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

[butterfly57]

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?

[keepsmiling]

Firstly, you have to include ALL debt.

Even if you could hold off on your bk til the cards are paid and file, say-- a year from now-- there's a reasonably good chance they'd close the cards on you regardless, as soon as they updated your file and found the bk. If they hadn't already closed them from lack of use.

People's experiences have been all over the place with store cards, but by and large, expect them to be closed.

[butterfly57]

Firstly, you have to include ALL debt.

Even if you could hold off on your bk til the cards are paid and file, say-- a year from now-- there's a reasonably good chance they'd close the cards on you regardless, as soon as they updated your file and found the bk. If they hadn't already closed them from lack of use.

People's experiences have been all over the place with store cards, but by and large, expect them to be closed.

I was told by one attorney's office that they'd definitely be cancelled and if I wanted to pay the small one that was fine. But, not to pay anything over $600. The other attorney's office that we hired she wasn't sure if they'd cancel, but I didn't have to include them if I wanted to keep paying them. So needless to say I have conflicting advice. I just wondered if anyone actually has done that (left the cards off and not gotten cancelled). I feel I need to pay what I have charged in the last 30 days, since if I didn't and we file in the next few months, it would be depicted as fraud, and I don't want that. I have enough stress dealing with the tax debt.

[keepsmiling]

You don't want to hire the one that gave you WRONG info You must include ALL debts. This is the fact of the matter. You DON'T have to include a card that has no balance though. This could be where the info got confusing.

But... you will be asked about that 600$ payment line. Theoretically, if you timed your payments and filing right, you could possibly be able to answer this honestly. HOWEVER...

It's a crap shoot whether or not the stores close the cards even if there is a 0 balance.. Mostly they do, but occasionally you get lucky. One or two here have reported keeping a Costco card, a Victoria's Secret card, etc. The discussion does come up from time to time.

This possibility is something you are going to have to make peace with. Many here will tell you that you must start to live a cash only life style. However, your credit rating may not take the kind of nose dive that many of ours have since your situation is so different.

[mountanddo]

I had a zero balance on my Target, Herberger's, and Sam's club credit card when I filed Chapter 7. Target and Herbergers promptly closed my cards not 30 days after my BK. Sam's club kept it open.

[AngelinaCatHub]

It's a shame that you were ill informed. Glad you found our site. We are or have been through the process. Taxes are not excluded in anyway. There is a 3 year Statute of Limitations on Federal taxes but that is all. Not sure about your State and local. Things like fines, child support, Court ordered alimony, are not exempt at all.

Once you file, I would NOT pay any unsecured debt as you could invoke a proprietary payment and get sanctioned. A very good book endorsed here is the Chapter 7 book on Nolo press. It is about 26 bucks pdf download from nolopress dot com. It is worth the investment and will easily explain all you would need to know and do. 'Hub BTW welcome.

[IamOld]

Just as another example...I had a QVC card with a whopping $100 limit and a zero balance for like the last FOUR years...as soon as I filed, GE Money (issuer) cancelled it.

[MSbklawyer]

I had a zero balance on my Target, Herberger's, and Sam's club credit card when I filed Chapter 7. Target and Herbergers promptly closed my cards not 30 days after my BK. Sam's club kept it open.

That kind of thing comes as a surprise to a lot of people filing bk: They rush out before filing and pay off their cards with low balances thinking that they'll be able to keep those. But 9 times out of 10, the cards get cancelled anyway. The money that they paid those cards off with was wasted because the balances could have been discharged.

[despritfreya]

That kind of thing comes as a surprise to a lot of people filing bk: They rush out before filing and pay off their cards with low balances thinking that they'll be able to keep those. But 9 times out of 10, the cards get cancelled anyway. The money that they paid those cards off with was wasted because the balances could have been discharged.

Couldn't have said it better myself.

Des.

[GoingDown]

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.

[keepsmiling]

Since the topic came up, it occurs to me that paying off a small cc might help in the long run for rebuilding credit.
With it taking years to rebuild, if you can avoid your number sinking (if you don't have late payments before paying), it seems to me it might be worth to pay a bit in order to save years later on, plus the cost of secured credit card,etc.
OTOH, if they close out those cards, that's a negative for the rating, right? Suppose you paid them off and then closed them yourself?
I know, I know, we shouldn't worry about the credit rating... but since there is an entire forum here devoted to rebuilding, it seemed to me worth at least a little discussion. It might be a kind of bk pre-planning.
Anyone have any thoughts?

[jacko]

What would you rebuild credit for?

Since the topic came up, it occurs to me that paying off a small cc might help in the long run for rebuilding credit.
With it taking years to rebuild, if you can avoid your number sinking (if you don't have late payments before paying), it seems to me it might be worth to pay a bit in order to save years later on, plus the cost of secured credit card,etc.
OTOH, if they close out those cards, that's a negative for the rating, right? Suppose you paid them off and then closed them yourself?
I know, I know, we shouldn't worry about the credit rating... but since there is an entire forum here devoted to rebuilding, it seemed to me worth at least a little discussion. It might be a kind of bk pre-planning.
Anyone have any thoughts?

[keepsmiling]

http://www.bkforum.com/forumdisplay.php?10-Rebuilding-Credit

almost 3k threads on the topic.
looks like some folks might be interested.
who knows, you might like to buy a car or house someday... or even get your insurance rates adjusted.

[mountanddo]

What would you rebuild credit for?

There are many reasons to rebuild credit. To get a car loan or a home mortgage. Some employers check your credit. Yes, you could pay cash for everything and you can live without a great credit score but in the long run if you can rebuild it why would you not?

[GoingDown]

The vast majority of the people on this site have demonstrated that they can't really handle credit very well. Credit, in most cases, leads to spending more money than you take in. Spending more money than you can afford to pay back.

If you bought that car with cash, chances are you would look for the best deal possible and end up paying less for it than you would if you bought it with a car loan.

As for home mortgages, so many people are now underwater because they bought too big of a house and went for too fancy of a house, or they took out a second loan to use the "equity" in their house on unnecessary remodeling or other unnecessary things. It would be very difficult to save up enough money to buy a house with cash, but if you did, I can only imagine that you would buy the cheapest, most affordable house available, and that would be a good thing.

And for many of us, renting is the best way to go. The landlord is stuck with the costly repair bills, and if we get sick of our house, we can just move away from it.

After about 7 years, if you never get any new credit cards or loans, your credit report will clear off the old negative accounts anyways.