There Will Be a Test…
Whenever anyone embarks on anything new, especially something that is a rather big change, there always seems to be a test of their commitment to the new direction they have chosen.
I am continuing working on my internet business, searching for a new career (possibly in tutoring full-time) and I’m filing a Chapter 7 bankruptcy. I’m also delivering pizzas and tutoring as many hours as I can get this summer, and there is plenty of tutoring this year where there was none last year. The internet business is not taking more time, but I’m working very hard to use the few hours each day I can devote to it in the most efficient, profit-driven manner possible. It’s taken a much stricter schedule with a daily set of marching orders that will be accomplished, period. There is no “or else”. It will be done on time and I will stay on task.
But into everyone’s life (and grand plans) some rain must fall and some tests of faith and will must be endured.
My tests came today. They are all big, and the smallest of the three will likely involve some physical pain. Here is what happened:
- A large piece of one of my molars broke off while I was eating lunch; crown $1,000
- I owe the State of Louisiana (Louisiana Department of Revenue) $2,737 in taxes for 2007
- I owe the IRS $3,598 in taxes for 2007
Some good news
I qualify for a stimulus check, so I’ll be able to turn it around and pay it right back to the IRS, I may use it to pay the rest of my attorney’s fees for the bankruptcy, or I may have to use it to pay for a portion of the cost of my crown. I can work out a payment plan with the IRS and LDR if need be.
I was lucky to get in to see the dentist this afternoon, and they were able to put a temporary plug of cement in the hole in my tooth until next week. They didn’t charge me anything for today’s visit or for the temporary plug. I have an appointment at 11 a.m. next Wednesday to start the crown process.
Dental Work
The tooth is mostly amalgam from being filled many times during my life, and about 1/4 of the tooth broke off. There is so little tooth left that it can no longer be filled. It has to be crowned. We all hope that the temporary filling will last the whole week until they can grind the tooth down and put a temporary crown on it. I’m not looking forward to 2-3 hours of grinding in my mouth, but once the temporary crown is in place, my mouth will feel more normal. Right now I can’t chew on the right side and I’m supposed to eat only soft foods.
The other part of the bad news is I don’t have $1,000 I can put my hands on immediately. I had to use a little over a third of my savings to pay all the doctor bills we had during June. I schedule all the check-ups, dental appointments, and anything else I can in the summer so appointments won’t interfere with tutoring hours, and thus, income. The good news is the dentist will accept payments in 3-4 installments. There are 2-3 visits involved with a crown (depending on whether the tooth abscesses), and I can pay some at each one, and pay one in between. They do want payment in full by the day they place the permanent crown.
Taxes
I talked with my CPA at length about my options for paying the taxes since I don’t have $6,335 sitting around. He advised me to send in the returns without payment and wait for the letters from the IRS and LDR that will come in 4-6 weeks with my payment options. Those letters will also contain all the necessary contact information I will need to negotiate with both agencies.
My CPA advised putting the most energy into getting the IRS paid first, then work on paying the LDR. LDR is here in town, and I can go over to their office, sit down with them and talk to them in person. The IRS isn’t so easy to get with face-to-face.
The IRS will allow up to three years to pay off what I owe them. The other thing I must do is make sure I pay enough in taxes this year so I won’t owe any more for 2008 or going forward. I thought I had it all worked out, but I made too much money tutoring in 2007, and it offset all the losses from my failed business.
I work for a tutoring company, but I’m a 1099 contractor and I have to pay my own taxes. In 2006, I overpaid significantly because of all the losses and deductions from Hurricanes Katrina and Rita. Some of the bigger exemptions went away in 2007 and I made more than I planned. I paid more taxes in 2007, but it still wasn’t as much as I owed.
How I’m going to come up with the money
- Federal stimulus check
- Have another garage sale
- Sell the hundreds of zipper-pulls I made over the last year while watching TV or listening to audio books or podcasts.
- I just picked up another student this summer for at least 2 hours a week, bringing me to 13 hours per week. I asked for more students.
- I’ll get a tutoring pay raise in August.
- I was just notified someone bought some advertising on this blog through Text Link Ads.
- I’ve joined a new PPC program, ShopZilla, I earn per click and I earn a commission if anyone buys anything through one of my links. I get to pick the products that go on my sites and I got a $25 sign-on bonus.
- Keep up with the daily marketing of my blogs and keep my traffic counts increasing.
- Add another day a week to pizza delivery
- Add product/merchandise pages to more of my blogs to increase passive income. Some of my side-bar affiliate links get extremely few clicks and no sales, so removing them won’t hurt revenue and it may even help. I started getting more sales on a site just by adding a page where all my products were located. I guess people can go there and find what they want quickly and buy it instead of having to hunt a link down. If they have to hunt, they won’t, and they won’t buy from me.
- Find better-paying affiliate programs than Amazon.com. Clickbank and eBay are much better.
- Cut the budget again somewhere. I don’t know where, but I’ve got to try. We are taking more drastic energy-saving measures, and I hope those will lower the gas/electric bill at least a little. The measures we’ve taken so far kept our bill from going up 10% when rates went up 10% this spring. Our bill stayed the same. I can probably cut a little more out of the food budget by cutting back on the amount of meat I add to soups, sauces and beans. I can cut the amounts of meat from a pound to a half-pound and I doubt we’ll notice.
