy code as something that is NOT “… reasonably necessary for the support or maintenance of the debtor or a dependent …”

What the judge will have to determine is whether a three thousand dollar couch is reasonably necessary.

Good luck with that. As a debtor’s attorney, even I would have a hard time believing that a $3,000.00 couch is reasonable and necessary.  I wouldn’t even CONSIDER buying a $3,000.00 couch unless there was $2,000 in cash stuffed in the cushions.

“But it was for my adult daughter. She’s handicapped and has lived with me all her life. The couch is specially designed for her – we had to get a prescription from her doctor to get it. It helps her back and legs. Without it she is in excruciating pain…”

That changes everything. See?

And let’s hope you included that $3,000.00 couch on your Schedules, either as a household belonging or a medical aid. As mentioned in my previous blog; even if the debt is ruled dischargeable if you did not list the couch itself you could be in trouble with the Trustee!

***

Also, debt is presumed to be non-dischargeable in bankruptcy if it is a cash advance (through credit cards or extensions of credit from a bank or loan company) that totals more than $750.00 within seventy days of filing bankruptcy.

This is pretty obvious: you get a cash advance on a credit card, or a loan from a finance company, of a thousand dollars and then the next week you file bankruptcy. It will survive the bankruptcy – no matter if you used it to pay bills or even your bankruptcy fees.

There is a section of the bankruptcy petition where you list payments of $600.00 or more during the 90 days before you file bankruptcy. As stated above, you had best list the payments you made with that cash advance – or at least list the cash you are still holding – on your schedules to avoid trouble with the Trustee.

***

Note that the creditor has to bring an action with the bankruptcy court – the dischargeability is not automatic. If the creditor does not file a Motion to Determine Dischargeability in time – the debt WILL discharge. But that is the risk you have to take when filing a bankruptcy so soon after incurring a loan.

***

If the creditor wins and the debt is ruled non-dischargeable, it will survive the Chapter 7 bankruptcy and you will have to resume paying it when the bankruptcy case is over. In a Chapter 13, any amount not paid by the disbursing Trustee will survive, including unpaid interest (if the original loan allowed for interest). In neither kind of bankruptcy will you have to pay on the debt during the bankruptcy.

***

But before it comes to that, is there a solution?

They are “presumed” to be non-dischargeable. This means the judge will take into consideration why you bought the item/got the cash and what happened in between. The couch for the daughter is a good example.

Twenty years ago I represented a widow whose husband in his final days racked up a huge credit card bill from Sears. The attorney for Sears asked her about what was bought – a tiller, a lawnmower, yard equipment, etc. He had a list of the purchases and quizzed her (nicely) on it. She said her husband likely gave the things away to friends and neighbors. Did she have any of these items at home? No. Was she aware of the purchases? No. She said her husband was having memory and other age-related mental problems in the year before he died (when these purchases were made). When the questioning was over and she left the courtroom the attorney for Sears (who was a very kind gentleman in any regard) caught my eye, shook his head and waved his hand. He did not pursue the dischargeability action.

The phrase to use is “intervening circumstance”.  I have two true examples I will give you next time.

Copyright 2016 Michael Curry

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

tags: Bankruptcy Attorney Lawyer Mount Vernon Illinois Centralia Fairfield Carmi

 

What Bankruptcy CAN’T Do: Intents and Purposes, Part Two

Damn Lies!

Bankruptcy helps relieve the burden of credit card and loan debts, medical bills, back utilities and rent, and so forth.

But there are some debts that bankruptcy does not affect; that are “immune” from a bankruptcy discharge – the word is “non-dischargeable”. This means that when the smoke clears and the bankruptcy is over, these debts will still have to be paid.

My previous blogs were about  taxes, traffic fines, speeding tickets and their ilk, and student loans.

In my previous blog, I talked about some Intentional Debt.

Here is another example of Intentional Debt: 11 USC 523(a)(2) is the part of the Bankruptcy Code that controls if a debt is discharged or not discharged. A debt is not discharged in bankruptcy if it is a debt “… for money, property, services …” (or “… an extension, renewal, or refinancing …” of a loan) if you got the loan because you used “… a statement in writing … that is materially false; (that was about your) … financial condition; on which the creditor … reasonably relied; and that the debtor (made the statement in writing) … with intent to deceive.

