Recent Blog Posts in February 2010 |
| February 24, 2010 |
| Settling a Debt for less than you owe can cost more than you think |
| Posted By Robert Kovacs |
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Yes settling a debt for less than you owe will save you money but it is not going to save you as much as you think.
When you settle a debt with your credit card or other creditors for less than you owe the amount forgiven is taxable income.
For example if you owe Bank of America $20,000 and they forgive $10,000 the forgiven $10,000 is treated as income to you which you will pay taxes on at year’s end. The creditor will issue you a 1099.
Also debt settlement for less is reported on your credit report and can negatively impact your credit score.
In bankruptcy debts are discharged through a court order. Discharged debt in bankruptcy will not be taxed or reported as income.
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| February 24, 2010 |
| New Credit Card Regulations – Opt in for Over Draft Fees |
| Posted By Robert Kovacs |
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As you may have heard there are several new credit card regulations. One such regulation
prohibits banks from charging over draft fees unless you “opt in.”
If you chose not to “opt in” to the service your credit card or debit card transactions will be declined if they exceed your limit or would over draw your bank account. However you cannot be charged an over draft fees.
Before this change banks allowed most customers to over draw their accounts or exceed their credit limit and then charge fees for exceeding the limit.
Banks will no longer be able to do this UNLESS you tell them it is okay to allow you to over draft your account and to charge you over draft fees. Some banks are currently undertaking marketing campaigns to convince customers to opt into over draft fees.
Banks make a lot of profit on over draft fees and they do not want to lose them.
It’s up to you to opt in or not but it will cost you if you do. In my humble opinion, do not opt in save your money and do not pay banks extra fees.
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| February 20, 2010 |
| I filed bankruptcy. When will creditors stop calling? |
| Posted By Robert Kovacs |
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As soon as your bankruptcy case is filed with the Court the “automatic stay” comes into effect. The “automatic stay” is much what it sounds like, it happens automatically upon filing of your case and it stays certain actions against you.
This means as soon as you file bankruptcy your creditors are legally prohibited from, foreclosing on your home, repossessing your car, sending bills, or making collection phone calls.
Of course, your creditors do not know you filed bankruptcy the very instant you file. The Court will send a letter to all the creditors listed in your Creditor Matrix informing them of your filing. This will likely take about two weeks.
If there is an urgent matter, such as a home foreclosure tomorrow, I will call and fax the law office handling the foreclosure to ensure they are aware of your bankruptcy filing and it does not take place.
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| February 15, 2010 |
| What is Bankruptcy Counseling? Pre-Discharge Education |
| Posted By Robert Kovacs |
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Individual debtors filing bankruptcy are required to complete both pre and post discharge counseling courses. Pre-filing counseling or “Credit Counseling” must be completed before the filing of bankruptcy.
After the filing of bankruptcy debtors must again complete a counseling course. The post filing course has several common names; including, “Debtor’s Education,” “Financial Management Course,” and “Pre-Discharge Education.”
The course must be completed in order to get a discharge of debts. If a debtor fails to complete the course then the debtor’s bankruptcy case will be dismissed and no discharge granted debtor. The course must be completed and the certificate filed with the Court no later than 45 days after the first scheduled date of the §341 meeting of creditors. However, it is my recommendation to complete the course before the meeting.
The course can be completed, on-line, over the phone or in person. There are many agencies that provide pre-discharge education to bankruptcy debtors. These organizations must be non-for-profit corporations AND must be approved by the US Department of Justice; commonly debtors use the same company for both the pre-filing and post-filing course.
I provide all my clients with a referral to an approved counseling course, however, clients are free to use any agency they wish to complete the course.
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| February 11, 2010 |
| What is Bankruptcy Counseling? Pre Filing Counseling |
| Posted By Robert Kovacs |
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In order for an individual to qualify for bankruptcy protection you must first complete Credit Counseling. Counseling can be completed on-line, over the phone, and in person. The counseling will take about 2 hours.
In order to for an agency to provide bankruptcy credit counseling, the agency must be a not for profit corporation and approved by the US Department of Justice. A list of approved agencies is available at
http://www.justice.gov/ust/
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I, and most other attorneys, will provide clients with a referral to the agency that has provided a Quality service to my clients in the past.
With the internet the counseling is available nearly 24 hours a day so there should be a convenient time for you to complete the course.
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| February 08, 2010 |
| If you are filing chapter 13 bankruptcy with careful planning you may be able to reduce your payment |
| Posted By Robert Kovacs |
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Chapter 13 bankruptcy is a payment plan. In chapter 13 the debtor makes a reasonable monthly payment based on his or her income and
expenses. Whatever does not get paid back to creditors through the plan is discharged and you never have to repay again.
In order to determine the amount of the monthly payment we first look to the debtor’s income and then take off deductions for living expenses. Such as utilities, rent, mortgage, car loan payments, food, gas, retirement contributions, and life insurance to name a few.
With some careful planning we can reduce the amount of the chapter 13 plan payment. The simplest way to reduce the payment is to increase the amount of you contribute to your employee retirement plan. For every dollar you contribute you have to pay one less dollar to your creditors. However, your contribution cannot exceed 15% of your annual salary.
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| February 03, 2010 |
| If you owe the IRS or DOR filing bankruptcy will put you in an interest free payment plan |
| Posted By Robert Kovacs |
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If you owe the IRS or the Massachusetts Department of Revenue (“DOR”) back taxes then filing bankruptcy may help.
Filing bankruptcy under chapter 13 or 11 will put you into an interest free repayment plan. Yes, you will have to pay the IRS or DOR back, but it will be INTEREST FREE, penalty free, and you will be able to do it over 5 years in chapter 13 and possibly even longer in chapter 11.
It should also be noted that some taxes will get discharged in bankruptcy meaning you never have to pay them back.
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| February 03, 2010 |
| If you file Bankruptcy you can keep your tax return |
| Posted By Robert Kovacs |
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For most debtors filing under chapter 7, 11, 12, or 13 you are able to keep your tax return without surrendering it over to the case trustee or the estate.
In bankruptcy you are able to exempt certain asset from your creditors and the bankruptcy estate. Although there is no specific exemption for tax returns, the federal exemptions allow for a “wild card” exemption for up to $11,200 per person or $22,400 for married debtors filing jointly.
Because of the large value of the wild card exemption it is rare that a debtor will lose their tax return in bankruptcy.
Also, individuals filing under chapter 11, 12, or 13 will simply factor their anticipated tax return into their monthly budget as to not lose their tax return over the course of the bankruptcy plan.
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| February 01, 2010 |
| Common Bankruptcy Mistake – Transferring an asset out of your name |
| Posted By Robert Kovacs |
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In order to protect an asset a person thinking about filing bankruptcy may transfer an asset out of her name and into the name of another. This can include a home, vacation home, car, boat, plan, motorcycle, or even cash in the bank.
This is a huge bankruptcy mistake.
This would be an attempt to defraud your creditors. It could result in, a denial of the bankruptcy discharge, loss of the asset, or even criminal actions.
The good news. The asset, would be bankruptcy debtors are trying to hide can typically be exempted in a chapter 7 bankruptcy or protected in chapter 13 filing. In short if you try to hide something from the Court you are risking a lot with no possible reward.
Before taking any action with your assets talk to a qualified attorney.
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