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this is extreme, but perhaps he could relocate to, say, Florida. I believe in Florida, a person's principal residence can't be confiscated to pay debts during a bankruptcy.
I doubt it's viable at his age and income level to relocate to Florida. That's for the financially distressed high rollers like O. J. Simpson and F. Lee Bailey.
It is like this for any business. I had write-offs when a customer refused to pay for the manufactured goods I shipped them. There are things we do to try to mitigate it but I know that if you are faced with an uncollectible debt. It is in schedule C of the 1040 tax form.
Banks are different, they are required to have already set aside money for future bad debts. When a bad debt is incurred it's a balance sheet item, not income statement and therefore not direct to income. Feel free to review when you have a chance, this will provide an understanding of how banks write-off bad debts.
Thank you, everyone who responded.
Chapter 7 will not work for him. In his state, he would lose his home, which is worth more than the debt bankruptcy would discharge. The county credit counseling service had said they would get back to him, but they have not done so.
He really needs to reach out to them again.
I would like to get him on some kind of repayment plan even though he does not have a lot to work with.
It is regrettable that so much credit was extended to him, as he is retired. He does understand that he is solely responsible for this mess.
I will continue to work with him to get his house in shape.
Spent a few hours working there today. Wish he lived closer!
I'm determined to help him resolve this.
I understand that the house is in bad shape, but wouldn't selling it for what he can get, paying the debts off, cutting up the CCs, and just moving into a cheap rental solve the problem? If his house, at present, is worth more than the debts, what's the problem? Sell it and get it over with, as long as the mortgage isn't upside down. Please don't say he doesn't want to sell. If he chooses his wants over paying what he owes, he will just go down in a financial death spiral. Tell him to buck up and sell it for what he can get and cut his losses now.
Banks are different, they are required to have already set aside money for future bad debts. When a bad debt is incurred it's a balance sheet item, not income statement and therefore not direct to income. Feel free to review when you have a chance, this will provide an understanding of how banks write-off bad debts.
I will not argue with you. I know that banks file tax returns. Yes they have reserves for losses like that. It is just the way of business. Banks and the like are a business.
You have received a great deal of information about and opinions on what to do for your brother.
I still think you need the advice of a bankruptcy attorney. I want to make sure that your brother's house is not sold as creditor debt. He may be able to protect the house until he dies. Then the estate would be called insolvent, the house sold to pay off any debt, the attorney and his funeral. Not in that order...the order is attorney fees, funeral and then debt.
I do not think a social worker is what you need now. You need someone that really knows the system and how to work it in your favor. Do not and I mean! Do not make a deal with the debtors without consulting an attorney. You will get a much better deal if the attorney negotiates the deal. Trust me of this one. One letter with an attorney's letter head can really sweeten the deal in your favor.
CCC do not want to have an attorney in the mix. They know you have on your side someone that will cost them time, money and energy on useless debt repayment. They know your brother isn't going to pay them and they have already been paid in interest upon interest. It will be the best money paid to secure the best deal you can get. I will bet you that what you pay for an attorney will be wiped away from the deal he/she makes. Take your choice. Pay an attorney or pay more in the debt your brother has.
Trust me.
Last edited by toosie; 11-13-2016 at 12:29 PM..
Reason: edited out manual signature
What you're referring to is a 1099C. Once the creditor issues one, they can't sell the debt to a debt buyer, which is the usual practice in the industry. 1099C's are often used as a threat by debt collectors. In reality they aren't issued in great numbers, unless there's an underlying reason that satisfies a particular creditor's business model.
Portfolio Recovery, a junk debt buyer, is notorious for issuing these on unvalidated and out-of-statute debts. The problem is---they just don't count on having them disputed, then defaulting when they can't (or won't) substantiate their claims.
Portfolio Recovery, a junk debt buyer, is notorious for issuing these on unvalidated and out-of-statute debts. The problem is---they just don't count on having them disputed, then defaulting when they can't (or won't) substantiate their claims.
As I stated, there's some creditors/debt buyers who incorporate them into their collection strategy. The usual defense strategy is to demonstrate insolvency to the IRS. How easy or difficult that is, I have no idea.
1099C's are controversial within the collection industry. Mainly because the court rulings are all over the place depending on venue. The risk is to the collector, is the debt will be rendered useless for resale if a 1099C has been issued. Those familiar with the industry, know that they trade these debts among themselves as a source of revenue.
I've never understood how a collector benefits from issuing a 1099C. It doesn't get them paid.
Those of us who borrow or charge items, WE pay for these deadbeats in the form of higher interest rates, fees. No free lunch.
Exactly. The high default rates on credit cards are a big reason why interest rates on them are so high. A 5% of 6% default rate wipes out a lot more profit than people realize. Kind of in the same way that tenants from hell can wipe out months or years of a landlord's profit.
This looks like the plan. But for the life of me I will never understand how anyone can keep their possessions when they file for bankruptcy, that hardly sounds fair to the creditors.
... Former 'DW' and I filed for Chapter 7, back in the mid-90's ... We had to prove that certain "assets" (from a list given to us) were no longer owned, or in our possession. I can remember giving-away Family heirlooms to my grown kids, because of that.
We were allowed to keep bedroom furniture that we used, and some living room furniture that we used, too. But, for the heirloom items, we had to quietly get rid of them, or surrender them, to satisfy the bankruptcy counselor.
Those were some really-tough times!
... Former 'DW' and I filed for Chapter 7, back in the mid-90's ... We had to prove that certain "assets" (from a list given to us) were no longer owned, or in our possession. I can remember giving-away Family heirlooms to my grown kids, because of that. We were allowed to keep bedroom furniture that we used, and some living room furniture that we used, too. But, for the heirloom items, we had to quietly get rid of them, or surrender them, to satisfy the bankruptcy counselor.
Those were some really-tough times!
I don't know why they don't grab the used furniture. Sure it isn't worth much but I don't think the bankrupt person should keep it.
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