Blogs

By Mary Ann Pekara
March Madness is in full swing now and gamblers' wallets across the country are a little lighter as they wait in anticipation to see how their brackets play out.
Whether you're a regular college hoops enthusiast or not, it has been projected that over 100 million people will take part in the "bracket" sensation that encompasses March Madness.
It has been estimated that those 100 million people will be collectively gambling approximately $12 billion on this NCAA tournament.
Based on the government's census calculations from 2012, the amount of money spent on gambling during this year's March Madness could have paid off over 2.6 million people's credit card debt at $4,554.97 each!
With approximately 191 million credit card holders in 2012, the credit card debt was projected at $870 billion.
Is it even worth asking ourselves why gamble when we could pay off some of our debt?
March Madness is its own world. It's a distraction from our lives. It brings us highs and lows. It brings people together. It pulls people apart. It pits people against each other. All in all, it is great fun.
What else could this $12 billion pay off if we didn't gamble it away?

• The Heinz Company's $12 Billion Debt
• Clear Channel Communications' $12 Billion Debt
• Portugal's Town Hall's $12 Billion Debt
• Texans' $11 Billion Unpaid Child Support
• Illinois' $9 Billion Unpaid Bills

There's a lot of debt that could be paid off with $12 billion but right now this country is busy watching their brackets.

If you file bankruptcy, you need to send in proof of your income.  For most people, that means your pay stubs.   Section 521 of the Bankruptcy Code requires people to send in at least two month of their “payment advices“–meaning pay stubs–received from your “employer.”
What if you are self employed?   You don’t get a pay stubs and don’t have en employer.  Do you dodge that requirement?

If you are self employed, you need to send in your income statement, or "profit and loss"

Well, no.   The Bankruptcy Rules, Rule 4002, requires “evidence of current income.”   Around here, the bankruptcy trustees want to see what they call a “profit and loss.”
What is that?
Your income statement, or profit and loss, shows your revenue and expenses, money in and money out, and what was left for you.  How much money is left for you is a big part of determining your eligibility under the bankruptcy means test.
I don’t find the label “profit and loss” very helpful and some of my small business clients are baffled by it.  Income statement seems clearer to me.
Either way, you need to do one for each month of the six months ending the month before you file your bankruptcy.  If you are not making much money, it can be pretty simple.
This article in Wikipedia has an example of a simple income statement–that’s all you need.  and then some complicated ones.  I think it was pretty helpful.
(Wikipedia also says that “income statement” is American English, and “profit and loss” is British English.  Around here in Northern Virginia anyway, the bankruptcy trustees call it “profit and loss.”)
If you have a bookkeeper, or keep track of stuff on Quicken, this is a snap.  If you just throw your receipts in a drawer, then you will have to take some time to put this together.
 
Here’s a simple Profit and Loss for Bob Weed’s Lawn Service.  You can use this as a guide.
January 2012
Gross sales                     $3000
Expenses
Wages, paid to others     $550
Draws, paid to you          1,000
Utilities                              60
Rent                                300
Office supplies                    50
Insurance                          90
Advertising                        50
Phone                               50
Travel                               50
Interest  paid                     20
Taxes & licenses                 50
Total Expenses         (2,270)
Net Income                   730
 
 
 
 
 

Ross Boydston, 57, of Creston, Nebraska, pleaded guilty this week to a federal charge of bankruptcy fraud.  He admitted he was involved in a scheme that included selling livestock he pledged as collateral without telling the lender about proceeds received from the sale.  He also failed to mention the transaction had occurred while in bankruptcy. [...]

You never thought bankruptcy would give you too much.  But sometimes it does.
When you file for Chapter 7 bankruptcy, the goal is to get out of debt. The discharge does just that – it ends your personal liability for debts that are wiped out in bankruptcy.
So long as a debt is not one of those that is not discharged, your liability ends at the end of the case.
Credit Reporting Of Discharged Debts After Bankruptcy
The Federal Trade Commission, in the famous Brinckerhoff-Lovern letter of April 24, 1998, spells out exactly how a debt discharged in bankruptcy must be reported. It states as follows:

Section 607(b) of the FCRA requires credit bureaus “to follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” In our view, it is not a reasonable procedure to label an account that has been discharged in bankruptcy as “charged off as bad debt” if the account was open and not charged off when the consumer filed bankruptcy. Such a designation would be inaccurate or misleading, because it would indicate that the creditor had written off the account at the time of bankruptcy when it had not in fact done so.

What If A Discharged Debt Is Reported As Due And Outstanding?
As far as the FTC is concerned, reporting anything but the fact that the debt was discharged in bankruptcy and now has $0 due is inaccurate. Therefore, you should dispute under the Fair Credit Reporting Act to correct the error. If the error persists, there may be grounds for a lawsuit.
In a few of my cases on the subject, the U.S. Bankruptcy Court held that such an inaccuracy may also be considered a violation of the discharge injunction under the bankruptcy laws.
Your Mortgage Was Discharged
In most cases, your personal liability to pay your mortgage was discharged at the end of your Chapter 7 bankruptcy. That means if you fail to pay, the lender can forclose but isn’t allowed to come after you for the deficiency after the foreclosure sale.
It means you owe $0 on your mortgage. You’re paying the security interest, but there’s no personal liability.
The mortgage company isn’t allowed to report on the account – at all. No payments, no balance, no skipped payments. Nothing.
That’s good if you fall behind, but if you’re up-to-date you’re not going to “get credit” for those payments.
How To Prove Payments
Under federal law, you can ask your mortgage company for a payment history at any time. That payment history will show all payments you’ve made, as well as the amounts and dates of those payments. You can take that to a new potential lender or anyone who wants to verify that you’ve been making your mortgage payments.
Reaffirmation
You could always use the reaffirmation process in bankruptcy to avoid the problem. A reaffirmation is a promise to repay a debt in spite of your bankruptcy – in essence, to pretend as if the bankruptcy never happened as to that particular creditor.
You can reaffirm a debt while the bankruptcy case is open, but many judges won’t let you reopen a closed case for the purpose of reaffirming a debt. Talk to your lawyer to see if that’s an option for you.
But remember, reaffirmation can be dangerous. Once you reaffirm a debt, you’re on the hook in case things go badly in the future. I don’t usually recommend reaffirmation to my clients, but that’s on a case-by-case basis.
The Bargain Of Consumer Protection
You want to be protected from creditor shenanigans after bankruptcy. In exchange for that, it’s up to you to keep records of your mortgage payments after the discharge is entered. And if there’s a problem, give a call to your bankruptcy lawyer. If he or she isn’t familiar with the rules, have them give me a call to talk about it – I’m happy to share the knowledge to help you get the protection you deserve.
Image credit:  Rev Dan Catt
How Your Mortgage Shows Up On Your Credit Report After Bankruptcy was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.