Self Employed real estate professional – 54 years old – making decent money even during the pandemic, but debt and tax issues straining emotions and marriage (30+ years and 4 kids).
My wife and I are Realtors and have been self-employed (mostly) since 2005.
We got behind on state and federal taxes and used credit during slow times.
We make about $110,000 per year, have an IRS lien for $15k (working with Optima Tax to try and reach some type of settlement – been with them about 2 years and all they’ve done so far is set up a $600 per month payment to the IRS – more financial strain).
We owe about $50k in credit card debt. $40k on vehicles. $190k on mtg.
We’ve never considered bankruptcy very seriously but wondering if we should. How would that affect taxes owed? If we file, would we lose all use of credit for several years?
What other options would you recommend?
Currently, we’re paying on time, except we did take Covid forbearance on several debts including mortgage ($80k in equity – one child still at home and we would like to sell in about 2 years or sooner to find something better for our 60’s, ie, master on the main level ) to try and pay down others (I guess robbing Peter to pay Paul you could say).
Your situation is tremendously stressful and I can’t imagine what you are going through.
While it feels like you are “making decent money” it has not always been sufficient and that has resulted in the problem debt. That debt is the result of not having enough income to meet those demands and instead have to push those off for another day.
I hope the company you are working with advised you that IRS debt can be eliminated in bankruptcy as long as the following conditions are met:
- You filed your returns for the debt you wish to discharge at least two years before filing bankruptcy.
- The IRS debt was originally due at least three years before you filed for bankruptcy.
- The taxes are for income and not payroll.
A good bankruptcy attorney can discuss your specific situation with you for free to give you information to help you make a good choice about how to proceed.
You can find a good local bankruptcy attorney and have a free discussion about what bankruptcy would mean for you. Bankruptcy is the fastest way to get a fresh start for the least amount of money.
I recently did a podcast that seems to be pretty close to your situation.
But is bankruptcy the only way out? No. There are other ways to deal with the current debt drag. Those options range from winning the lottery, doing nothing, or limping along.
Getting new credit after bankruptcy is not that hard. In fact, people are surprised that credit offers will start to appear in the mailbox right after the debt is discharged. And rebuilding credit after bankruptcy is stupid easy.
None of those is a factor for not filing bankruptcy. But what is a major concern would be to make sure that a bankruptcy filing would not ding your real estate license. I would check with your state licensing department and find out what the implications are to your respective licenses.
I would be very surprised to hear back that it would create a problem but it is absolutely a consideration to factually verify and not assume.
My primary concern is your retirement savings and your age. If you do not have a sufficient amount saved for retirement then I think the math makes the decision for you. The one factor here you can’t resolve is losing time.
A day delaying saving for retirement can’t be recaptured and given the uncertainty of Social Security being around when you need it, or to provide you with safe income, your retirement has to be your overriding concern right now.
It’s the biggest reason why I fear we need to resolve your problem today.
Another concern is what will happen to the people that do not have federally backed mortgages that have indicated they will tack the mortgage forbearance onto the back of the loan. It is not out of the question that private mortgage companies will request all of the delayed mortgage payments due.
Please let me know in the comments below what you decide to do.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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