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Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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I am employed and make a pretty good hourly rate, but am out

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I am employed and make a pretty good hourly rate, but am out of work between jobs, and have a not so dependable income. I have substantial debts and seek to learn the various options available to me.

When starting a business about 10 years ago, I fell into a $100K debt hole, consisting entirely of unsecured debts when the business failed. I have judgments against me but have only heard from a small handful of law firms as of late, and make small monthly payments to keep myself out of court.

I have a horrible credit rating, but have no real plans to get credit cards or a mortgage.
(and even feel slightly protected from identity thieves since they would get refused if they tried to get credit in my name)

I also have substantial tax debts, to the tune of $20K to the IRS. Plus I have next to nothing put aside for my taxes for 2012. I am on an installment plan for the back taxes and pre-pay when I can. I make that my priority far and above paying the credit card debt. I have been offered settlements as low as 30 cents on the dollar, but worry this kind of deal would simply deepen my tax debt, since the 70% "gift" of the amount forgiven is taxable. So I do not want to shift my burden from owing unsecured debts to owing more back taxes that a sweet sounding settlement could do to me.

One law firm to which I made $50/month payments, when I was employed, returned the check and said the account was close by the client. So that debt just disappeared, probably for good.

What real obligation am I under to pay?
Does this obligation ever go away? Or does the willingness to pay law firms, on older and older debts, diminish as the debts age?

I do not want to consider bankruptcy, since I fear a court would not be friendly towards me. Even though I earn a high hourly rate when working, I am between assignments often and that reduces by annualized income. Also, having my own consulting company, I feel a bankruptcy on my record wold look very bad. I get contracts in spite of my bad credit, but avoid applying to asset management companies, which have stringent credit requirements.

I have my own company which I use to contract myself out to clients, and have been told I would not qualify for the Chapter #7. I have also been told Chapter #13 is costly.

I think the easiest route is to maintain the payments to the law firms and get any new law firm onto a monthly payment plan; Hope to strike it rich one day to be able to make a settlement with the credit card companies; but first get past 100% of my back taxes and to the point where I could file quarterly income taxes and be sure I am not accumulating a tax debt.

I forgot to mention, any repayment agreements I ever signed, I have broken due to unemployment. So any repayments I am making are strictly voluntary and/or verbal agreements.

Is maintaining the status quo my best option?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 5 years ago.
*This chat is not intended as legal advice. It is general information that may or may not apply to your situation and should not be relied upon.*

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My name isXXXXX shall do whatever I possibly can to provide you with helpful information about the law. Please keep in mind that, although I am an attorney, I am prohibited from giving customers of the site legal advice or forming an attorney-client relationship on this forum.

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You may want to consider a chapter 7 bankruptcy. Although it would not eliminate the IRS debt, it would eliminate most other unsecured debt without creating discharge of indebtedness income from the forgiven debt

You may have been told that you do not qualify for a chapter 7 bankruptcy due to your high income. I will explain

In order to file a chapter 7 bankruptcy, you must pass a means test that compares your family income with the median income of the family of the same size in your state. If you are at or below the median income, you pass the means test in are eligible to file a chapter 7 bankruptcy. If you are above the median income, you must pass an additional test which compares your disposable income and unsecured debts.

Since you are not working, you do not have an income and therefore would be able to pass the needs test

I think this is what you wanted to know. Please let me know if I have answered your question
Customer: replied 5 years ago.
I am employed at the moment and single, with a high hourly rate. That's why I was told there was no way I would qualify for Chapter 7. Assuming that's true, is Chapter 13 a big step higher in legal costs?

Maybe next time I am unemployed I should file Chapter 7?

Expert:  Ellen replied 5 years ago.
Typically attorneys fees in a chapter 13 is approximately $5000. Many attorneys will accept partial payment with the balance paid over the 5 year plan
Ellen and other Bankruptcy Law Specialists are ready to help you