This time we are still talking about lying, but lying on paper specifically about your financial condition.

Wait. Wouldn’t that be included in the “false pretenses, a false representation, or actual fraud” you talked about last time? Yes, but that part of 11 USC 523(a)(2) specifically says that does NOT count to a writing about your financial condition.

Why not?

I don’t know. Someone, somewhere, must have been able to worm their way around the “false pretenses, a false representation, or actual fraud” because it was something in writing about their financial condition. So the legislature added this extra part.

In this case, I am talking about writing on an application (or anything in writing) that you make $40,000.00 per year when you make $20,000.00 per year. When you put in writing that you own your car when you still have a loan on it.

It’s the Nixon problem. It’s not the fact that you did it (which is bad enough) but the fact that you lied about it – on paper.

And this specific part of the code deals with anything in writing about your financial condition. When you checked that you were NOT convicted of any crime when you were; that doesn’t count – even if you intentionally lied (and that is not something you tend to forget). Of course, the creditor can still “get” you on the “false pretenses, a false representation, or actual fraud” part.

***

            Or can they? Remember I said that it is difficult for a creditor to win these kinds of actions. If only because a creditor – usually a company in the business of lending money – has ways to check and double-check what you say.

Did they ask for copies of your paycheck stubs? How did they verify your income? Did they NOT verify your income?

That was kind of … well … stupid wasn’t it?

A common defense as to not listing all your debt is to ask if the company got a credit report before approving the loan. Does the credit report show the unlisted credit card? Why did they approve the loan in the first place when they SAW there was a credit card not listed on the loan application?

This is especially helpful when they say “I wouldn’t have given her that loan had I known she owed that much on her Discover Card!”

And they will ALWAYS say that.

***

            If, in the course of the lawsuit, it seems the judge is siding with the debtor – and a good attorney can tell most of the time – the attorney may pursue how the debtor got the loan? Did they get a letter saying they were pre-approved? Well, if they were pro-approved it hardly matters WHAT they put on their application, doesn’t it? J

***

            The Court will use reasonableness and common sense with these issues. Forgetting one or two other loans on an application? That’s probably okay. Forgetting about tens of thousands of dollars’ worth of debt? That is NOT reasonable.

You forgot your name was on your brother’s car? That’s probably okay. Forgetting that you DON’T owe on the car you are currently driving? That is not reasonable.

Stating you make $35,000.00 per year when you make $40,000.00? That’s probably okay. But if you were out of work when you made the loan? That is not reasonable. Did the question ask about potential future income? We might be back to reasonable again. This is the kind of thing your attorney will ask the creditor – do you ask about his current situation? Did you follow up on the questions about potential income?

***

                “Intent to deceive”. That is the key. Cackling with glee over your nefarious deed. Twirling your mustache. Nyah-ah-ah.

***

If the creditor wins and the debt is ruled non-dischargeable, it will survive the Chapter 7 bankruptcy and you will have to resume paying it when the bankruptcy case is over. In a Chapter 13, any amount not paid by the disbursing Trustee will survive, including unpaid interest (if the original loan allowed for interest). In neither kind of bankruptcy will you have to pay on the debt during the bankruptcy.

***

More “Intentional Debts” next time …

Copyright 2016 Michael Curry

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

tags: Bankruptcy Attorney Lawyer Mount Vernon Illinois Centralia Fairfield Carmi

 

What Bankruptcy CAN’T Do: Intents and Purposes Part One

 

Lies!

Bankruptcy helps relieve the burden of credit card and loan debts, medical bills, back utilities and rent, and so forth.

But there are some debts that bankruptcy does not affect; that are “immune” from a bankruptcy discharge – the word is “non-dischargeable”. This means that when the smoke clears and the bankruptcy is over, these debts will still have to be paid.

My previous blogs were about  taxes, traffic fines, speeding tickets and their ilk, and student loans.

Today I’d like to discuss what I call Intentional Debt. It’s not a legal phrase and you won’t find it in a law dictionary or on other legal websites or blogs.

I made it up.

Intentional Debts are the kinds of debts incurred that you should not have incurred – and knew you should not have. You were being naughty when you incurred the debt. Shame shame!

