Silly me, thought there was a special BK just for taxes, not CC

[keepsmiling]

Everyone's situation is different. I thought it was worth discussing from another angle and am still hoping someone will contribute something helpful to my question. There is a great deal of collective wisdom here and it is worth pursuing, and unlike many other topics , we haven't discussed this one at length lately.

Another thread recently addressed the cost of insurance doubling due to poor credit scores. This MIGHT be mitigated if the score didn't plummet as much. So here's one practical ramification of my question.

From another angle just raised, WE cannot rent for less than our home costs unless we go to a one bedroom in a slum. My dh works from the house so we would have to rent office space and storage space as well, plus lose our tax deductions. We cannot leave the state due to licensing. So.. speaking in broad generalities doesn't always work.

I would imagine there are others in similar situations. Regardless, since we discuss so many issues here on BKforum at length, I see no reason we can't do the same with this one.

[keepsmiling]

I also wanted to point out that the OP isn't necessarily in trouble due to cc's. It's down to taxes (granted, if she weren't paying her cc's, there would have been more to pay taxes with, I get it).

So I was thinking, "I wonder if the IRS reports to credit bureaus?"... again, to see how credit rating is affected.

[mountanddo]

Everyone's situation is different. So.. speaking in broad generalities doesn't always work.

Exactly. There is alway's the argument that using credit is spending beyond anyone's means so the general consensus might be not to use it at all. One plan for one person might not be a good plan for everyone.

I like renting because the headaches are other people's problem. I would also like to be able to buy something that might end up being less than rent. One thing that is popular where I live is buying a condo. It's actually an apartment that they sell individually. My nephew pays half of what he would to rent in a comparable rental complex. I have no retirement to speak of and who knows what social security will even pay out, if it does at all. Getting something that I can afford is imperative to me being able to live without worry when I have to stop working. There are also things you can do to a property you own that you couldn't do when renting such as painting, changing light fixtures, stuff like that. In order to do this I have to have the ability to use credit. Do I have to use credit? no, probably not. I could save for years and pay cash but realistically that isn't going to happen. Obviously millions of people have mortgages and do just fine and given the right property can be a good investment. Just because you ended up in a position to have to file bankruptcy doesn't mean that using credit should be taboo. Hopefully we all learned a little bit more about how to use it wisely by going through this.

[keepsmiling]

Perhaps I should just ask the OP: What is your credit rating? Has the IRS reported your lack of payments?

I am disappointed in the lack of discussion on this topic and wondering if I should bring it up on the rebuilding forum. Lord knows we discuss everything else to death

To restate the question: Can we discuss mitigating one's credit rating pre-emptively as part of bk preplanning.... so as to let's say, save money on insurance costs, interest rates on a car, etc? That is, in a constructive way, and not just "why bother"?

It's too late for me.. my credit is trashed... but it might be helpful for others.

[mountanddo]

Two years ago I consulted with an attorney about capital gains taxes owed to the state of NC and the IRS after my ex and I sold property we ran a business off of. We didn't make much on the property and foolishly used the funds to pay off business debt, my car and thankfully paid the business overdue sales taxes and payroll taxes in full. I used the rest to live on after my divorce. When I met with the attorney 2 years ago he said if my income status and employment status didn't improve I could consider bankruptcy for my taxes. I do not have a problem with credit card debt. I had hoped to keep my store credit cards, I don't have any major credit cards.

My income status hasn't improved, lucky to have found a part time job after 2 years unemployed. But, now I find out after meeting and signing a contract with another attorney that I have to include all debt. There is no such thing a just as a "tax bankruptcy". I truly wanted to pay those store credit cards, I've had them over 10 years (one is under $100, the second $600 and the highest $1,500). I had used 2 of the cards in the last 30 days. The young lady at my attorney's office said I could try to keep the cards and not include them in my list of creditors, but she wasn't sure if they'd get cancelled anyway and then I'd be stuck with the debt. I have all payments up to date on them. Two cards are JCPenney and Belk and the billing comes from GE Money Corp (they aren't very nice for the times I was late paying them). So does anyone have experience with store credit cards and any opinion on what I should do?

