Archives for June 2013

ATTORNEY OUTLINES LEGAL OPTIONS FOR FINANCIAL CHALLENGES

Do you need legal guidance regarding your financial challenges? Would you like to know more about bankruptcy and other options? New Directions Career Center, a non-profit organization serving Central Ohio for more than 30 years, invites you to hear Attorney James Jeffery Jackson, a legal expert who specializes in assisting clients address debt issues. This one hour workshop entitled, Bankruptcy: Putting Your Financial World Back Together Again, is designed to educate participants on legal options regarding financial difficulties – and how to recover from bankruptcy. It will be held on Wednesday, June 26th, from 3:15pm – 4:45pm. Made possible by our generous sponsors, the workshop will be held at 199 E. Rich Street. A suggested $10.00 registration fee is payable at the door; however, the Center assists individuals regardless of their ability to pay. For more information, call 849-0028, extension “100”.

Image Credit: Ken Teegardin www.SeniorLiving.Org

 

 

Buying a House After Filing Bankrutpcy

How soon can I buy a house after filing bankruptcy is a question that many people often ask.  There is no clear answer to this question.  It depends upon a number of things like how well your credit score improves following bankruptcy, what your income situation is, and what other debt you have incurred after your bankruptcy discharge.  Other considerations are whether you still are the owners of a house that is still in foreclosure.

What is the Hurry to Jump Back Into Debt?

Generally speaking, the largest debt people have is owning a home.  Not only is there the mortgage payment, but you also have homeowner’s insurance, real estate taxes, and home maintenance which can add 30% more to the actual mortgage payment.  There may also be homeowner association fees.  So why are we in such a rush to take on huge debt?

Our society has placed a premium on home ownership.  Be it good or bad, we have this notion that we have to be homeowners.  In fact, our real goal should be saving money for emergencies, future necessary purchases, education, and retirement.  If you can rent comfortable accommodations for $200 per month less than it would cost you to purchase a home, you could save $2400 per month (easy math).  Likewise you don’t have a 15 to 30 year debt obligation that may be very difficult to get out from under depending upon the real estate market.

I am not against home ownership, but I am definitely in favor of making smart financial decisions and saving for the future.  Real estate can be a good investment, but how many people actually make money when it is time to sell?

Improved Credit Score

As I stated earlier, one consideration in the equation will be your credit score if you are going to borrow money.  How quickly your credit score rebounds after filing bankruptcy all depends upon what you do.  If you want to improve your credit score, you must obtain credit sparingly and use it wisely.  You have to pay your credit accounts on time and keep your running balances low.  In other words, borrow a little and pay it off every month.  Use cash more frequently than you swipe a credit card.  There is no magical formula, but you have to live below your means.

Your Income Situation

Again, when you apply for a mortgage, assuming you are going to borrow money to purchase a house, your income needs to be more than adequate.  Following the mortgage crisis of the early 2000’s, lenders are now requiring that your mortgage payment cannot exceed about 30% of your income.  That is a huge change compared to the loose lending practices before the crisis.  So, if your household brings in approximately $40,000 a year, your mortgage payment needs to be less than $1100 a month.

Other Debt Incurred Post Bankruptcy

Another consideration lenders consider when deciding to lend money is your debt to income ratio.  As stated above, your income will be a major consideration.  Also included is the amount of debt you have.  Following bankruptcy your debt position should have improved, but over a couple of years it may be creeping up again.  You may have needed to replace a car or two.  Or you could have suffered some major medical expenses after your bankruptcy that affect your debt position.  Regardless, it is important to minimize the amount of debt you are carrying if you plan on buying a home.

New Time Limits

One of the biggest factors out there affecting how soon you can purchase a home after bankruptcy is the lenders requirements.  I have been told by many of my previous clients as well as associates in the mortgage industry that most, if not all government secured loans now require a four year waiting period after bankruptcy before they will approve a loan to purchase a house.  Obviously there are non-government backed loans that will play, but who knows what the terms will be.  And, remember the saving money talk earlier, you may have the willpower to save the money outright and purchase on a cash basis.  Wouldn’t that be great.  You can also explore rent to own options.

The Bottom Line

There is no sure answer to the question “How Soon Can I Buy A House After Filing Bankruptcy?”  Regulators are going to impose certain barriers, but most of the answer will be found in how well you manage your financial affairs after filing bankruptcy.

Received A Notice of Federal Tax Lien

Federal Tax Liens Attached to Your House and All Your Property

The Internal Revenue System (IRS) issues tax liens against your property when your income taxes are delinquent. The IRS does not have to file a complaint in court and obtain a judgment before the lien attaches. They just file the lien and it is done. That is efficient and actually pretty cruel.

I Don’t Own Real Estate in the State the Lien was Filed

Many people believe the lien is against their real estate because it is normally filed in the land records office. So they mistakenly believe that it only attaches to their real estate in that county. Wrong. It attaches to ALL of your real estate WHEREVER located within the United States. And it attaches to the real estate you acquire after the lien is filed.

I Don’t Own Any Real Estate for the Lien to Attach To

So you don’t own any real estate. No need to worry, right?  Wrong.  Even if you don’t own any real estate the federal tax lien attaches to all your property. That’s right, all of you property, including property you obtain a year from now. Included are your earnings, cars, savings accounts, and even household items. The federal tax lien pretty much places a net over everything you own and are going to own.

What About My Due Process Rights?

Although there is no requirement for a court proceeding, your due process rights have not been violated. The IRS does follow specific procedures to collect the tax debt before resorting to the Federal Tax Lien. You will likely receive many notices from the IRS notifying you of their intent to collect a tax debt. You will even receive a notice of their intention to levy (put a lien on your property) that gives you one last opportunity to work with them prior to issuing the lien. In most cases your due process rights have been protected.

How Do I Deal With Collections of Federal Taxes?

Like most matters, you can always try on your own. The process is complicated and requires that you properly prepare and file many complicated documents. Errors on these documents could be costly.

You could consider filing bankruptcy. Contrary to popular belief, certain taxes in certain circumstances can be discharged. If you have other pressing debt, bankruptcy might be a very good option.

You can retain a competent professional who understands the complex nature of the forms and the proper classification of income, assets, liabilities, and necessary expenses. A tax profession can negotiate with the Internal Revenue Service and seek a number of remedies, such as affordable installment agreements, offers in compromise, and obtaining non-collectible status.

If you have back taxes owing to the IRS, call a competent professional to find out what options are available to remove or prevent a Federal Tax Lien.