Chicago Bankruptcy Lawyer Blog

With April 15th come and gone, most of us are breathing a big sigh of relief. But for some folks – the ones in debt to Uncle Sam - it's a year-round nightmare.

My parents dealt with this a few years ago. Because they own a small business, their own taxes are increasingly complicated—and they unwittingly made an error on their return for which they were seriously penalized. Fortunately, they were able to scrap together enough to pay, if a little late. But not everyone is so lucky. What if all your money is tied up in other debts? What if you’re living paycheck to paycheck as it is? As if surviving the recession while dealing with creditors isn't bad enough, now you’ve got the IRS calling.

Don’t worry – they can’t send you to jail for not having enough money (though you can definitely get jail time for not filing!). But the longer you go without paying, the more interest you’ll end up owing. And the IRS sees nothing wrong with snatching the money right from your bank account, leaving you unable to pay your other bills.

Fortunately, there are ways out. I’ve mentioned the benefits of Chapter 13 bankruptcy plenty of times on this blog –it’s your surest bet to keep your home, it’s your Constitutional right, it will lower your credit card payments while offering you protection from creditors. What’s not to love, right? But it gets even better. Both Chapter 13 and Chapter 7 bankruptcy can kill two birds with one stone. Not only can bankruptcy save you from credit card debt, but it can also—under certain circumstances—save you from the clutches of IRS debt.

You might be able to discharge your tax debt if it meets the following criteria:

·         The due date for filing the tax return concerning the debt is

           at least three years old.

·         The return was filed at least two years ago.

·         The tax assessment is at least 240 days old.

·         Your tax return was not fraudulent (this is pretty straightforward)

·         You’re not guilty of tax evasion (again, kind of a given).

As you can see, filing for your taxes not only keeps you out of jail (for tax evasion, anyway) but is also one of the criteria for discharge. The IRS is the agency everybody loves to hate, but they will usually work with you if you are cooperative.

Of course, whether bankruptcy is right for you depends on you individual situation. For that reason, it’s best to seek professional advice before proceeding. Here at DebtStoppers, we can answer your financial queries for free. All you have to do is sign up for our personal debt analysis. Not only can we help you with that IRS debt, but we’ll show you how you can clear all your debts. When you’re free and clear, tax time might still be a hassle—but it won’t feel like the end of the world.

If Uncle Sam treated you as well as he treated me recently, you’re probably still smiling over the fact that you have a tax refund coming. Maybe you’ve even started to plot how you’ll spend the money once it arrives. If so, good for you! Having a plan for your refund is the best way to stretch it as far as possible—though it took me awhile to figure this out.

Back when I was younger, my only plan was to blow every dime on a mad shopping spree. In those days, a tax refund was as good as free money. Never mind that it was actually money I had earned yet was being withheld by the IRS—I pretended I had hit the jackpot. Since it didn’t feel like my income, I didn’t treat it with the same kind of responsibility as my paychecks—meaning I felt no guilt over spending it at the mall.

Problem was, I was otherwise living paycheck to paycheck because I had a lot of credit card debt. And because I never had enough money, I continued to rely on the same credit cards that put me in the red. I thought I was stuck in a vicious cycle, but I didn’t realize I had a ticket to financial freedom in the form of those IRS checks. After a few years (and after my refunds began getting smaller and more precious) I began using portions of them to pay off debt and actually stock up some savings. And you can do the same.

If you’re like most Americans, you have a lot of debt—probably at least a few thousand bucks. And if you’re making minimum payments with a typical annual interest rate—let’s say 20% or 30%—you’re giving a ton away to creditors. Most of those minimum payments will barely cover the yearly interest (if they do at all), and it could take years before you are able to pay off the principal balance. By spending your refund on reducing your debt, think how much money you will save yourself in the future! It will go much farther than if you merely use it for day-to-day spending, in which case you will still owe interest on your debts.

The principle still holds even if you didn’t get a refund this year. If you can save a portion of your paycheck every month—even if its just 10%, give or take—for paying down debt, you will be closer to financial freedom. And when you’re free of debt, you won’t have to wait for an IRS check to have money to spare.

Tackling debt can be a challenge. But if you find yourself overwhelmed, the debt experts at DebtStoppers in Chicago and Atlanta can help. You can start by signing up for our free one-on-one debt analysis. In the meantime, check out paycheck-stretching tips on our blog and in our free Financial Toolkit.