***

Here is the law that states that some intentional acts are non-dischargeable. The law that says so is 11 USC 523(a)(2). I will reprint it here without all the legalese:

A debt is not discharged in bankruptcy if it is “… for money, property, services, or an extension, renewal, or refinancing of credit … obtained by … false pretenses, a false representation, or actual fraud, other than a statement … (of) … the debtor’s or an insider’s financial condition.”

In other words: you lied.

About anything. Whether it was on the loan application or over the phone or in person. If you intentionally lied to get the loan, that debt can be ruled non-dischargeable and you will have to continue to pay it even though you filed for bankruptcy.

If you said you were working and you were not. Or that you were NOT working and you WERE (this applies to overpayment of unemployment, for example), if you said you were current on your rent or mortgage and you were not. If you said you owned your car and you did not. If you said you have no children living with you and you have two. You get the idea.

Remember we are talking “intentional” …

“You said you co-owned a car with your ex-boyfriend but he traded that car in the month before!”

“He did?”

***

Let’s pause a minute and let reality sink in. It’s hard to get a ruling against you with this kind of action. Because it’s hard to prove intent.

“You didn’t list the fact that you still owe on a credit card!” Maybe when you filled in the loan application you honestly forgot about that. You DID list the car, the OTHER credit card, the computer loan … maybe it was an honest mistake. Maybe the application only had room for a few loans and you didn’t have space to put it in. Maybe the loan was going to be used to pay OFF that credit card and so why bother list it? (Hey, that line of logic made sense to you at the time – and it still makes sense!).

“You didn’t list all your bank accounts on the application!” Was it a Christmas club and the application was filled out the spring (and you forgot about the ten dollars in it)? Was it a joint account that you forgot about?

The creditors will comb through your bankruptcy paperwork for things like this.

Fortunately things like this fall through. “I got the bank account after I got your loan but before the bankruptcy. Same with the credit card. Same with the car loan.”

If the creditor is smart they will ask your bankruptcy attorneys about these discrepancies before bringing any court action. Your attorney will ask you about the facts (when did you open the account? When did you buy the car or get the credit card?) and relay them to the attorney for the creditor. The creditor can then decide whether it is worth filing an action in the bankruptcy court.

Do you see the inference here? As long as the creditor can prove you were NOT twirling your moustache and snarling, “nyah-ah-ah!” after getting the loan, you are probably safe.

The creditor still has a right to try the case before the bankruptcy judge. You will still have to defend yourself or hire an attorney to help you defend yourself.

Keep that in mind: do you want to pay an attorney a thousand dollars to defend an eight hundred dollar loan?

Check with a local bankruptcy attorney anyway if this happens. It may be you have a solid defense. And in some cases the losing side pays the winner’s attorneys fees. Since the creditor who is filing the challenge to the bankruptcy is usually a business, collecting the attorney’s fees will be easier than if it were an individual.

***

Read through those examples above and remember that your bankruptcy trustee will also be listening. You didn’t list a bank account on your loan? Was it also missing from the bankruptcy schedules? You might not only be in trouble in this proceeding to have the loan ruled non-dischargeable, but NOW the trustee might file an action for not telling the truth on your bankruptcy schedules.

Calm down. If the missing bank account (or missing vehicle or other asset) is not enough to make the debt in question non-dischargeable, it is probably inconsequential enough to escape the trustee’s wrath, too. To be safe, amend the schedules to add the bank account or vehicle or asset anyway…

***

One last example:

“You forged your grandmother’s name as a codebtor so you could get the loan?” Um, yeah. If that is true; I think they got you. You’d better own up and admit that debt will survive the bankruptcy …

***

The bottom line is that if you were cackling with glee over “getting away” with what you did – getting the loan – that loan may survive the bankruptcy if the creditor (the person or company you owe the money to) challenges your bankruptcy.

 

A good local bankruptcy attorney will have the experience and knowledge of your district to advise you how the bankruptcy judge of that district views and reviews these factors.

***

If the creditor wins and the debt is ruled non-dischargeable, it will survive the Chapter 7 bankruptcy and you will have to resume paying it when the bankruptcy case is over. In a Chapter 13, any amount not paid by the disbursing Trustee will survive, including unpaid interest (if the original loan allowed for interest). In neither kind of bankruptcy will you have to pay on the debt during the bankruptcy.

***

More “Intentional Debts” next time …

Copyright 2016 Michael Curry

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

tags: Bankruptcy Attorney Lawyer Mount Vernon Illinois Centralia Fairfield Carmi

 

Form 1099-C, when forgiving is NOT divine… Part One

1099-C, when forgiving is NOT divine…

Part One

Bankruptcy clients rarely receive a 1099-C. Only on certain specific debts do I advise a client that after discharging their debt they might get a 1099-C in the mail. Usually mortgages, specifically mortgages with Greentree.

Also, they come in waves every few years. Earlier this year (2016) I had four or five calls from clients about getting a 1099-C. This is the first time I have had to handle calls about it in about five years. I suspect that the person in charge of doling them out at a credit company has moved on and a new person takes over the department trying to make his (or her) bones by inflicting these flimsy pieces of paper on their heretofore loyal customers.

What is a 1099-C form? When a creditor forgives a debt that you owe, it can send a 1099-C to the IRS and that counts as part of your income you must report and on which you must pay taxes.

1099c

What?!

Let’s suppose you owe a credit card $11,000.00. Miraculously you have managed to persuade the company to accept $6,000.00 in one lump payment and they write off the rest. They agree and do not renege.  You pay (somehow managing to collect the money – hopefully not as a loan from another credit card company thereby going from the frying pan into another frying pan) and they still do not renege.

(Keep in mind this is a fantasy only used as an example. The odds of a credit card company actually agreeing to something like this and not weaseling out of it even after payment are the same as winning the lottery – so you might as well win the lottery and pay off the card entirely…).

Everyone is now happy. Until you get a letter from the credit card company some months later containing a 1099-C. Now you have to declare that $5,000.00 that was forgiven as income.

Note that you have to declare that $5,000.00 as income whether you get a 1099-C or not!

The logic, that word used loosely, is as follows: now you do not have to pay that $5,000.00. You have five grand you would not have had if the credit card company had not forgiven the debt. That $5,000.00 is income for the year in which it was forgiven.

“But it would have taken me more than five years to pay off that $5,000.00, why does it count for only that one year?” Don’t try to argue around this with reason and sensibleness …

Imagine this family earns $35,000.00 per year. For 2016, their income will be $40,000.00.  If this person is single they are in a new tax bracket – 25% instead of 15%.

The problems come in with real estate mortgages – either modifications or short sales or whatever the latest scheme is from the mortgage companies. In cases like this we are not talking about a “few” thousand, but tens of thousands. Suppose the bank writes off $60,000.00 from the house you just gave back to them. They send you a 1099-C.

Now you go from $35,000.00 to $95,000.00. That a jump up one tax bracket for a married couple, two brackets for a single person!

Here’s an ugly scenario: imagine if the student loan problem is resolved and the government starts forgiving loans. What if THEY start sending out 1099-Cs? You might go from owing the Department of Education $200,000.00 to owing the IRS $100,000.00! And the IRS doesn’t believe in forbearance or deferment! {Note that if a student loan was forgiven because the person who received the loan worked in an underprivileged area as a teacher or a physician (remember that was the original premise for the TV show “Northern Exposure”), that is an exception to this rule.}

Does the credit card or mortgage company benefit from this? No. They do it because 1) they are required to under the tax code, and (more likely) 2) it tickles them.

What can you do? Not much, I’m afraid. You will have to consult an accountant or a tax attorney. You can except the “income” from a 1099-C only in certain circumstances – proving insolvency, if the debt was your home, your business or farm property … things that go beyond this blog and my expertise.

Speak to an accountant or a tax attorney for ways to stave off the extra income.  Tax avoidance versus tax evasion.

Can you file bankruptcy on the debt? No, as there is no debt to discharge. I have had to break this bad news to a few clients in my twenty years of practicing bankruptcy, but not many. And remember – even if the creditor did NOT send you (and the IRS) a 1099-C, it is still your duty to report it as income!

But what if it WAS for a debt that was discharged in bankruptcy?

Ah, that is another story altogether! And a story with a happy ending!

 

Original Material Copyright 2016 Michael Curry

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

tags: Bankruptcy Attorney Lawyer Mount Vernon Illinois Centralia Fairfield Carmi

 

 

Budgeting, avoiding debt and getting out of debt Part 2

Budgeting, avoiding debt and getting out of debt

Part 2

            On January 27, 2015 I was asked to speak to families by the BCMW Head Start program in Centralia about budgeting, avoiding debt and getting out of debt.

