Results 1 to 25 of 25

Thread: a couple questions reguarding bankrupsy...

  1. #1
    Banned i.breathe.in's Avatar
    Joined
    Sep 2006
    Location
    ohio
    Posts
    4,967
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default a couple questions reguarding bankrupsy...

    i know theres a ton of threads circulating but im not sure if this has been addressed.

    if you file bankrupsy, are you more likly to be audited?

    also, as an alternative to not filing bankrupsy many sites say to just ignore your debt and it will go away in 7 years just like a bankrupsy would. which would be better in the long term?

    thanks!

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    If you file for bankruptcy, it is GUARANTEED that your finances will be reviewed by the bankruptcy court, by other gov't agencies, by your creditors etc. with a fine tooth comb.

  3. #3
    Banned i.breathe.in's Avatar
    Joined
    Sep 2006
    Location
    ohio
    Posts
    4,967
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    so if a person owes back taxes it would be wise to not file is that what your saying?

  4. #4
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    it probably doesn't matter, because under US law you can't go bankrupt on unpaid tax bills. Those will haunt you forever even if you were to go bankrupt on other creditors and the bankruptcy court allowed a Chapter 7 total discharge of the other debts.

  5. #5
    Veteran Member
    Joined
    Oct 2006
    Posts
    536
    Thanks
    2
    Thanked 6 Times in 5 Posts

    Default Re: a couple questions reguarding bankrupsy...

    Yepyep, I went bankrupt in 2000, all debt was wiped EXCEPT for what we owed the IRS. Now the laws have changed since I did it, but for what it's worth at that time it was a pretty painless process- no creditors challenged it, and no audits since.

  6. #6
    Banned i.breathe.in's Avatar
    Joined
    Sep 2006
    Location
    ohio
    Posts
    4,967
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    im trying to decide if i want to go the statute of limitations route (6 yrs in my case)

    or bankruptsy.

    i just dont know which would be better in the long run to do.

  7. #7
    Veteran Member
    Joined
    Oct 2006
    Posts
    536
    Thanks
    2
    Thanked 6 Times in 5 Posts

    Default Re: a couple questions reguarding bankrupsy...

    Weeell, when I did it I think it stayed on your report for 7 years, so looking forward to it falling off this year. But I heard the way it is now it hangs around for like 10 :/ Consult with an attny

  8. #8
    BrunetteGoddess
    Guest

    Default Re: a couple questions reguarding bankrupsy...

    Chapter 7 Bankruptcy stays on your credit report for 10 years now. And even if you file some debts are not eligible to be discharged. Back taxes are one, student loans are another. Honestly though, if you have tax issues, either way you're still likely to be questioned/audited etc don't you think? It seems that would not be a question of if, but rather when...

  9. #9
    God/dess sxybrat07's Avatar
    Joined
    Jan 2006
    Location
    in yer bum
    Posts
    3,827
    Thanks
    0
    Thanked 12 Times in 11 Posts

    Default Re: a couple questions reguarding bankrupsy...

    Well, the way I understand it is this...

    Negative items fall off of your credit report in 7-10 years, HOWEVER, this does not get rid of the debt, the debt still exists. Odds are, the companies will write it off long before then, BUT assume you have a credit card bill now, and 3 years from now they give up collecting and write it off. It will take 7 MORE years before it falls off, as that was the last time it was reported. If you really aren't planning on paying the debts back, you're probably better off filing bankruptcy.
    I believe you Dottie and you have my support

  10. #10
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    ^^^ however, be aware that under the new bankruptcy laws there are strict rules defining which bankruptcy cases can be 100% discharged under Chapter 7, versus which bankruptcy cases must file under Chapter 13 which will involve a bankruptcy court mandated monthly payment schedule for making reduced payments to all of your creditors for the next 5 years or so. Under a Chapter 13 bankruptcy, reporting can easily extend beyond 10 years due to the bankruptcy not actually being completed until the 5 year payment plan is completed.

