Archive for the ‘las vegas debt consolidation’ Category

Debt Settlement and Your Taxes

Saturday, December 17th, 2011

Debt settlement ads are very attractive to individuals struggling with debt. The promise is to reach an agreement you can afford to pay. The debtor agrees to pay a percentage of the debt (usually in a lump sum), and the creditor agrees to release the remaining obligation. Sounds simple, right?

Unfortunately, many times the debtor will receive a nasty surprise in the mail: an IRS Form 1099-C: “Cancellation of Debt.” You see, the U.S. Internal Revenue Service considers forgiven or canceled debt as part of your income. In fact, any creditor who agrees to accept at least $600 less than the original balance is required to file a 1099-C form with the IRS and to send debtors a canceled debt notice. If you have negotiated a debt settlement, you must report the forgiven or canceled debt as income on your federal income tax return. This usually causes a tax debt, since no money was withheld from this “income.”

There is an exception to this situation. If you were insolvent at the time the debt was settled, the cancelled debt is not considered income. The IRS instructs the taxpayer to “determine your liabilities and the fair market value of your assets immediately before the cancellation of your debt to determine whether or not you are insolvent and the amount by which you are insolvent.” Let’s say your net assets after subtracting your liabilities amounts to $5,000. If you negotiate a debt settlement for $10,000, you must pay taxes on the first $5,000 of the cancelled debt. If your tax rate is 25%, you may Uncle Sam over a thousand dollars!

For debtors who have negotiated big savings through a debt settlement company, a large tax debt can be a slap in the face. Owing the federal government is much worse than owing a credit card company. Here are some interesting “facts” about owing the IRS:

  • the IRS does not have to obtain a court judgment before garnishing your wages;
  • recent tax debts are not dischargeable in bankruptcy;
  • the IRS can intercept future tax refunds and even government benefits like social security to pay your income tax debt.

Congress has made sure that all debts discharged during bankruptcy are excluded from “Cancellation of Debt” income. If your debt is discharged, the debt cannot be collected from you in the future, and you owe no taxes on it. If you can afford to repay a part of a debt, a Chapter 13 bankruptcy will allow you to pay what you can afford, over three to five years, and the remaining debt is discharged without a “Cancellation of Debt” tax obligation. If you cannot afford to repay any part of the debt, a Chapter 7 can discharge the debt within a few short months.

Debt settlement often makes a bad situation worse. Before you commit to a settlement process to eliminate your debts, speak with an experienced bankruptcy attorney. You deserve to know all of the consequences before agreeing to any financial program – including any potential tax liability. Your attorney can explain the pros and cons of debt settlement and bankruptcy, and can help you decide on the best course of action.

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Las Vegas Debt Collection and Your Rights

Monday, March 28th, 2011

Debt collectors can be ruthless. Persistent telephone calls at home and work, embarrassing letters in red envelopes, calls to friends and family, and even public posts to your Facebook account are all dirty tactics that debt collectors employ to harass you into paying. Fortunately, there are laws that protect you from unlawful creditor harassment.

The Fair Debt Collection Practices Act, or FDCPA, is a federal law that protects against abusive collection practices by third party collectors. Third party collectors include collection agencies and collection attorneys. The FDCPA does not apply to business debts or to original creditors. The FDCPA prohibits certain abusive practices including:

  • Telephone calls before 8 a.m. or after 9 p.m. (your time);
  • Requesting payment beyond what is actually owed;
  • Using abusive, profane or obscene language;
  • Threatening legal action which is not permitted by law (e.g. criminal action);
  • Telephone calls at work after being instructed that your employer prohibits phone calls from debt collectors;
  • Contacting you directly after being instructed that you are represented by an attorney

Another federal protection is the Fair Credit Reporting Act (FCRA). The FCRA is designed to promote accuracy and ensure the privacy of the information used in consumer credit reports. The FCRA contains a dispute process for correcting inaccurate information placed on your credit report.  More information about the Fair Debt Collection Practices Act and the Fair Credit Reporting Act can be found on the Federal Trade Commission’s Bureau of Consumer Protection website.  The FTC is charged with enforcement of both acts.