If you have trouble sticking to a savings plan most of the year, there’s no better time to take action than when you get that refund. Don’t look at it as free money—look at it as savings that you temporarily invested with the IRS (for not very much interest, but that’s another story). Now you just need to finish the job by putting it somewhere where it can really pay off.

I couldn’t believe my eyes when I looked at my finished tax return this week. For the first time in five years, I will be receiving a refund! Nothing relieves the stress of doing taxes like the realization that a check will soon be coming your way.

In fact, it can make you so blindly happy that you do not-so-smart things. For instance, had I walked outside immediately after finishing my taxes, I probably could have stepped right in front of traffic—with a silly grin still plastered on my face. But more likely, I could have fallen victim to a common loan.

You see, tax preparation companies aren’t just doing taxes nowadays—they’re also making loans. Refund anticipation loans. Here’s how it works: You find out that you’re getting a large refund. You’re already walking on air anticipating the money when your tax preparer says, “How would you like me to write you a check for that amount today?” Sure, you think, the only thing better than money in the future is money now, right?

Not exactly. Loans involve interest, remember? Let’s say the IRS plans to give you $2,000 back. Your tax preparer can write you a check today, but in a few weeks or months, you’ll owe them the original $2,000 plus $250 when your refund comes in—the equivalent of more than 500% annual interest!

And that’s not all. Loans also involve risk. What happens if your refund doesn’t arrive on time? Maybe it gets lost in the mail, maybe the IRS discovers a tiny error, but the end result is the same—a delayed check. You’re still responsible for coughing up that $2,250—the original amount plus interest—whether or not you receive your refund.

It’s a classic example of how quicker doesn’t always mean better. But fortunately, there is a fast way to get your money that also happens to be virtually free. If you opt to file electronically and choose direct deposit, you could have your refund in as little as 10 days. I realize that you may have already filed your taxes this year, and if you went the refund loan route, it’s probably too late this time. But you’ll know how to get your money’s worth next year.

And if you are desperate for a refund—or to receive one ASAP—it could be a sign that you’re carrying too much debt. Are you routinely out of money? Do you find yourself pulling out the credit card just to tide yourself over to your next paycheck? It doesn’t have to be that way. DebtStoppers can help. When you sign up for a free one-on-one debt analysis, our bankruptcy lawyers will take a personal look at your finances and identify the best methods for you to eliminate your debt. You can also browse the advice on our blog and website anytime for free, or send away for our complimentary Financial Toolkit. So if you find out you have a refund on the way next year, you can enjoy—not fear—the wait.

Though it’s still early in the game, President Obama’s Making Home Affordable initiative is on track to help an estimated 7 to 9 million Americans refinance or modify their mortgages, thus avoiding foreclosure. And it’s right on time, especially in states like Illinois, where one in every 369 households received a default notice, bank repossession or auction sale notice this February (as opposed to the national average of one in every 440), according to this CNBC slideshow.

Unfortunately, Obama’s program is already helping businesses. What’s so bad about boosting business, you ask? Nothing, as long as the companies are legit. Problem is, these guys aren’t.

You’ve probably seen and heard them: the flashy ads on your TV or messages on your machine promising to “save” your house—for a fee, of course. Last week, a guy called my house to tell me he had funds from the president’s program and wanted to help me with my mortgage. The fact that I don’t even have a mortgage (I’m currently renting) raised a red flag right away! What’s worse, some companies go so far as to pretend they are part of the program, with fake U.S. seals and all. Once the liars have your trust, they can sign you up for a shoddy mortgage or ask you to sign over the deed to your house, making your financial situation far worse than it already is.

Fortunately, there’s a surefire way to tell sleazy from legitimate business—they’ll almost always ask for money upfront. That’s your cue to hang up the phone, change the channel, or walk out the door. A company that cares about their clients will never ask for cash upfront and will never request payment without a service or product in return.

Find out the truth about Making Home Affordable—and whether you’re one of the millions of Americans who might benefit from the program—by going online to www.makinghomeaffordable.gov. If you’re having trouble making your mortgage payments because your rate has increased or you’ve suffered a pay cut, or even if you’re able to scrape by but you’d like to take advantage of lower mortgage rates due a decrease in your home’s value, this could be your ticket to keeping your home. Even if it's not, you still have options. If you ever have questions about your mortgage, know that they don’t have to go unanswered. You can find helpful information on our blog and website, or sign up for our debt analysis. Here at Debt Stoppers, our professional debt relief experts can clear up your financial queries—for free.

