10 Smart Things to do With Your Tax Refund

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Now that Tax Day has once more officially come and gone, most taxpaying citizens have tallied up their yearly income taxes and mailed in the associated documentation. Many anxiously await their refund.

If you are among the many who will be receiving a tax refund this year, perhaps you’ve wondered how you should best handle that money. Let’s face it: the sudden arrival of some several thousand dollars can be overwhelming to even the most responsible person. Unfortunately, many people make irresponsible choices when it comes to spending their refund. Are you one of them?

Instead of throwing money away by making irrational purchases at this time, employ one or more of the following tips into your life, and spend your tax refund more wisely this year:

1. Pay off a credit card. First and foremost, apply the biggest chunk of your tax refund toward the credit card debt that is racking up the highest interest rate.

2. Open a savings account. Many people feel that getting a tax refund from the government is just like having a savings plan. Keep in mind that tax refunds are not gaining you any interest. Putting at least a small portion of your refund into a savings account is a smart way to start planning for the unexpected.

3. Change your withholdings. Although this is not advice about how to spend your tax return, if you are barely making ends meet from paycheck to paycheck, it may be time to change your withholdings status so that your paychecks increase. By putting a little money from your paychecks into a savings account, you will be growing your money much faster than waiting for next year’s tax return.

4. Pay off your car. Eliminate a monthly car payment and put more money in your pocket by paying off your car early.

5. Make an IRA contribution. Not only is it tax-deductible, but an IRA contribution will make you eligible to claim tax credit next year. This is an extremely valuable way to spend some of your tax refund. Making a $2,000 IRA contribution can add up to $1,300 in refunds next year!

6. Save for your children’s education. Hopefully, if you have children, you are already planning for their future. If not, a 529 savings plan is a state-sponsored plan that helps parents saving for college. 529 plans allow your savings to compound and you will not be charged taxes when the money is withdrawn, as long as it is used for educational purposes.

7. Pay extra toward your mortgage principal. Did you know that one additional principal payment per year can nearly cut your mortgage repayment time in half?

8. Pay off student loans. Making a significant one-lump-sum payment to pay off your student loans can be an extremely freeing experience. Even if your return doesn’t cover your entire student loan balance, bringing it down to a reasonable balance can make a world of difference for your credit score.

9. Educate yourself. If your credit history is in the clear and you don’t owe a lot of money to different people, consider continuing your own education in order to increase your earning potential in the future.

10. Take a family vacation. As long as you have made several responsible choices regarding portions of your tax refund, you may be able to take some of the money and enjoy a family getaway.

We all know that money isn’t everything, but it does in many ways make the world go round. Responsibly attend to your most pressing financial obligations first, and then, if possible, give yourself and your family a reward for all of your hard-working efforts.

Photo courtesy of Alan Cleaver

Student Loans: Can They Ever be Discharged?

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The year 2012 was the year that the student loan bubble popped, for lack of a better description. Now, in 2013, 90+ day student loan delinquency rates are creeping higher than ever before. The amount of student loan debt owed in the United States is roughly $1 trillion.

The amount of delinquent loans continues to rise due to a variety of economic factors. Although several sources have indicated a slight improvement in the employment outlook for Americans, there are still millions who are underemployed or unemployed. The lackluster job market combined with regular layoffs, furloughs and budget cuts has left many consumers unable to repay their tuitions.

In an effort to take positive action regarding their employability, many Americans make the decision to attend more college in order to make a career change, with high hopes that a new career path will present better employment opportunities and higher pay. This cycle often repeats itself, with many labor markets showing consistent weakness and offering limited work options to Americans, even in their second or third careers. As their job options dwindle, mounting student loans loom threateningly behind them, making it impossible to get ahead financially.

All of these factors have led to an increase in loan deferments and write offs. Americans want to know: How can I reduce my student loan debt?

Unfortunately, student loans are not frequently forgiven in Chapter 7 bankruptcy cases. It may be possible to have part of your student loan forgiven in a Chapter 13 bankruptcy filing, but you would have to show undue hardship as well as make consistent, agreed-upon payments for the duration of your Chapter 13 term. At the end of your bankruptcy term, some or all of your student loans may be forgiven. A word to the wise, though: typically only federally funded student loans are eligible for forgiveness, as opposed to private education loans.

Certain professions will increase your chances of being granted loan forgiveness. Volunteering with the Peace Corps, enlisting in the military, teaching, practicing medicine or non-profit legal positions are all jobs that you may want to consider in order to have a portion of your federal student loans forgiven.

There are many programs you can participate in that can increase your chances of being eligible for loan forgiveness. Working with a qualified bankruptcy attorney like George Veitengruber will increase your chances of finding the appropriate forgiveness programs for your unique and individual situation.

If your student loans are not easily forgiven even after all avenues have been exhausted, there are other options that may help you find the debt relief that you need. Special debt relief services, debt consolidation, and debt settlement are all options that will help you reorganize your debts in order to make your payments more manageable and reasonable. To learn more about all of your student loan debt options, call an experienced bankruptcy attorney for a free consultation today.