  11. #11
    Banned i.breathe.in's Avatar
    Joined
    Sep 2006
    Location
    ohio
    Posts
    4,967
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    so basically i should just let it go to default, itll still kill my credit for 7 years, but at least i wont have to pay it.

    if you end up settling with a debt collection agency for pennies on the dollar does that affect your credit as bad as not paying at all and going through to default?

    credit and finance are freaking interesting things....

  12. #12
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    ^^^ again, there is no guarantee under the new bankruptcy law that you'll be allowed to file Chapter 7 and have your debts 'cancelled'. Much more likely today is that you'll be forced to participate in a bankruptcy court ordered Chapter 13 proceeding - where the debts are not 'cancelled'. Under Chapter 13 the bankruptcy judge establishes a payment schedule based on your future income, where you'll be required to continue to make small payments to all of your creditors over the next 5 years or so, with the payment schedule allotting you only a 'poverty level' portion of your own future income to spend on things like rent, food and anything discretionary - with any money you earn over the 'poverty level' being paid to your creditors before you ever see it.

    Given the direction that subprime lending is taking lately, I think it's safe to say that both a bankruptcy filing or a 'charge-off' settlement without filing bankruptcy will both nuke your credit for the next 7-10 years ! Theoretically, a 'charge-off' settlement is worse than a Chapter 13 bankruptcy, because 'never' is not better than 'late' in the eyes of future creditors plus the law provides some advantages for people who successfully emerge from a bankruptcy proceeding.

    You really probably need to thoroughly understand the new bankruptcy law re Chapter 7

    "If the debtor's "current monthly income"(1) is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $10,000, or (ii) 25% of the debtor's nonpriority unsecured debt, as long as that amount is at least $6,000. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed. 11 U.S.C. § 707(b)(1)."

    and you will definitely want to read

    I would add that the new median income provisions of the bankruptcy law will absolutely result in a thorough investigation of your finances possibly over the past 5 year period. This may be originated by the bankruptcy court, but can also have 'fallout' involving the IRS ... and you cannot go bankrupt on back taxes regardless of which Chapter a bankruptcy filing takes place under.
    ~
    Last edited by Melonie; 04-13-2007 at 11:21 PM.

  13. #13
    Banned i.breathe.in's Avatar
    Joined
    Sep 2006
    Location
    ohio
    Posts
    4,967
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    mel, i think everyone on this board can safely say we would not know what to do without you on here

    you know your stuff

  14. #14
    Veteran Member
    Joined
    Oct 2006
    Posts
    536
    Thanks
    2
    Thanked 6 Times in 5 Posts

    Default Re: a couple questions reguarding bankrupsy...

    Dang, I didn't realize just how bad it was now... what's next, the return of debtors' prison?

  15. #15
    Banned i.breathe.in's Avatar
    Joined
    Sep 2006
    Location
    ohio
    Posts
    4,967
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    they would need a prison the size of texas for that place!

  16. #16
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    Dang, I didn't realize just how bad it was now... what's next, the return of debtors' prison?
    Nope ... people in prison aren't earning / spending money and aren't paying taxes ! Thus the proliferation of Chapter 13 avoids the logistical problem of physically imprisoning debtors ... but arguably imprisons them economically by putting the gov't in control of where and how their earnings get spent, who gets paid first and last, and severely limits how much of their own money the person is allowed to spend at their own discretion.

    Soon millions of Americans are likely going to be faced with the choice of accepting a life under Chapter 13 bankruptcy terms in order to keep their houses and cars and personal possessions, versus having everything foreclosed / repossessed, having any assets liquidated, and basically being 'thrown out into the street' with no money and no credit if they refuse to file Chapter 13 and are denied Chapter 7 'liquidation' of past debts on the presumption of abuse.

  17. #17
    Veteran Member
    Joined
    Oct 2006
    Posts
    536
    Thanks
    2
    Thanked 6 Times in 5 Posts

    Default Re: a couple questions reguarding bankrupsy...

    That's interesting and makes sense. Makes me wonder though in light of all that- how was debtors' prison EVER a viable way to recoup money? Did they get hired/bailed out or what?

  18. #18
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    ^^^ no, they got shipped to America or Australia as indentured servants !