Millions of Americans risk losing their homes to foreclosure because of some unfortunate myths that persist about bankruptcy. With foreclosures at an all-time high, it's time to put those misconceptions out to pasture. At Debt Stoppers USA, our professional bankruptcy lawyers know the benefits of Chapter 13 bankruptcy. Here's the truth behind the most common Chapter 13 questions. For even more myth-busting info, stop by our online video learning center and bankruptcy page.

Myth #1: Bankruptcy will ruin my credit and/or reputation

Not true. Look at it this way. What's your credit like right now? If you've been missing mortgage payments, chances are you're late on other bills as well--not good for the FICO. Even if you're making minimum payments, you're still in debt. And that hurts your credit score.

Continue reading "Chicago lawyers know the benefits of bankruptcy" »

Credit card companies are scrambling to make up for the millions of Americans who have defaulted on their credit card bills thanks to the recession. But the way they're going about it is a little sneaky.

Last week, my bank called twice to offer me a new low-APR platinum credit card. Yeah, like I'm going to open another account when I'm struggling to pay off the few I already have? I could barely conceal my laughter from the sales rep. Because while it's true companies are offering lower rates on some cards, like the one they tried to sell me, they're also hiking the rates of current customers--particularly anyone with large debts. Since laws next year will limit the tricks creditors can pull--such as sending out bills really close to the due date, suddenly lowering credit limits and sneaking in fees here and there--they want to pull those antics now, while they still can.

So what can you do about it? Be more vigilant than ever about reading the fine print on your credit card statements.

Continue reading "Choose Chapter 13 over new credit cards to escape credit debt" »

Debt and pessimism seem to go hand in hand. I spent much of my life as a shameless whiner, but only when I took control of my credit card debt did I began to realize how much of a toll the complaining took on my life.

As a kid, I'd blame my parents when I got a bad grade (they were too busy to help me with my homework--it wasn't fair!). When I was older, I'd blame them for my carefree spending habits (they lived paycheck to paycheck--why would I do otherwise?). In college, I whined that my professors were too hard. At my first job, I complained I was underpaid. When I caught a cold, I resented the person who I suspected gave it to me.

I used to think whining actually made me feel better ("It's venting!" I told my boyfriend). Until one day he asked me a simple question that changed my life: "Does it make you happy?" I had never thought about it that way. And the truth was, it didn't.

Continue reading "Eliminate credit card debt by bankruptcy, not bellyaching" »

Even the Easter bunny is feeling the pinch of the recession. In keeping with a theme that started with Halloween and continued through Christmas, sales of chocolate rabbits, marshmallow chicks, jelly beans and Easter baskets are all down. In 2009, it’s estimated that consumers will spend an average of $116.59 on Easter candy, gifts, food and decorations compared to last year’s $135.03, a difference of 14 percent.

But it’s not exactly bad news. By now, kids (and adults) are hopefully starting to get used to the need to pare back. And if you have children (or even plan to have them someday) it’s actually a great opportunity to demonstrate what the holidays are really about. After all, it doesn’t take a hundred bucks spent on candy and plastic to spend time with your family. There shouldn’t be pressure to buy chocolate eggs when many people are struggling to afford real eggs at the grocery store.

My family always celebrated Easter by getting dressed up (rare for us) to go to church, then coming home to a giant Easter egg hunt on my grandparents’ lawn. That’s where the fun was, because the parents would try to outwit the kids with better hiding places each year. Though we’d sometimes color a few eggs the night before, they were usually hardboiled eggs meant for eating. We mostly hunted for the same plastic eggs year after year—so in all it was a pretty cheap holiday.

If your kids are worried that the Halloween pails, Christmas stockings and Easter baskets have been a bit barren recently, it might be time for a talk. Consider telling them that, yes, you are worried about money, but you’ll handle it together as a family. You might be surprised at how much they understand. Sure, kids like material things, but much of their desire for them is influenced by advertising and even by parents, grandparents and other relatives who (though they mean no harm) buy gift after gift. When you take away the fancy toys and pricey store-bought snacks, most kids would be just as happy—or happier—playing in a cardboard box munching on homemade cookies.