            I prepared a thirty-minute speech with handouts and other documents. Most of my speech was cobbled together from notes online, and I thought I would write it up as a blog to share with you.

            Note that these are lecture notes and not originally done to be read. It’s like reading a play – something I always complained about in school when studying Shakespeare, etc. It’s like trying to “listen” to Mozart or the Beatles by only looking at the sheet music. So it is a little disjointed, but I hope you enjoy it.

            I am quite pleased and proud that the tweet of the original blog post was republished by Financial Times Weekly!

            Check the first part of my speech here:

 ***

            Now that you’ve found a small pool of “extra” savings, how can you use that to get out of debt?

            Make a conscious decision to stop borrowing money. Right now. If you want to get out of debt fast, you have to stop using debt to fund your everyday expenses and lifestyle. This means no more financing furniture, no more signing up for credit cards, no more test driving brand new cars that you don’t have the cash to pay for. This will help you focus solely on the debt that you currently do have so that you can develop a game plan to pay it off quickly.

            DON’T take out a big loan to pay off all the smaller ones; you can’t borrow your way out of debt. Especially if you are still used to using debt to finance your everyday expenses. In a few years, or even months, you’ll be back to several loans and credit cards AND the big loan that paid off your previous debt…

            Ask for a lower interest rate: Frankly I usually have doubts about this working, but I’ve had people tell me they have had some success. Grab a bill from any account charging you more than 15% interest. Dial the toll-free number on the bill and ask to have your rate reduced — say, to 10%. Tell them that you’d really like to stay with them as a customer, but you are facing financial difficulty and have received offers for much-lower-rate cards. Stand firm and remember that, to them, you are both a customer and a means of profit. You have nothing to lose – all they can say is “No.” Thank them and hang up. But if they say yes, you could save some money. And always, always ask a letter from them confirming the new rate.

            Should you switch to a low-interest or no-interest credit card? Well, why not? If you stick to the payment plan it will save you money in the long run. One saying is applying for lots of credit cards at one time hurts your credit. Odds are your credit is already hurting right now … so where’s the real harm? And all the new credit cards can say is no and you can cancel them before charging anything on them – but watch out for the transfer fees. Is it worth paying no interest when they add a thousand dollars to your bill?

            Is there any way to earn extra cash? Books and financial gurus tell us to “go get a second job”. Yeah, right. I earn more money, I lose my aid.  Or “start your own business”. Seriously? How can they say that and keep a straight face?

            But maybe the older children can help with part-time jobs. And they can help with expenses. They can start learning about income and not using debt to fund living expenses. A habit they’ll get into that will benefit them the rest of their lives!

            Can you sell things? Don’t think of ways to make some extra money as a waste of time. You might spend all day on Saturday sitting at your yard sale for $40.00. But it’s $40.00! What else would you be doing? Watching TV? The kids can help count money and make change – my gosh they might learn something!

            Take old toys to consignment shops, sell old clothes on those online or Facebook yard sales.

            Once you have found some extra cash, it’s time to organize your debt and start paying it off.

***

            Financial gurus use two approaches:

  1. List your debts smallest to largest regardless of the interest rate. This helps build momentum. When we paid off our first debt it’s encouraging and exciting! Even though we had higher interest debts, this gave us something that was very powerful: the belief that we could get out of debt quickly if we stuck to the plan. Then when that debt is paid off, roll that monthly payment into the next debt.

            Example: you’ve found a pool of $75.00 extra per month and pay that on a bill until that is paid down. Then you go to the next bill and pay that bill the extra $75.00 plus its minimum payment, let’s say $30.00, too. So you have $105.00 going to pay that bill. Once that is paid off in a few months to a year roll that $105.00 to the next bill and add its minimum payment – let’s say $40.00 per month. So you are making $145.00 per month on that third bill!

  1. List your debts starting with the highest interest rate first and end with the debt with the lowest interest rate. This will save the most money in interest over time.

            Regardless of which process you choose, the key is to stick with it.

            Throw that excess cash at your debt

            I mentioned this before … if extra money comes to you, take this cash and use it to tackle your debt. Some good examples would be a tax refund, selling a car, selling toys at consignment shops or online. The more cash you can put towards your debt, the faster it will disappear.

