chargeoff or settlment or bankruptcy

[joemuni]

What is the name of your state? What is the name of your state? What is the name of your state? new jersey
I have several monthes past due on credit card debt.
I have received many offers to pay much less and settle, or low balance repayment program. But since I don't work I can't take them.
I have gotten letters from collection companies, and lawyers of 30 day to verify or will go for judgment.
I have not received anything from courts of legal actions.
Credit card bank has been calling me regularly, and I told them I will be filling BK, unless I have a job to make payments.
He wants to know tommorrow the name and address of lawyer, or he will chargeoff the account.
I don't think I'm ready to select a lawyer, and am considering a few. Bank wants monthly payment to hold off on chargeoff.
Should I tell bank I'm not paying, and not give the name of bankruptcy lawyer, or should I pay and avoid chargeoff because I know there getting ready for a lawsuite against me, and it may take several weeks before lawyer can file BK, unless I find one who files fast.
Thanks for reply.

 

[Ladynred]

Sounds like you need to file ASAP.

I wouldn't pay the bank anything on the threatened charge-off if you're really going to file soon. In BK the debt will go away anyway, and the BK will overshadow any bad marks from a charge-off on your credit report, so I'd say its more or less a wash.

Once they charge it off, they'll send it out to a collection agency, so even if it takes a little time to get your BK filed, it will take a while for the collection agency to take over. It'll probably take quite a while before they actually sue, IF they do.. they like to make that threat hoping it'll scare you into paying them. I don't think you have to give them any attorney's information. You've already told them of your intent, just tell them you haven't made your choice of lawyers yet. They'll get notice and info soon enough once you file.

In any case, if you do get sued, an attorney can do a kind of quick-file to get the automatic stay in place and stop all collection action. Then you go thru the rest of the process of doing all the paperwork for the bankruptcy.

 

[sillygirl]

I have been threatened by the credit card companies, that once they charge off I will then have to pay taxes on the money as it is reported as income! And that I will still owe the money.....

Will I owe taxes on charge offed debt if I file bankruptcy?

 

[bigun]

Sillygirl,

If your debts are discharged in bk, there is no tax liability.

 

[Ladynred]

What you're referring to is called 'cancellation of debt income', and yes, its possible. However, a lot depends on the amount charged-off. Anything over $600 can be reported and you might have to pay taxes on.

But, as Bigun said, if its discharged in BK, there's nothing to worry about.

 

[bigun]

Ladynred,

There is one other way to avoid any tax liability. That is to be able to prove you are insolvent.

 

[sillygirl]

thanks, let me clarify a bit to make sure I understand....

If they do a charge off, but are still after me for the money, and I file bankruptcy, I won't see a tax liability?


Does the term charge off mean different things then? I was under the impression that if they reported to the IRS and I was required to pay taxes, that would mean that I didn't have to pay the debt. If bankruptcy takes away the debt, then I wouldn't have to pay taxes on it. I guess I am just concerned as I got a copy of my credit report to make sure everything was covered and saw a charge off....but that company is still after me for the money, so it's not like they have it written off completely!

 

[bigun]

Chargeoff is merely an accounting term. It"s just a creditors way of informing there shareholders and regulatory authorities that the chance of collecting this debt is zero. Financial institutions have to chargeoff at the 180 day mark. It doesn't mean you don't still owe the money and it doesn't mean collection activity stops. It just means it was charged to P/L. Again, no tax liability for debts discharged in bk.

 

[Ladynred]

For cancellation of debt income, you would get a 1099 form at year's end. You would attach that to your tax return, but you would also be reporting the bankrtuptcy on your return. I'm not good at taxes.. LOL, but I believe it would cancel out the 1099 income reported.

 

[joemuni]

I am planing to file next week, as soon as I choose a lawyer.
I have money in savings/checking accounts that I got on advances several monthes ago before I stopped making payments. Will the credit card bank want the money back or ask what I did with it . Should I spend it before I file, or can I claim as exemption and keep in my accounts, or will creditors take the money. When I took the advance, I only made 2 or 3 payments to bank.
Thanks for reply.

 

[bigun]

Do not make any financial moves until you speak with a lawyer. You'll need money for legal fees and, most states allow you to exempt some small amounts of cash.