Hiring a bankruptcy attorney provides immediate relief from creditor harassment under the FDCPA, and all collection action must cease the instant you file a bankruptcy case. This protection lasts the duration of your bankruptcy and is replaced with the bankruptcy discharge at the end of your case. A creditor who violates these bankruptcy prohibitions can face a contempt of court charge in the federal bankruptcy court.

Don’t let creditor harassment overwhelm your life. Take charge by consulting an experienced Haines & Kreiger Las Vegas bankruptcy attorney about your debt and learn how the federal and state laws can protect your property, your income, and your peace of mind. Call us at 702-880-5554.

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Will my creditors still come after me if I file for bankruptcy?

Tuesday, December 7th, 2010

Once you file for bankruptcy, you’ll likely see an immediate change in the activity of your creditors.

This is partly because of the “Automatic Stay,” which forbids creditors from contacting a debtor directly (i.e., not through the debtor’s lawyer) once the bankruptcy case has been filed.  And partly because for some creditors it just may not be worth their time and money to pursue the debt.

Here are 5 things that are likely to happen once you submit your bankruptcy petition:

1.  Thanks to the Automatic Stay, creditors must immediately stop all collection activity.  That means no more collection letters or phone calls to you.  Period.  It also means they can’t continue to garnish your wages.  And any lawsuits against you are put on hold and can’t go forward during your bankruptcy case.

2.  That said, some smaller creditors may still contact you because they’re unfamiliar with the bankruptcy laws and the automatic stay.  If you have any problems with them, simply instruct them to contact your bankruptcy lawyer.  (They may not be terribly thrilled with this suggestion, but that’s the way things work in bankruptcy and there’s not anything they or you can do about it once you’ve filed.)

3.  You may never hear again from some creditors, because they’ve weighted the costs and benefits of pursuing their claim and they’ve decided it’s just not worth it.  Perhaps they don’t expect to get anything back in the case.  Or they realize that the amount they would get back is less than the amount they would have to pay a lawyer to represent them.

4.  Other creditors (those with more at stake) will file what’s known as a “proof of claim” in the case.  This is each creditor’s way of trying to get as big a piece of the asset pie as possible.  Since the pie is limited to your non-exempt assets, the proof of claim is more about creditors competing with other creditors for their share of the pie.

5.  Your bankruptcy lawyer (if he/she is a good and experienced one) will keep you up to date on the parts of the case that you need to know about and where action is required by you.  Your bankruptcy lawyer should also patiently answer all of your questions to your satisfaction.

For a free consultation, contact Haines and Krieger at 702-880-5554.

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Las Vegas: When Paying Your Debts Can Cause Trouble

Friday, November 26th, 2010

Many tough decisions are made when a family is struggling with debt.  Often debts are paid according to priority.  Those bills at the lowest priority may not get paid at all.  While this may be a good strategy under ordinary circumstances, it may back-fire when a bankruptcy is imminent.

The act of paying one creditor while ignoring another is called a preference payment by the bankruptcy laws.  The debtor preferred to pay one creditor and not others.  A preference payment is defined as a transfer of money made before a bankruptcy filing, to pay on a pre-existing debt, made while the debtor is insolvent, and gives the creditor more than it would receive from the liquidation of the debtor’s assets during a Chapter 7 bankruptcy.

In deciding who should get paid first, the Bankruptcy Code divides creditors into classes and creates a hierarchy of preferences.  For instance, the Bankruptcy Code prefers that child support is paid before credit cards, and that a secured car payment is paid before a medical bill.  In many cases a pre-bankruptcy preference payment is perfectly fine; in other cases it can create trouble for the debtor and the creditor.  This is especially true when one creditor in a class receives more than other creditors in the same class, or a creditor in a lower class receives money before creditors in higher classes.

When a preference payment occurs within 90 days of the bankruptcy filing, the bankruptcy trustee can ask the court to order the preferred creditor to turn over the payment(s) for distribution according to the hierarchy of preferences.  This period is increased to one year if the creditor is an “insider” creditor.  An “insider creditor” is generally a relative, business partner, etc. who has a special relationship with the debtor.

Common preference payment scenarios include:

1.     Repaying a personal loan from a family member just before filing bankruptcy;

2.     Paying one business vender, while ignoring others.

3.     Transferring a credit card balance from one card to another.

4.     Paying off a credit card, medical bill, or personal loan just before bankruptcy.

When the trustee requests turnover of a preference payment, the creditor is faced with either complying with the request or litigating the matter in bankruptcy court.  There are legitimate preference payment defenses which largely depend on the circumstances of the payment.  However, the general practice of bankruptcy trustee is to sue first and ask questions later.

