Archive for March, 2011

WARNING

Tax refunds are pledged to the Chapter 13 Plan in all orders confirming plans, and you must give your federal and state tax returns to the Chapter 13 Trustee each and every year you are in Chapter 13. So they know what you refund is and will demand it. Accordingly, it is not wise to over-withhold from your payroll during your Chapter 13 case. You should plan to owe the government slightly, but not too much, so that you can pay the small amount due at the same time you file your tax return. Don’t learn this the hard way. Discuss with your accountant the proper number of allowances to claim. Then make the necessary changes in your payroll department to the number of the allowances you claim as deductions.

I have lots of clients who only owe credit card debt to the big banks and pay them for years, and when it snowballs beyond their ability to pay from current earnings, they dip into their savings and retirement instead of even considering bankruptcy. They do so mainly to avoid feelings of guilt. So they pay Chase, Citibank, Bank of America, American Express instead of saving for their retirement or their childrens’ college fund, even depleting those resources already saved. It’s nothing short of a disaster. When I meet with them I truly wish I could time travel backward to make them avoid these mistakes.

No, your banker’s children will no go hungry if you default on your credit card debt and file bankruptcy. Have you noticed how in the past few years after we’ve bailed out the banks that bonuses for bankers are back in the stratosphere? Yet at the same time governors of many states are attempting to balance the budget deficits partly caused by the banker driven financial catastrophe on the backs of public sector workers, including teachers.

There is something perverse in the way our society favors the financial over the real work that needs to be done. We now have something like 20% of our GDP coming from the financial sector which is supposed to service the rest of the economy, not supplant it. Think of the game of Monopoly. The bank is only suppose to serve the players as they buy utilities, railroads and develop the neighborhoods. The player who takes on the banking role is merely counting out the phony money and doesn’t take exorbitant fees or make its own investments as the banker. It used to real banks were boring institutions that made safe but reliable profits. Now they’ve entered this casino phase which has only been mildly tempered by the new financial laws passed in 2010.

Yet somehow bankers have managed to keep their lofty pay and teachers and union workers are getting the squeeze. Folks, we need to use the laws to the extent we can to get our economy back in balance to reward the folks who actually do things that make us globally competitive. If you need to deleverage LeverLaw is here to help, using our laws to the best possible effect for your new financial beginning.