            Be aggressive in paying down debt, but don’t get so ambitious that you risk missing minimum payments on your mortgage, automobile, or any other secured credit account. (Secured means that if you miss enough payments, the bank can show up and take away your stuff.)

***

            Then there is bankruptcy, this is what I do. I am a bankruptcy attorney. In this debt pay-off plan I consider this the nuclear option. Boom!  I’ll explain why in a bit.

            There are two kinds of bankruptcy you can file – the Chapter 7 and the Chapter 13. Why they are called that is because the bankruptcy code is like any book – it’s divided into chapters and the chapters that apply to people at 7 and 13. Chapter 13 is a consolidation of all your debt – kind of like what we are talking about right now. The Chapter 7 eliminates or liquidates all debt.

            There’s a lot more to it than that, such as car loans and house loans, but that would take up another half hour.

            The trouble with filing bankruptcy is the same as getting a big loan to pay off your debt. You need to get in the habit of not financing your everyday expenses with credit. Bankruptcy will eliminate your credit cards and loans, but if you don’t learn to live and spend without them – you’ll be back to owing more credit cards and loans in a few years, or months!

            Remember that originally credit cards were a safe substitute for cash – usually in bigger cities or stores. I charge on my account and pay it off at the end of the week. In rural areas people charged until they had the cash available. It’s too wet to cultivate the beans, but after ten days of sunshine I can harvest the crop and pay store or bank debt.

            Debit cards are now the substitute for cash. I use a debit card instead of cash. It’s safer and most places take them now. Don’t use credit cards for food or clothes. When Wal-Mart announced in the mid-1990s they would start accepting credit cards, I knew the impact it would have on people dependent on credit cards.

***

            OK, so I’ve paid off all my debt, now what? Establish a starter Emergency Fund of $1000.

            You might be wondering, ‘Why is having an emergency fund important’? Well, if you don’t have any money in the bank and an emergency does happen, how are you going to pay for it? For most people, credit cards become the funding source for those emergencies. If you are trying to get out of debt then you need to put a buffer between you and debt; that is exactly what an emergency fund does.

            A fun way to save money is to add money into a jar or piggy bank at the rate of the same amount of dollars as the week of the year beginning January 1st (we’re nearly in February so you will have to catch up quick). $1.00 the first week, $2.00 the second week, etc. This might get tight by the time you get to week 30 or so… (this will be mid-July), but by then you’ve collected $465.00 – in ten weeks that will be $820.00 (mid September): there’s your Christmas spending money. If you can make it to Week 48 (just after Thanksgiving), that’s $1,176.00. That’s a nice way to save up for your emergency fund. By the way, if you want to catch up, the end of January totals $15.00.

***

            When you have a huge debt load you feel isolated and bummed out. But if there is one thing to remember is that you are not alone. And there are people you can turn to for help. There are lots of books and financial gurus out there. You can check out books and DVDs from the library or buy them cheaply on ebay.

            And by the way, check your local libraries or museums or conservatories for free activities for kids and families – game days, reading nights, movie nights, etc. Substitute that instead of paying for the family to see a movie.

            When it comes to getting out of debt one of my favorites is John Cummuta. His earlier tapes and DVDs talk about this system of paying off your debt slowly and I like what he says and his down-to-earth style. Nowadays he also talks about what to do with all that extra money: invest in this, invest in that, start your own business, etc.; but his method to climb out of debt is still good advise.

            But there are also so many scam artists and charlatans out there, so be careful. You know, “I can help you make a millions dollars. Just send one dollar to “How to Make a Millions Dollars”…” and their secret is to get one million people to send them a dollar…

            And don’t put up with smarmy condescending jerks. The type that says it’s not your fault and then spend twenty minutes telling you why it’s your fault.

            Debt doesn’t have to be forever. Develop your financial game plan and start your journey toward being debt-free.

***

            (The suggestions and ideas of this blog are cobbled together from various internet sites and blogs. Some ideas and suggestions are original; some taken from various “un-cited” sources. Copyrights, if any, are held by the proper holders.) 

Michael Curry

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

tags: Bankruptcy Attorney Lawyer Mount Vernon Illinois Centralia Fairfield Carmi

Budgeting, avoiding debt and getting out of debt (Part 1)

Budgeting, avoiding debt and getting out of debt

Part 1

            On January 27, 2015 I was asked to speak to families by the BCMW Head Start program in Centralia about budgeting, avoiding debt and getting out of debt.

