I updated the June 2008 debt report to explain more about the numbers I’m using and the reasoning behind my decisions on what to keep and what to let go in the bankruptcy.
Please see the update at June 2008 Debt Report.
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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:
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.
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.
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.
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The week I retained my attorney, I was served papers from one of the collectors (Eaton Group Attorneys) that they were going to seize the money in my bank accounts.
I called my attorney so she could stop them from carrying it out. She had already drafted a letter to that collector that had a judgment against me to cease and desist.
I hadn’t had a chance to write a post about it. I’ve been trying to focus on bigger articles on this and other blogs.
Lesson?
Once a creditor or collector has a judgment against you they can proceed with getting a writ of seizure or a writ of garnishment or both. They can force you into bankruptcy.
Even though a debt is unsecured, they can still legally come after you and take money and assets. Just because the credit card company probably won’t do it doesn’t mean the collectors they sell your debt to won’t do it.
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For the third time in the last 9 months, my laptop is on the fritz. This time it’s the hard drive and the DVD-CD/RW drive (multi-drive).
Total cost to repair and recover my data: $350
Replacing the hard drive is self-explanatory. Why do I have to replace the multi-drive? It’s how all the software will be loaded back onto the computer. Without it, I’m screwed. I’ll have all my data but none of the associated programs.
I would say this is unexpected, but it’s really not. I’m lucky the hard drive and multi-drive lasted over 4 years. They usually don’t last that long. I was just hoping the hard drive would hold on until fall when I have less time to work online and more money coming in from tutoring.
Plans
As soon as the bankruptcy is over and my income stabilizes, the first thing I’m saving up for (after a baby emergency fund) is a Mac Book. They are about the same price as a Windows machine now, and I soooo miss my Mac.
Productivity
My productivity isn’t what it would be if I had my own computer in my office. I’m back working on the desktop computer until they get my laptop fixed. In the last 9 months I’ve had my laptop in working order for about 6 months. That’s 3 months of lost work.
If I’m going to make a living online, I’ve got to get a reliable computer. I’m praying that keeping the Toshiba going for 6 more months will do the trick and turn the tide on my earnings. I’ve been improving steadily over the last 3 months, but I’ve got to improve exponentially over the next several months to replace the full-time income I’m earning at two part-time jobs.
I still plan to continue tutoring part-time regardless of how much I earn with any other endeavors, online or off. I enjoy it and I would do it for free if money were no object.
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Debts Paid in Full:
Status Report:
Balance Report:
Total debt balance including 1st mortgage on house: $368,270
After Bankruptcy Projection:
Debt remaining after bankruptcy:
Debt snowball:
- CFCU Visa: $4,596.53
- Chase HELOC: $5,020.19
- Capital One HELOC: $21,576.12
First mortgage balance: $117,616
Debt Balance excluding co-signed student loans and first mortgage: $31,193
Total debt including first mortgage, excluding student loans: $148,809
- 148,809/368,270 = 0.53 x 100 = 53% of the total debt will remain
Student Loans:
- Co-signed student loan approximate balance: $45,238 (need a complete audit on these accounts; not sure this balance is correct or even close)
Possible total balance including 1st mortgage: $194,047
When I calculate debt remaining, I mean everything but my house (1st mortgage), so remaining would be $31,193 if I don’t have to pay the student loan, and $76,431 if I do. Total debt excluding the 1st mortgage is $250,654.
Calculating what I’ll have left to pay as a percent without the student loans is as follows: 31,193/205,416 = 0.152 x 100 = 15.2%
Including the student loan, the percentage will be: 76,431/250,654 = 0.305 x 100 = 30.5%
I’ll be wiping out 84.8% to 69.5% of the debt in the bankruptcy.
Why do I leave out the debt on my first mortgage?
- We have to live somewhere and pay either rent or a mortgage. Selling my house would wipe out almost all of those debts, but it wouldn’t change the fact that we have to pay for a place to live.
- Rent in our area is still inflated from Hurricanes Katrina and Rita. A smaller rental house runs $1500 to $1800 per month. Even with the 2nd mortgages we’re better off staying where we are, paying less per month to live, and not incurring all the expenses of moving.
My 1st mortgage payment totals $980.73 and includes the following:
- P & I - $739.14
- PMI - $66.34
- Remaining escrow (taxes, insurance) - $175.25
Second mortgage payments are:
- $76
- $130
Total to stay in current house: $1,186.73
Why a house? We have 3 animals, including two large dogs (65 lb and 85 lb). It’s hard to find any rental at all that will allow one large dog, let alone two. An apartment is completely out of the question. Our animals are part of the family and we’re not giving them up.
FYI: The going rate for a 2 bedroom, 1 bathroom apartment is currently $900/mo anyway. If we move to an apartment I’d have to pay to store some furniture, and storage facilities also have inflated rental prices. The size I would need costs $100/mo.
Co-signed Student Loan
I still haven’t received anymore notices from the student loan people. It’s possible the friend I co-signed for is paying them again. The bankruptcy trustee will require an audit of these accounts as part of my remaining obligations and I have to call and request it.
I didn’t pay anything on the debts I’m going to bankrupt. I don’t see the point of spending money on them when they will be gone soon.
Tutoring is busy this summer
I don’t have many LEAP students, but my tutoring company has scheduled me for 10 hours per week so far, and more students are coming each week for summer enrichment in math and reading/language arts. If you don’t know what LEAP is, please go back to my May 2008 Debt Report and read about it there.
I’m pleasantly surprised because I didn’t have any company students last summer. This summer I started tutoring the week after Memorial Day week, just after school was out here.
I’m deliver pizzas on my free evenings part-time.
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This is the story of my
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Does everyone remember years ago how when we were at school if there was a party
going on, flyer's would be handed out in between classes or amongst a group of
friends? If not... you have seen the movies where people give out flyers about
a big party at Howie Lowenstein's place on Friday night! The classic "throw
the flyers" routine from the top of the stairs and everyone gets a copy magically
fall into their hands?
Or now, how many of us receive invitations to events through Facebook that
already have over 30 people RSVP to go.