You post that you didn't make much on the property but you did use it to pay down other debt. You aren't in any trouble really with credit card debt. What is the amount of capital gains back taxes you owe. Is it that much that you couldn't try and work out some sort of payment plan and keep your cards and credit rating? You mention that you were late on cards GE owned so I don't know if your credit is ruined already. Are you talking 10k or 100k? I know you are only working part time so I'm guessing that is part of the reason.

[lillymarlene]

Just because you ended up in a position to have to file bankruptcy doesn't mean that using credit should be taboo. Hopefully we all learned a little bit more about how to use it wisely by going through this.

That's for sure. I've read somewhere that a "debt problem" is sort of like an "overeating problem" but not like, for example "nicotine addiction." You need some food in order to survive, but you don't need to smoke at all. Some debt, like a mortgage, in certain instances, is beneficial.

I've managed to hang onto my house, and what I really like is that the mortgage payments are about 1/2 of what it would be to rent a comparable apartment in my area. Though, I never want to have credit cards again the way I did pre-bk, I'm grateful that a few of my business vendors still extend me small amounts of credit.

[shark66]

Given the global economic situation, we may very well be facing times when there will be NO credit available anywhere...so most of us who have gone through BK regardless of reasons that brought them to it, should be well-prepared...

Good luck to us all.

[mountanddo]

It wouldn't matter to me if I never got another credit card again however I would like to be able to purchase a home and a car someday and I'll need to rebuild my credit somehow. I could wait for time to heal it all but having no credit is almost as crippling than having bad credit. When I am in the position to be able to start rebuilding I will do it wisly as I will have done more research on what is the smartest way to do that. There are differing opinions about buying a car with cash or renting a home instead of purchasing and I have no doubt that is possible to do but it is also possible to do both those things within your means and still be ok whether you filed BK in the past or not.

[shark66]

It wouldn't matter to me if I never got another credit card again however I would like to be able to purchase a home and a car someday and I'll need to rebuild my credit somehow. I could wait for time to heal it all but having no credit is almost as crippling than having bad credit. When I am in the position to be able to start rebuilding I will do it wisly as I will have done more research on what is the smartest way to do that. There are differing opinions about buying a car with cash or renting a home instead of purchasing and I have no doubt that is possible to do but it is also possible to do both those things within your means and still be ok whether you filed BK in the past or not.

What you're saying makes a ton of sense here and now.

What happens when the rules of the game are turned upside down?

Cash was king not that long ago. Then it got overthrown.

And now a new king will rise...we'll see what form it will take, but credit shall not be the one...

I'm a strong believer in buying cars for cash and driving the heck out of them, if that matters.

My $0.02 only...

Good luck to us all.

[GoingDown]

I agree. That's what I have done since I got a truck repossessed. I buy them with cash now.

This last time I actually went to a dealer and bought a used Ford, and traded in the old Dodge truck. I had already done my homework online, looking at the trucks they had available for sale, and looking up the Kelly Blue Book for them, so I knew exactly how much I was willing to pay for it before I went in.

Well, the salesman had all these ideas about financing the purchase for me, and kept focusing on getting a low monthly payment by extending the payments out for 6 years, rather than reducing the price.

I made it clear to him that I was going to buy it with cash, and that I would only pay what the truck was actually worth. I even got up and walked out of the dealership and then he ran after me to get me to come back to the bargaining table, and I ended up getting pretty close to the amount I had hoped to pay for it.

I cashed it out and have no payments at all.

The key seems to be to go at the right time of the year, the right time of the month, and to watch their inventory, and when you see a vehicle that has been there for awhile, you know they want to get rid of it. And know exactly what it is worth and how much you can afford to pay for it.

I know that this saved me a lot of money. If I had financed it, I would have paid full price for it plus interest.