            I prepared a thirty-minute speech with handouts and other documents. Most of my speech was cobbled together from notes online, and I thought I would write it up as a blog to share with you.

            Note that these are lecture notes and not originally done to be read. It’s like reading a play – something I always complained about in school when studying Shakespeare, etc. It’s like trying to “listen” to Mozart or the Beatles by only looking at the sheet music. So it is a little disjointed, but I hope you enjoy it.

            I am quite pleased and proud that the tweet of the original blog post was republished by Financial Times Weekly!

***

            If you do not have debt, congratulations. There aren’t many people out there that can say that. Most of us have debt and that can cause stress & anxiety.

            If you’re afraid to open letters, answer the phone or open the door, but they are ignoring the problem – but it won’t go away.

            Being in debt can be a stressful experience. No matter what your circumstance is, if you signed for a loan, you are obligated to pay it back even if you have a life altering experience like losing a job, getting into an accident, or even if you have increased expenses due to having a child.

            Money is the No. 1 cause of relationship breakdown.

            Ignoring it may also make you dread what tomorrow might bring. And it’s all because of money worries.

            Facing up to the problem can be a frightening thought, but it is the first step towards doing something about it.

***

            To avoid debt or to get out of the debt trap you are in is to know your income and expenses.  What you have coming in and going out…

            Few of us were taught the basics of money management.  Drawing up a budget is a mystery to many. Yet it has an impact on our day-to-day living.

            Look at your income; I made an income sheet that details your gross, your deductions and then you final net income – your take-home pay.

 

Gross Income                                              $

Overtime (average):                                   $    0.00

Total:                                                           $_____________

 

DEDUCTIONS:

Taxes

          Federal                                              $

          State                                                  $

          Social Security                                   $

          Medicare                                           $

          Other (FICA, etc.)                              $

 

Insurance

          Health                                               $

          Life                                                    $

          Vision                                                $

          Dental                                               $

          Disability                                            $

          Other                                                 $

 

RETIREMENT                                                  $

 

UNIFORMS/SHOES/

EQUIPMENT                                                  $

 

OTHER                                                          $

 

 

NET INCOME:                                               $

 

 

Determine your monthly income:

          Paid weekly*?                                             x 4 =

          Paid every other week*?                             x 2 =

          Paid two times per month?                         x 2 =

          Paid monthly?                                             x 1 =

 

*(actually, weekly is 4.33 and bi-weekly is 2.167, but this will give you a cushion)

***

            Know what your deductions are. Is this insurance? Is this a voluntary charity? It’s important to know where your paycheck is going.

            Is there a way you can adjust this?

            Can you adjust your withholding? Do you need that big tax refund or can you lower your withholdings to make more money during the year. You may get thousands of dollars in February but are eating Ramen noodles by November, and borrowing for Christmas and paying for it with those thousands of dollars in February – it’s a vicious circle of debt…

            You can even spread out your earned income credit through the year. This can be hundreds of extra dollars per month.

***

Then look to see where what you are spending. I’ve also included an expense sheet we use at our office. You can find lots of these online or in self-help books at the library you can copy for your own use.

EXPENSE
AVERAGE MONTHLY COST
RENT OR HOME MORTGAGE $
UTILITIES  
Electricity $
Heating Fuel; Gas or Propane $
Water and Sewer $

Telephone

$
Cell Phones $
Cable $
Satellite $
Trash $
HOME MAINTENANCE (repairs, lawn mowing, painting, etc.) $
FOOD $
NON-FOOD GROCERY ITEMS (laundry soap, diapers, toiletries, etc.) $
CLOTHING/SHOES (yearly average ¸ by 12) $

LAUNDRY / DRY CLEANING

$
MEDICAL AND DENTAL EXPENSE (do NOT include insurance premiums) $
TRANSPORTATION – include gas, oil, repairs ( do NOT include car payment or insurance) $
INSURANCE (do NOT include any payroll deductions)  

Homeowner’s /Renter’s (if not escrowed)

$
Life $

Health (Major medical, dental, vision, etc.)

