Tag Archives: tax refund

What If the Tax Refund Doesn’t Catch You Up?

Like most businesses, mine has patterns. One of those patterns is that someone will call me about this time of year and we will talk for a bit about a possible bankruptcy filing. Then, I won’t hear anything back from them for several months. What happens is that shortly after talking to me, the caller discovers that he is going to be getting a substantial tax refund – enough to get caught up. Of course, in some cases they are right; and I never hear back from them; and that is a good thing.

Then, there are the people who are calling back in May or June. They got a $3,000 or $4,000 tax refund. They threw it all at the problem bills. Those payments paid a ton of interest. A few months later, they realized that they are still in trouble. Their tax refund bought them a little bit of time and not much more. So much of it went to interest that it didn’t really reduce their principal balances much. They still can’t pay the debt. They still can’t save for retirement. They still can’t help their kids save for college. They still need dental work they can’t afford. They still have cars that desperately need new tires. Oh, and they have $0 saved to pay for a bankruptcy filing.

If you think you will, “get caught up” with your tax refund; do a lot of math first. How much of your payments will actually reduce the principal. What interest rates are you paying and how long will it take that rate to increase your balances more than your refund reduced them? How long will it be before you can start doing the things you need to do – like plan for retirement, college costs, oh, and just how long will those tires last, anyway?

I don’t actually mean to be this depressing, and if your tax refund will get you out of trouble; more power to you. If all it will do is buy you some time, then maybe it is time to take a deep breath and consider where your real responsibilities lie – Visa, Master Card or your family’s future? Personally, I like to think that Visa and Master Card are big enough to take care of themselves.

Ok, so you still really want to pay this. Great. Pay it. But wouldn’t paying it without interest be a better solution than what you are currently fighting? There is a way to do that. It isn’t fun, it isn’t quick and easy; oh, and it isn’t cheap. It is called a Chapter 13 Bankruptcy. Yes, it is a bankruptcy; but it is a bankruptcy that lets you take five years to pay as much of your unsecured debt as you can – with NO interest.

Do the math, and do it before you throw yet another tax refund at 28% interest charges.

Elaine

Bankruptcy, Tax Returns and Identity Theft

Looking at the title to this post, I must say that those are not words I ever expected to be putting in one sentence — but then this morning happened.  Let me begin at the beginning.  Early this morning I got an email from a friend of mine with a link to this article:

http://krebsonsecurity.com/2014/03/experian-lapse-allowed-id-theft-service-to-access-200-million-consumer-records/

Evidently, some time ago Experian (one of the three major credit reporting services) bought a company called Court Ventures.  Now, from what I gleaned from Google, Court Ventures is a company that collects public record information on people.  I assume from the name that they tend to focus on court house type records.  Whether or not they are collecting Bankruptcy court records, I don’t know.  Regardless, many bankruptcy cases wind up being referenced in State Court files.  The most common reason for that is when a bankruptcy is filed and there is a pending state court case (a foreclosure, a collection case, anything like that), a Notice is filed in the state court case that the case has been stayed by the Bankruptcy filing.  This notice is sometimes called a Suggestion of Bankruptcy.  This notice includes the bankruptcy case name, case number, and the bankruptcy court in which the bankruptcy is filed.  So, if Court Ventures is collecting courthouse based public records, they are collecting bankruptcy filing notices — albeit indirectly.

Court Ventures then had a contract with another data collection company, US Info Search.  From them a Vietnamese man, who was in the ID theft business,  bought access to both US Info Search data and Court Ventures data — kind of the warehouse shopping model for Identity theft.  Ultimately, this Vietnamese man was able to sell to his customers access to names, Social Security numbers, dates of birth, addresses, former addresses, phone numbers and email addresses — among other things.

The article goes into considerably more detail, and it is quite interesting and well worth reading.  Still, you might be wondering what this has to do with tax returns and bankruptcy clients.  An increasingly common form of ID theft is to file a fraudulent tax return for the victim of the ID theft in an attempt to steal the victim’s tax refund.

Shortly after reading this article this morning I received an email from a Chapter 13 client of mine letting me know that she didn’t have her tax return ready quite yet.  You see, she was working with the IRS to unravel it, but evidently someone had filed a tax return for her in an attempt to abscond with her refund.

That got me thinking.  I wonder how many bankruptcy clients assume (rightly or wrongly) that their Trustee is entitled to their tax refunds, so when the refund doesn’t appear; they don’t go looking for it?  I have had a number of clients over the years receive correspondence from the IRS that they don’t understand (and that may or may not make sense to me), but they don’t follow up on it.  They don’t call the IRS and get them to explain something to them or ask what something means or why it happened.  They just assume.

So, don’t do that.  Nobody in Vietnam deserves your refund more than you do.

Elaine