And I got rid of the old Dodge truck without having to haggle with a private buyer on Craigslist.

[Gonzo]

Perhaps I should just ask the OP: What is your credit rating? Has the IRS reported your lack of payments?

I am disappointed in the lack of discussion on this topic and wondering if I should bring it up on the rebuilding forum. Lord knows we discuss everything else to death

To restate the question: Can we discuss mitigating one's credit rating pre-emptively as part of bk preplanning.... so as to let's say, save money on insurance costs, interest rates on a car, etc? That is, in a constructive way, and not just "why bother"?

It's too late for me.. my credit is trashed... but it might be helpful for others.

I have never seen the IRS "report" to the credit bureau. I worked in the mortgage biz for years and I saw thousands of credit reports. The IRS might pull your credit report for various reasons, but they do NOT report a debt to the bureaus with recurring entries like a bank will. If you have an IRS lien, the IRS doesn't even report that to the bureaus. The lien gets on your report from public records.

As for whether having bills paid up-to-date before the BK will help your score after filing BK, YES it will. I know from experience seeing endless credit reports. For example, I would see lots of credit reports where the only reason the borrower filed was to save their home. Nothing else was being paid late. Those people had their score back up to 700 or more within a year or 2 after Chapter 13 discharge. But if everything was in the toilet before filing the BK, it took those people much longer to rebuld their score.

Hope this helps.

[keepsmiling]

I have never seen the IRS "report" to the credit bureau. I worked in the mortgage biz for years and I saw thousands of credit reports. The IRS might pull your credit report for various reasons, but they do NOT report a debt to the bureaus with recurring entries like a bank will. If you have an IRS lien, the IRS doesn't even report that to the bureaus. The lien gets on your report from public records.

As for whether having bills paid up-to-date before the BK will help your score after filing BK, YES it will. I know from experience seeing endless credit reports. For example, I would see lots of credit reports where the only reason the borrower filed was to save their home. Nothing else was being paid late. Those people had their score back up to 700 or more within a year or 2 after Chapter 13 discharge. But if everything was in the toilet before filing the BK, it took those people much longer to rebuld their score.

Hope this helps.

Thanks Gonzo! btw I tried to watch your new movie last night and it was BAD. How a movie with Jordan Segel and my beloved Muppets could be that bad I just don't get. But it was fun to see you as a plumbing magnate.

See that, I had to wait for the new guy from Jersey (hey neighbor!) to show up to give me some thoughtful answers (whine whine, need some cheese to go with that). As mentioned over and over, there isn't always a one-size-fits-all answer.Admittedly, it is a rare occasion for one who comes here to not already have their credit trashed.

This is why I disagree with the majority here regarding OP not paying small amounts and getting her affairs in order pre filing. I think it would NOT be throwing money down the toilet in this case and is worth a couple bucks to keep the score up. Cheaper in the long run than paying inflated insurance rates etc.

[mountanddo]

but you don't need to smoke at all.

Probably quoted from someone that never had a nicotine addiction!

[butterfly57]

I have never seen the IRS "report" to the credit bureau. I worked in the mortgage biz for years and I saw thousands of credit reports. The IRS might pull your credit report for various reasons, but they do NOT report a debt to the bureaus with recurring entries like a bank will. If you have an IRS lien, the IRS doesn't even report that to the bureaus. The lien gets on your report from public records.

As for whether having bills paid up-to-date before the BK will help your score after filing BK, YES it will. I know from experience seeing endless credit reports. For example, I would see lots of credit reports where the only reason the borrower filed was to save their home. Nothing else was being paid late. Those people had their score back up to 700 or more within a year or 2 after Chapter 13 discharge. But if everything was in the toilet before filing the BK, it took those people much longer to rebuld their score.

Hope this helps.

Sorry life has overwhelmed me of late, my husband had a compression fracture of his lumbar spine and one of our dogs needs to be put down due to cancer and Christmas is around the corner and I've gotten sick....ugh....when it rains it pours!

But, I had to answer this question about the IRS and the NC Dept of Rev. reporting on my credit report. Yes, I believe they have. I have pulled my credit report from all 3 bureaus and it's the first thing you see on Transunion and Experian, Equifax has it on the last page. The taxes are all listed under the heading of "Public Records". As for my credit score, it varies from the low 500's to the high 500's. Prior to the tax liens being reported I was in the mid to high 600's. So since it's on my credit reports doesn't that mean it's been reported? Or is it reported only because it's a public record? I'm confused. Either way it seems to have affected my credit scores with all 3 agencies. And the amount of tax I owe now with penalties and interest being piled on for the past 3years has hit the $100,000 mark.

[butterfly57]

Who cares if they close the cards?

You will be better off if they close them.

You will spend less money if you have to pay for everything with cash.

You need to realize now, before you file BK, that credit is not real. It is not income. Don't treat it like income. Don't treat it like something you must hang on to or cherish.

I realize the dangers of credit card use. My mother at age 82 filed chapter 7 after my Dad died. She had credit card debt in the amount of $80,000. The attorney looked at me and asked, "How does an 82 year old woman spend that much money and on what?" Unfortunately, my Mom was a compulsive shopper and there was nothing to show for all that she charged. Towards the end she was using her cards to pay utilities, etc. I had no knowledge of this until she started borrowing money from relatives, neighbors and finally me then she broke down and told me. My Mom wasn't senile or had any form of dementia, she still worked at that age and drove and had her own home. She was something else that's for sure but she always had this problem and my Dad didn't find out till later in life when he applied through his credit union for a car loan and was denied. The man made good money, had stocks and bonds with the company he retired from and was mortified to learn of the debt he owed. He never looked at the bills, Mom paid them.

Then of course I learned a lesson living with my ex-husband who thought he hit the lottery when our business became successful and bankers were showing up to woo us at work, taking us out to lunch and giving us loans for whatever we wanted or needed for the business. Credit card companies offering us cards with high limits and us taking them. But, we were able to pay the bills, life was good. The ex loved the attention, he wanted a big jacuzzi and a fat cigar like Al Pacino in "Scarface". I'm not kidding about that, he said he wanted it and he did it, there's a pic of him with the cigar in hand, sitting in the jacuzzi next to the built in pool. We looked very wealthy to people that viewed us from the outside, the ex had lots of toys, huge custom built home, built-in pool & someone to come clean it weekly, a cleaning woman, landscaper, etc but in actuality we didn't own anything outright. But, the business took a nosedive after 9/11 and I started to eliminate the luxuries of having all those people help maintain the house and property we had. I did it all, plus worked (the ex was lazy and too busy on the internet hooking up with other women) so I watched less money coming in and the credit cards getting used more at home and at work, then not being able to pay them at all because we were scraping by to make payroll. I kept trying to discuss what we should do with the ex but he didn't want to hear it. Then finally after 14 years of owning the business we made the decision to close it. We were separated by then and the divorce which I had put off for many years finally went through with.

So I understand not to abuse credit cards. I just felt like I could keep the 3 department store cards because I've had everything else taken away and now live paycheck to paycheck. They gave me a sense of control because I paid them on time and didn't take advantage of them. I guess the car that I own outright, a Lexus and the 3 cards are what is left of my old life.....but the taxes are also a reminder of how badly the ex and I handled everything and all the professionals we paid vast amounts of money to during that time certainly didn't advise us, they took advantage of us. So I am remarried now but unfortunately my husband will probably need to try to file for disability, he's got an illness that will never go away and it is debilatating so I can't count on him for help with these taxes plus he has his own ex-wife, child support issues.

Sorry didn't mean to ramble on and on, guess I needed to explain all that so everyone could get a clearer picture. The past 5 years have truly humbled me, not that I wasn't humble prior but struggling like I have and watching my credit report plummet when it never was bad.....and now facing BK, it's all very humbling.