$
Auto $
Other $
TAXES – do NOT include any payroll deductions or any that are included with your mortgage payment  

$

INSTALLMENT PAYMENTS – only those you  intend to keep  
Automobile payment $
Automobile payment $
Other $
Other
$
ALIMONY, MAINTENANCE AND SUPPORT PAID TO OTHERS (do NOT list if this is a payroll deduction)  

$

CHILD SUPPORT (do NOT list if this is a payroll deduction) $

MISCELLANEOUS

 

Tobacco

$
Postage $
Haircuts/Beauty Shop $
Pets $
School Supplies/Lunches/Expenses $
Charitable contributions $
Other __________________________ $

 

            Be realistic! This will help you see where your spending goes.

            Check the income minus the expenses – where are you at? Do you need to trim some expenses?

            Go over each line item on your budget and ask yourself, ‘how can I make this number smaller?’ It may involve cancelling services that you rarely use like a gym or swimming pool membership, Netflix subscription (although that is sometimes cheaper than cable), etc. It might even involve reducing the amount of times that you eat out at restaurants each month.  Maybe make it once per month – makes it more special.

            Stop buying non-essentials. Buying lunch every day? Coffee? Think how much you spend on high-end coffee per cup. $7.00 for a mocha froth? One of those a day for month equals an average car payment. A car payment … a cup of coffee. Get it?

            Use coupons or buy generic (although it is usually cheaper just to buy generic green beans rather than name brand even with coupons).

            If you decide you’d like to keep getting that big tax refund instead of spreading it out through the year: think hard about what you want to use it for. Don’t blow it on a vacation.  Remember the cute phrase some years ago – “Staycation?” Go to Springfield if you like history, camp out at Giant City or Rend Lake, St. Louis Zoo is still free, etc.

            Movies? Get them from the library. Games? Rent them, too. Cable? Can you watch shows you like online or though Hulu or Netflix (but watch out your not paying extra for the internet streaming. Netflix may be $7.00 per month, but if you go over your internet limit that will cost tons… see? You have to watch for those little things)? Cell phone? Get prepaid – you can reward yourself with a smartphone after a debt is paid off.

            And feel free to reward yourself when you hit a milestone and pay off a debt. Go to that movie, eat out someplace nice.

            Before buying an expensive item, count how many hours you will have to work to pay for it or how many months’ income it is. Rule of thumb: if you can’t afford it, you can’t have it.

            Other ways to shave off a few bucks from your expenses are old tropes or old ideas, but they happen to be true and happen to work: Your car’s most economic speed is likely to be between 50 and 55 mph.   When you buy a car, get one that is two years old – its price will have dropped by 40-50 per cent – and keep it three years.

            Never go shopping when you are hungry – and, if possible, don’t take the children. My secretary told me her cousin plans their meals for the week and writes it down in a notebook and takes it shopping – cuts down on the impulse buying and buying things you don’t need or impulse items.

            The amount that you slash depends upon your commitment level to getting out of debt.  The more committed you are, the easier it will be for you to give up some of the unnecessary amenities in life.  You might not even need to sacrifice much if you can find these items or services for less.

            But you will probably have to make changes in your life to climb out the hole. Think about how long did it take you to get here? This won’t happen overnight, or in a month or a year! It takes perseverance, patience, and dedication; it takes time and effort.

            From here you can now make a plan – by looking at the kind of debt you have – secured (fixed payment) and unsecured.

***

            End Part 1 …

                        (The suggestions and ideas of this blog are cobbled together from various internet sites and blogs. Some ideas and suggestions are original; some taken from various “un-cited” sources. Copyrights, if any, are held by the proper holders.) 

Michael Curry

***

About the author: Michael Curry of Curry Law Office in Mount Vernon, Illinois has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.

He is also the author of books on finance and bankruptcy available on Kindle through Amazon!

Whether you live in Mount Vernon, Salem, Waltonville, Woodlawn, Lawrenceville, Centralia, Louisville, Xenia, Grayville, Effingham, Dieterich, Vandalia, McLeansboro, Dahlgren, Albion, Flora, Clay City, Kinmundy, Chester, Sparta, Olney, Mount Carmel, Nashville, Fairfield, Cisne, Wayne City, Carmi, Grayville, or anywhere in Southern Illinois call Curry Law Office today at (618) 246-0993 and Finally Be Financially Free!

tags: Bankruptcy Attorney Lawyer Mount Vernon Illinois Centralia Fairfield Carmi