If you are struggling financially, seek out legal advice early and avoid making mistakes with preference payments.  An experienced Haines & Krieger bankruptcy attorney can help you make wise financial decisions and avoid preference payment situations. Call us at 702-880-5554 to see up your free consultation.

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Debt collector scam defies belief

Thursday, November 4th, 2010

Las Vegas may be the “foreclosure capital” of the U.S.  But Erie, PA may now be the country’s “bizarre debt collector scam capital.”

Apparently, a debt collection company called Unicredit, Inc. (also known as “Unicredit Debt Resolution Center”) decided it would be more effective in its efforts if it set up its office to look like a court.  Everything from court-like furniture to a judge-like raised bench to a guy dressed in black who would periodically sit at the raised bench (though apparently without saying anything).  They issued civil subpoenas and even had employees refer to the designated area of their office as “the courtroom.”

The debt collector’s intent was to intimidate less sophisticated debtors by tricking them into believing that there was some sort of official process going on.

Needless to say, this did not go unnoticed by the Pennsylvania State Attorney General’s office, which issued a press release stating:  “Fictitious court proceedings were used to intimidate consumers into providing access to bank accounts, making immediate payments or surrendering vehicle titles and other assets – sometimes dispatching Unicredit employees to consumers’ homes in order to retrieve documents or have consumers sign payment agreements.”  read more

It’s just one more example of the lengths to which debt collectors will go to get money from people.  We understand that debt collectors have a job to do.  But this approach is rather scary.  And it’s not like it was one bad apple in a phone center.  This was clearly a top-down decision by management.  (Which makes you wonder what the strategy meeting discussions must have been like and how the idea was even brought up.)

This is also a reminder to be mindful of debt collection scams.  There are many things that debt collectors are not legally permitted to do.  Simulating a court is an obvious one.  But other infractions are not as clear cut.

If you’re having debt collector problems, or you have questions about what’s legal and what’s not, please feel free to contact an experienced Haines & Krieger attorney at 702-880-5554 for a free initial consultation.

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Las Vegas, which is better bankruptcy or debt consolidation?

Tuesday, April 21st, 2009

Many of our Las Vegas clients ask us if they should try consolidating their debt through a debt consolidation company instead of filing bankruptcy.

We advise against debt consolidation.

Here’s what debt consolidation allows you to do:  You can combine all of your credit card debt, car loans and other consumer loans into one single lower-interest loan.  The idea is that you’ll be able to take the extra money you are saving and use it to get out of debt faster by making extra principle payments.

Sounds tempting, but here are some of the pitfalls:

  • The number of unscrupulous debt consolidation companies being investigated by the Attorney General is astonishing.  Many of these companies have been charged with deceptive practices like charging high upfront fees or taking the first month of their clients’ payments for themselves.  Worse, some companies simply took all of their clients’ payments for themselves, and paid the creditors nothing.  Unless you do extensive research and are confident that you are dealing with a reputable and honest company, your money and credit score might be in serious jeopardy.
  • Your creditors can still call you to harass you for not paying their bills while you are paying off your consolidated debt.  In fact, they can even sue you.  Not so with a bankruptcy filing, which automatically stops creditor harassment and lawsuits.
  • You may be saving money with your lower monthly interest payments, but you have to be 100% certain that you won’t use that money to get into more debt.  Many of our Las Vegas clients have told us about how debt consolidation made their problems worse, by allowing them to incur more debt than they started with.
  • You’ll need to scrutinize the terms of your new consolidated loan.  Even though the monthly payments and interest rate might be lower, the life of your new loan might be longer, meaning that you’ll end up paying more interest in the long run.

Too many of our clients have had bad experiences with debt consolidation companies for us to recommend them.  If you live in Las Vegas and are experiencing financial difficulties, contact our Las Vegas offices at 702-880-5554.  You’ll be able to schedule a free consultation with our knowledgeable and experienced bankruptcy lawyers, who will help you decide how to get your financial life back on track.  If you are calling from within Nevada, you can also reach us at 702-880-5554.

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