  19. #19
    God/dess
    Joined
    Jan 2005
    Location
    NJ
    Posts
    3,786
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    Quote Originally Posted by i.breathe.in View Post
    if you end up settling with a debt collection agency for pennies on the dollar does that affect your credit as bad as not paying at all and going through to default?

    credit and finance are freaking interesting things....
    Just wanted to let you know that this could screw up your taxes as well as your credit. Settling doesn't look good on your credit but the big problem is that the money you didn't have to pay, gets added to your income at the end of the year.

    I paid off/settled some debts for my fiance. We paid a 50% settlement on both of them. At the end of the year, he had to declare the other 50% as income.

  20. #20
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    ^^^ yup ... the IRS has ruled that any money which is 'paid to you' by a creditor in the form of a reduced dollar settlement on an outstanding debt must be treated as additional taxable income. This obviously applies to consumer debt i.e. credit cards and auto loans. I believe that it now also applies to 'short sale' settlements on real estate as well. This little tidbit should be a big factor when a person is trying to decide between accepting settlements or declaring bankruptcy (where there is no such additional 'income' and resulting tax obligation), but is usually totally ignored until the following April 15th (at which point the person finds they owe a ton of money to the IRS instead of to creditors, but they can't go bankrupt on the IRS !)

  21. #21
    Banned i.breathe.in's Avatar
    Joined
    Sep 2006
    Location
    ohio
    Posts
    4,967
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    that is so sketchy!!

  22. #22
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    ^^^ yup, and it gets even more cryptic because of the 'progressive' tax rates.

    For example, say there is a person who earns $40k a year but who also owes an aggregate of $40k on a delinquent car loan, credit cards etc. Her normal income taxes would probably run about 25% or $10k a year. However, if she were to accept a 50 cent on the dollar settlement on her debts, she would in effect have $20k added to her $40k income ... increasing her tax liability to the 33% or $20k ballpark.

    Needless to say, these 'settlements' are automatically reported to the IRS.

  23. #23
    God/dess
    Joined
    Jan 2005
    Location
    NJ
    Posts
    3,786
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re: a couple questions reguarding bankrupsy...

    Quote Originally Posted by Melonie View Post
    ^^^ yup, and it gets even more cryptic because of the 'progressive' tax rates.

    For example, say there is a person who earns $40k a year but who also owes an aggregate of $40k on a delinquent car loan, credit cards etc. Her normal income taxes would probably run about 25% or $10k a year. However, if she were to accept a 50 cent on the dollar settlement on her debts, she would in effect have $20k added to her $40k income ... increasing her tax liability to the 33% or $20k ballpark.

    Needless to say, these 'settlements' are automatically reported to the IRS.
    Exactly. And if you don't have the write offs like we did, you're screwed.

  24. #24
    God/dess
    Joined
    Sep 2002
    Posts
    8,031
    Thanks
    0
    Thanked 143 Times in 42 Posts

    Default Re: a couple questions reguarding bankrupsy...

    I don't understand how that's sketchy -- I mean, sure it sucks, but at the end of the day you spent that money for free by not paying the whole amount of the debt, so it is sort of like income.

  25. #25
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: a couple questions reguarding bankrupsy...

    ^^^ I'm told that this is exactly how the IRS views it ... 'forgiven' loan balances are the functional equivalent of the lender 'paying' you X amount of dollars in settlement (in exchange for not going bankrupt), and then you in turn pay those same dollars you just received as a settlement towards the outstanding debt.

Similar Threads

  1. Webcam couple have a few questions
    By littlebigswallow in forum Camming Connection
    Replies: 7
    Last Post: 11-02-2011, 10:53 PM
  2. Yo, DJs, a couple of questions.
    By Susan Wayward in forum Stripping (was Stripping General)
    Replies: 41
    Last Post: 02-05-2006, 04:35 AM
  3. A Couple of Questions
    By Chani_Fremen in forum Newbie Board
    Replies: 3
    Last Post: 10-19-2004, 02:18 PM
  4. Replies: 8
    Last Post: 01-12-2004, 01:05 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •