Please help - What do I do? Taxes, credit card debt, medical bills..

[jpascone]

Current Situation:
Live in California. Have worked the past year making 1/3 of what I used to, barely enough to cover mortgage and food. Home is only asset which I live in and have some 100-150K in equity. Only 1 note (primary against house)

1. Credit score has tanked.
2. Owe 45k on Wells Fargo Credit Card
3. Owe 30k in Medical Costs
4. Owe 35K IRS
5. Owe 10k FTB
6. Probably 5k in other..
7. Trying to qualify for loan modification with Chase.

I live check to check, often don't have money for gas, live on Marie Calender Pot pies when they are on sale. FTB is helping themselves to $300 month. IRS wants some sort of plan by the 15th of this month. For 5 years I didn't work and amassed tax debt borrowing against 401k and cashing stocks, all of which are gone.
I am totally overwhelmed with collector calls and just want to start moving forward with my life. This all seems so insurmountable. What are my options?
Thank you in advance for any assistance.
Sincerely,
Broke Dude

[justbroke]

A nice planned bankruptcy. If the taxes are too recent, you may need to go into a Chapter 13 bankruptcy to give you up to 5 years (60 months) to pay the taxes back. Otherwise, if the taxes are not more than 3 years old (along with some other qualifications for discharge), filing a Chapter 7 would leave you back to where you were with the taxes.

(The IRS does allow installment plans of up to 6 years! They are actually pretty good with this and you can do a payment plan on line. Their interest rate is like 3% right now. They have a streamlines payment agreement for those amounts under $50K. They may ask for "financial" information for amounts from $25K to $50K, but it's just to make sure you're paying enough to pay it off and what you can afford.)

You have a LOT of equity so be careful! The IRS is probably about to lien and/or levy against you. Even under California's System I, you probably have exposed equity. However, and I repeat myself, if the tax liability is more than 3 years old, you may be able to discharge the IRS debt! For the Franchise Tax Board, I do not know your options unless you go into a Chapter 13.

I'm just so sorry that you dug into your 401(k). Please don't hate me for saying this, but we need to say this every single time we see it posted. NEVER EVER dip into your future to pay your current debt! Your 401(k) would have been 100% protected in a bankruptcy. I know that everyone wants to do the right thing, but the right thing may include filing for bankruptcy.

[pamkev]

+1 to what just broke said

[tobee43]

+2 lol!!

[jpascone]

A nice planned bankruptcy. If the taxes are too recent, you may need to go into a Chapter 13 bankruptcy to give you up to 5 years (60 months) to pay the taxes back. Otherwise, if the taxes are not more than 3 years old (along with some other qualifications for discharge), filing a Chapter 7 would leave you back to where you were with the taxes.

(The IRS does allow installment plans of up to 6 years! They are actually pretty good with this and you can do a payment plan on line. Their interest rate is like 3% right now. They have a streamlines payment agreement for those amounts under $50K. They may ask for "financial" information for amounts from $25K to $50K, but it's just to make sure you're paying enough to pay it off and what you can afford.)

You have a LOT of equity so be careful! The IRS is probably about to lien and/or levy against you. Even under California's System I, you probably have exposed equity. However, and I repeat myself, if the tax liability is more than 3 years old, you may be able to discharge the IRS debt! For the Franchise Tax Board, I do not know your options unless you go into a Chapter 13.

I'm just so sorry that you dug into your 401(k). Please don't hate me for saying this, but we need to say this every single time we see it posted. NEVER EVER dip into your future to pay your current debt! Your 401(k) would have been 100% protected in a bankruptcy. I know that everyone wants to do the right thing, but the right thing may include filing for bankruptcy.

Well, I spoke to the IRS and they immediately offered up a 6 year installment plan but the payment was still double what I could afford. A $700 payment is just not realistic right now. They said with full financial disclosure and liens I could work something else out. When I dug in to my 401K I was not in a good place, I had gone to a pretty bad place with drugs and alcohol after losing my job and made a lot of bad decisions. How I kept the house was a miracle, I lost everything else. I had to rent the house out for a year and live in a 1/2 way house to get caught up on the loan, of course I had to report that as income. The house is everything to me, it's a piece of crap in the bad part of town but it represents a great deal to me.
I will go home at lunch today and get my taxes and post which years I owe what.
Will the bankruptcy at least make the credit card debt and medical bills go away?
Thank you so much for your assistance. Everything seems so insurmountable right now.

[bookworm]

You're overwhelmed right now, and things seem very dark, but you'll be okay. Consult with a few attorneys. They'll put your mind at ease. And keep coming back to this forum for support and virtual hugs. We've all been there.

[justbroke]

I will go home at lunch today and get my taxes and post which years I owe what. Will the bankruptcy at least make the credit card debt and medical bills go away? Thank you so much for your assistance. Everything seems so insurmountable right now.

Yes, everything can be overwhelming and we all here on this Website has experienced overwhelming debt; that is why we are here.

Depending on how old the taxes are you could possibly discharge some of them. The IRS amount should have been about $540/month unless you owe more than $35,000.

As you plan your bankruptcy, you may get a little more stressed but know that the day you file, you will feel 1000% better. (You should have seen the smile (or smirk) on my face after I walked out of the courthouse the day I filed back in 2008!)

[jpascone]

I wanted to say thanks, I am gathering up my tax years owed, their respective dollar amounts and will post. One thing which I am not proud of, this whole debacle began when I lost my job and took on a new career as a full time cocaine addict. For 5 years I was in and out of rehabs, sober living (which I know are write offs) but consumed most of my 401k through a straw.
I am in recovery now, working a program and trying to rebuild. I have certificates, notes from doctors, etc. My life is getting back on track but my financial "house" is a disaster. This is a recognized as a legitimate disease and I am curious if I could appeal to the IRS.
I am considering making an appointment with my local IRS to discuss the matter.
Just curious.
Thanks.

[Floridagail]

We do not judge here, We are here to support you. We all been bankrupt, reasons vary for everyone. Glad you are on road to recovery.
My Grandson is clean now 2 yrs. Please see a attorney to get your options. Some of your taxes may be dischargeable. I hope so . Keep us posted.

[Pjmax]

You may not be proud of the road that led to recovery, but you should be very proud of getting to where you are now! Welcome to the forum.

Most BK attorneys offer free initial consultations. You should make a few appts. to get some opinions on your situation, and read as much as you can here. Lots of good info, and lots of good people to help.

[jpascone]

You know, I really appreciate everybody here. Congrats on your Grandson Floridagail. 2 years is huge. I am going to set up some consultations this week and will report back.

[Drazil65]

Hi, everyone is right, no judging here, do what you gotta do to get to the next step. Congrats on getting your life on track and recognizing the problem. One step at a time, one bite at a time or one day at a time, no matter how you say it its all the same. You will do it and it will not be easy but you will survive. The free consults will ease many questions you have, throw some our way as well you will see it will be easier than you think. Keep us updated or just come back to rant it doesn't matter we will be here. Good Luck!

[df04527]

What everyone one said....baby steps.

[justbroke]

Before talking to the IRS again, talk to an experienced bankruptcy attorney! You don't want to tell the IRS that you're filing, and have them try to create a tax lien.

Best of luck to you!