There Will Be a Test… | Debt Free or Bust…
Whenever anyone embarks on anything new, especially something that is a rather big change, there always seems to be a test of their commitment to the new direction they have chosen. The tests this author is enduring are $6300 in tax debts and a $1000 d…
Trackback by bloggingzoom.com | July 3, 2008
There Will Be a Test… | Debt Free or Bust…
Whenever anyone embarks on anything new, especially something that is a rather big change, there always seems to be a test of their commitment to the new direction they have chosen.My tests came today. They are all big, and the smallest of the three wi…
Trackback by blogbookmark.com | July 3, 2008
Not checked in here for a while. Initially, I was glad to see that you were taking the bankruptcy seriously but now I am confused about your options. Am I right in thinking that bankruptcy will only cover about $60,000 of debt but leave you with about $145,000 secured on the house and this $45,000 student loan? If that is the case, is it worth it when you will still owe so much ($190,000)? Or is it because of the 25% equity rule that you don’t do it?
Also, what will the HELOC lenders and the mortgage company’s attitude be to you being bankrupt?
Comment by ArthurWankspittle | July 3, 2008
[...] There Will Be a Test… I had to use a little over a third of my savings to pay all the doctor bills we had during June. I schedule all the check-ups, dental appointments, and anything else I can in the summer so appointments won’t interfere with tutoring … [...]
Pingback by All Else Failed » There Will Be a Test… | July 3, 2008
Hi Arthur,
Glad to have you back. I need to clear up the original debt balance vs. the balance I’ll still have after the bankruptcy. I know what’s going on with all the numbers so I tend to leave out very important details. The debt balance before the bankruptcy doesn’t include my first mortgage. I’ll update the June Debt report to reflect that after I post this.
Including the first mortgage balance on my house, my total debt is $368,270. This does not include federal taxes, state taxes and the dentist bill. All not bankruptable (if I want my tooth fixed).
The amount of debt that will be wiped out by the bankruptcy is $174,223. I’ll still have $195,000 left, but most of it is on my house ($144,212) and I may never have to pay the student loan at all.
This will also wipe out some payments I have to make until the bankruptcy goes through. It will free up enough money to pay the dentist in 2 months and IRS and LDR in less than 3 years with some money to spare. That way I can snowball the tax payments.
I’m keeping my house and the associated second mortgages because it will cost more than I would get out of it to sell. We’d have to move into a house because of all our animals, moving isn’t cheap, and rent for a house smaller than mine would cost about $1500 a month (I’ve seriously looked for a rental). Total 1st and 2nd mortgage payments are $1200/mo and decreasing. I’m better off paying my 1st and 2nd mortgages. My house is worth about $150,000 and I owe $144,212 on it. I’m using the equity exemption to keep it.
My friend is paying on the student loan again now that she’s employed. So far, I won’t have to pay on that anytime soon. If I eventually do, it will be down the road and all the rest of my debts, except maybe the first mortgage, will be paid off.
My house payment will go down when I wipe out each second mortgage, and when I own 20% of the house again, I can get rid of the PMI. That costs about $70/mo.
In the bankruptcy I’ll reaffirm my primary and secondary mortgages. The interest rates on the seconds may go up initially, but my primary is fixed and they can’t change the rate. I haven’t missed any payments on any of the mortgages.
My credit is already in the toilet and has been for some time. The bankruptcy will stop negative reports by at least 19 creditors from continuing to go onto my credit report each month, so my credit score may actually start to recover over the next 6 months to a year. Not that I care about that, I’m not borrowing again.
Thanks for asking those questions,
Sherri
Comment by joubess | July 4, 2008
Thanks for asking those questions,
And thanks for answering them. I think it’s important to explain the details so that readers can understand your reasoning for the course you have chosen, and so that readers also understand the specifics in your state, which may not apply to them.
It also makes sense that you keep the mortgage and house if renting is as expensive or more so. Plus the aggravation of finding a landlord who will take you, given that a lot run credit checks these days, and then you say you have “all our animals”. I hadn’t realised you had some pets, so that too makes it so much harder to find anywhere to rent.
Comment by ArthurWankspittle | July 4, 2008
Arthur,
I hadn’t even considered the credit check a landlord might do. It’s been so long since I’ve rented. A lot of things have changed about qualifying to rent now vs. 15 years ago.
Between bad credit and animals, I wouldn’t have a snowball’s chance in hell of renting anything.
Comment by joubess | July 4, 2008
I don’t know why I always had the idea that bankruptcy meant ALL your debts were wiped out. Back to zero. Thanks for sharing details about your particular case. I think it will help a lot to those out there who are considering this as an option but don’t know exactly what to expect.
Comment by CountingPennies | July 7, 2008
Hi Counting Pennies,
That’s part of the reason I’m sharing so much detail. There are a lot things I didn’t know until I started going through the process, and each state has different rules, so you need a good, but reasonably-priced local bankruptcy attorney to advise you.
I hate it that there isn’t a realistic way for me to pay everything back, but with all the tacked-on interest and fees from my debts being sold, I didn’t actually borrow more than about half of what I currently owe. I am only keeping the debts that make sense for me to keep, mostly the ones to do with my primary residence. We have to live somewhere and the house payments are low enough to make it advantageous to keep the house payment. It’s cheaper than rent.
Thanks for stopping by, and I hope you’ll come again soon,
Sherri
Comment by joubess | July 8, 2008