The thing that scares kids most about the economy is not the thought of having less, but of the insecurity. They see you worried about paying the bills or losing the house, and they don’t know what to expect. It’s important to assure them that even though you have less things, you still have each other.

And of course, you might also want to throw some financial education into the mix so their generation won’t make as much of an economic mess as, ahem, ours did. For instance, paying cash rather than credit makes it easier to explain where the money is going. Tell them that you get a certain amount of dollars from work, and you have to make that amount stretch until your next paycheck, just like they do with their allowance. If you do pay with a credit card, talk about the challenges of using money that doesn’t actually exist. Maybe show them how they can budget their allowance the same way that you budget your paycheck. Hey, they might even come up with some more creative ways to save money.

In the meantime, send away for our free Financial Toolkit for a wealth of advice on surviving the recession. And if debt is keeping you from making the bills or the mortgage, don’t wait until there’s a “foreclosure” sign in your front yard to get help. You have a constitutional right to keep your home—it’s called Chapter 13 bankruptcy, and we can walk you through it. Whether you’re looking to save a few bucks or to save your house, sign up for our free debt analysis for a one-on-one session with a professional debt relief attorney. We can answer all your questions and show you how to start turning your finances around. So whether you have a traditional Easter dinner this weekend or just a regular Sunday night with the family, you can count your blessings, not your worries.

Up until a few years ago, my caffeine fix ruled my life. Well, maybe not my life, but certainly my wallet. I had to get a cup of coffee going into work and usually picked up a latte leaving the office. If I was having a really bad day, I’d sometimes sneak one in on my break, too. Needless to say, it added up. A typical day was anywhere from $5-7 in coffee costs – roughly the price of an additional lunch.

I’ve cut back significantly since then. I brew my morning cup at home and just once a week I treat myself to a latte at our local café. Even then, it’s not just for the coffee; it’s also a chance to catch up with friends, many of whom are also looking for little ways to save. We’re like a club of reformed spenders finding ways to be frugal.

But last week, one of my friends couldn’t pay for her weekly drink. Thinking she must be completely broke, we all offered to chip in to buy her coffee. After all, there’s nothing wrong with a little indulgence now and then to keep you on track. But she declined our offer, opened up her wallet and showed us a $5 bill, explaining that her new savings plan was to pay for everything in cash and keep all of the fives, eventually depositing them into her savings account. If a $5 bill is all she has left, she pretends she doesn’t have any more money until she goes to the ATM again. She promised she’d buy a coffee next week—if she had different change.

Since my friend doesn’t really have an emergency savings account and her employer had been hinting at layoffs, she made the very smart decision to kick her saving into overdrive. It’s important to have enough money to tide you over for a few months (six months is best, but any amount is better than nothing) if you lose your source of income. What if you lost your job or had an unexpected illness in the family and couldn’t work? What if you car needed major repair? What if you lost your home? It’s not pleasant to think about these things, but being prepared can make them less painful if they do unfortunately occur. If you lose your job, wouldn’t you rather spend your energy trying to find a new job than worrying how you’re going to put food on the table?

There are different methods for saving money. For my friend, it’s by keeping certain bills. For me, it’s by keeping coins. I pay for as much as I can in cash, using bills only, and by the end of the week I empty all of my coins into a jar. Then there’s automatic deposit. If you earn a steady paycheck, you can probably figure out how much you can afford to save each month—10%, for example—and request that your bank automatically transfer that amount from your checking into your savings account. If you can’t save a dime, it means you’re spending more than you earn—and it’s time to make a budget so you can figure out where to make changes (in the meantime, put your credit cards away—paying cash makes it much easier to track, and minimize, purchases).

Keep in mind that a savings method that works for your best friend might not work for you and vice versa. What’s important is that you try different methods until you find one that’s right for you. Of course, in the long run, you’ll want to save money for more than just an emergency. You should also be saving for a comfortable future—for a home if you don’t have one, for retirement, even for fun stuff like vacations. But your priority should be taking care of yourself in the present, which is why having a cushion of cash is so important. Developing a savings plan can be intimidating if you’re accustomed to living paycheck-to-paycheck, or even if you’re a former saver who is now being forced to live on less money. But you don’t have to do it alone. Try out our free debt analysis. In the one-on-one session, an expert debt attorney will go over your finances, answer your questions, and show you how to get your savings in gear. Saving a few bucks here and there might seem like small change, but it’s a big step—and a big investment in your future.