Photo courtesy of Sean MacEntee

Bankruptcy: When to Stop Making Payments

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Here at Veitengruber Law, we have been asked many questions regarding bankruptcy, but far and away, one of the most common questions is, “Should I stop paying my bills?”

Believe it or not, the answer is not as simple as it may seem. It’s important that you know which bills you should do your best to stay on top of, and which debts you can safely stop making regular payments on.

Any real property that you hope to retain possession of after your bankruptcy case must receive your utmost attention. For example, if you plan to keep your vehicle and home, make it your priority to pay your mortgage (or rent) and your car payment in full as often as possible up to the date of your bankruptcy filing.

If you’re filing for a Chapter 7 bankruptcy, you can safely ease up on your payments regarding unsecured debts like past medical bills, credit card balances, and miscellaneous loans of a personal nature. An unsecured debt means that it is not connected to real property that you could lose in a foreclosure, should you stop making the payments.

The reason that you can safely stop making payments on unsecured debts is that these are the items that are most likely to be discharged or “released” through your bankruptcy case. As they will be forgiven anyway, to continue paying on them would be synonymous with flushing money down the toilet.

It is also important for our clients to know that, according to Bankruptcy Code, you may not make any large payments within 90 days of filing for bankruptcy. The reason for this rule is to prevent debtors from paying back money they may owe a family member or friend so that that money won’t be taken to pay other creditors. These payments are also called “preference payments,” because it will appear that you gave preferential treatment by paying some people and not others. The bankruptcy trustee will find out about any of these payments and will simply sue whomever you made payment to in order to get the money back. Avoid a lawsuit by abiding by the Bankruptcy Code Rules.

You will also want to avoid making anything that would be deemed a luxury purchase within three months of filing for bankruptcy. Doing so looks very bad to the Bankruptcy Court and the debts incurred will most likely not be discharged. Attempting to defraud the Bankruptcy Court will almost never be successful. In many cases, even big purchases that are made more than 90 days before you file for bankruptcy can be intensely scrutinized to make sure you originally had the intention of paying them back. Although the Bankruptcy Court will have to prove that you had fraudulent intent (for purchases made more than 90 days before filing), it’s still advisable to avoid making any extravagant purchases at a time like this.

As you prepare for your bankruptcy case, there are many rules to follow and hoops to jump through. Although it isn’t wise to stop paying for everything, you can forgo making payments on your unsecured debt because it will be wiped out when the bankruptcy case is discharged. Do make sure that your mortgage, rent, car payment and insurance policies are kept as current as possible so that you do not lose valuable property. For all of the details regarding filing for bankruptcy, and to get the best results possible, call George Veitengruber, Esq. today, and set up your free consultation.

 

Image credit: Flickr/photos/jakerust

Bankruptcy and Tax Requirements

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There are many questions and misconceptions surrounding all aspects of filing for bankruptcy. We aim to dispel bankruptcy myths and answer your questions so that you can make informed decisions and correctly follow bankruptcy procedures.

Tax season is upon us, and as usual at this time of year, Veitengruber Law wants to keep you abreast of the most up-to-date information and policies regarding bankruptcy and tax filing. Better to avoid a problem now than to have an unwelcome surprise, like an IRS tax penalty, later.

Upon filing for a Chapter 13 Bankruptcy, which allows debtors to keep possession of valuable, non-exempt property, all state and federal tax filings for the four years immediately prior to the bankruptcy filing are required. Accurate tax returns for all four years must be filed and presented to the appointed trustee before the initial Meeting of Creditors occurs, with the absolute deadline being 7 days after this meeting. This typically falls roughly 30 days following the official filing of the bankruptcy case.

Failure to have your tax returns completed in this manner is very dangerous when filing for bankruptcy, because the rules regarding same are quite strict, and failure to abide by them will risk having your case dismissed entirely.

We understand that our clients are often quite distressed financially, which frequently leads to falling behind on filing for taxes. This is precisely why we work in tandem with an accountant so that your late tax paperwork can be filed in an emergent matter, if need be.

Tax debt is a profoundly serious issue. Veitengruber Law provides clients with solutions that make sense and are affordable. You need not fear astronomical attorney’s fees on top of your already mounting debt. You will quickly understand that our retainer is only a small fraction of the money you will save with a smoothly executed bankruptcy case. We help you avoid IRS penalties and interest, as well as keep liens off your property. It is possible to have certain taxes discharged in bankruptcy, but in order to have this happen, we must work closely with you to ensure that you are 100% compliant with IRS regulations.

Any taxes that are not eligible for discharge can be placed in a Chapter 13 payment plan. This allows clients to repay remaining tax debts over a reasonable and attainable 3-5 years without accruing interest or additional penalties. Abiding by your payment plan will allow all remaining dischargeable debt to be released at the end of your payment period.

To learn more about the importance of timing your bankruptcy filing appropriately (especially during tax season), contact us today for a free consultation.

Photo courtesy of Chris Tolworthy