Bankruptcy

Not long ago, we shared the experiences of several Americans who had climbed their way out of deep debts. Their tales touched a nerve with readers who shared their own harrowing stories of their experiences with debt collectors. Some of these agents treated their debtors professionally; others, less so. Readers described dodging collection calls and hanging up on agents.

A few brave professionals also responded, complaining of the unfair mis-characterization of their jobs, and of them. What's it like to be on the other end of that phone, or on the other side of that doorway? Here's the consensus: Being a debt collector is a tough way to make a living.

"It was the worst, nastiest job I ever had. Every day, I would go to work stressed out," says Lisa Crowley, who handled receivables for a heavy-equipment company in Michigan in the late 1980s. Half of her job involved calling clients who hadn't settled their bills, from mom-and-pop businesses to the city of Detroit. Crowley stuck it out for a year before transferring to another department.

The tax code is over 18,000 pages long. And it's so complex that even Wall Street wizs like Treasury Secretary Tim Geithner make mistakes on their tax returns. WalletPop's experts are on hand to help answer your questions and correct mistakes before it's time to file.

Question:
I have been filing single with one dependent. I make less than $17,000 a year. My daughter is single, 19 years old and graduated high school May of 2009. She has worked and probably made less than $10,000 last year. I really need to claim her on my taxes if I can. She lived with me for over six months last year. I am getting conflicting advice. Some say that I can claim her all year and she can claim zero on her taxes. Some say that I can only claim her for six months, but I am not sure how that works -- how does she claim herself on her taxes?
--Elizabeth Weber, 43, Marana, AZ

Answer from Ralph Hymans, CPA based in Charleston, SC
With the facts presented, you should file your return as the head of household with one dependent. Your daughter must file her own return as a single because of her income in 2009, and she cannot take an individual deduction for herself.

You are allowed to do this because she is a dependent; your daughter is under the age of 19. Filing as head of household gives you your greatest tax benefit. The fact that your daughter lived with you for less than 12 months in 2009 is not relevant to the issue. The key issues are your daughter's status as single and her age of 19.

In the aftermath of Uno Chicago Grill's parent company filing for bankruptcy, its Manhattan location at South Street Seaport seemed far away from the bad news. Tables were nearly full when WalletPop popped in at lunchtime on Thursday. Many customers, including yours truly, indulged in the signature Chicago deep dish pizza.

"We're the most popular [Uno] in the country," Ben Niass, general manager of the South Street Seaport Uno, told WalletPop.

But somebody's not doing well somewhere, even if the company was offering its "no-biggie" line to other financial outlets.

With many economic experts predicting unemployment staying at 10% through this year and dropping down to about 8% for years to come, it's time many of us get our financial houses in order to better weather the stormy times ahead. Our experts are on hand to help, answering questions about back taxes, bankruptcy and the pros and cons of the ROTH conversion.

Question:
I am looking for the best way to begin resolving back taxes owed to the IRS. It has been over four years. Do I need to find an attorney?
-- Darlene McCreary, 41, Pensacola, FL

We're addicted to free information, and we only have ourselves to blame. When the Web emerged, newspapers and magazines saw it as a sort of add-on -- a guest bedroom in their fancy mansion, where they could give away their best work in the deluded (and rarely substantiated) knowledge that readers would be moved to pay for the real thing. Publishers failed to see the Web for what it became: the coming standard of information distribution.

But the rules of economics are hardier than the rules of marketing, and it turns out that we won't pay for what we can get for free. Every day, more publications are switching off the lights for the last time, and tragedies abound.

Travelers of the world, we may be witnessing a sort of airline hari kari. The union for cabin crews at British Airways, a carrier that is already tottering toward fiscal disaster, is pressing for 12 days of strikes. That would cripple the airline at a price of $50 million per day. BA, which began in 1939 as the British Overseas Airways Corporation (BOAC), may not make it. A British court blocked the strike for now, but it could be in the wings.

If it eventually happens, about one million passengers may not make it where they want to go due to canceled flights. British Airways said that it would refund or re-book stranded passengers on new flights aboard rival carriers once flights are canceled. This is the standard in most strike actions.

The Dow may be over 10,000, but unease about the economy persists as unemployment hovers over 10%. To help ease some of your concerns, WalletPop is ready to answer your personal finance questions. Here's this month's sample:

Question: My wife and I are in debt that I no longer can tolerate. I am retired and have burned through my 401(k) and my annuity to pay the $6,000 a month in mostly credit cards and home mortgages.

What are my options? I don't think we qualify for Chapter 7 bankruptcy. What about Chapter 13, and what does that entail?? Do I need an attorney? How do I keep creditors from calling me day and night?

Answer from James Caher, co-author of Personal Bankruptcy Laws for Dummies

"Bankruptcy is definitely something you should look into, since it looks like you're sinking fast and probably wasting your retirement paying debts that you might be able to eliminate in bankruptcy. But there are many, many things to consider.

"I suspect that you may very well qualify for Chapter 7 (the one that does not involve a repayment plan of any kind), since you are living on retirement income. But this depends on whether your income exceeds the median income for your state, which is probably around $4,300/month before taxes. Social Security income does not count. Even if your income exceeds the median, you may qualify for Chapter 7, but you would have to pass the Means Test.

Guess those mortgage bankers showed Congress who's the boss ... They are!

Only a day after the Mortgage Bankers Association fired off a stern letter of warning to Congressional leaders about attempts to change foreclosure bankruptcy laws to ease the plight of those facing foreclosure and help end the still threatening housing crisis, the House of 'Who The Heck Are We Representatives?" shot the proposal dead.

But make no mistake about it, the House may have been holding the gun, but the mortgage bankers provided the ammunition.

It's war!

The Mortgage Bankers Association has just fired off a letter to Congressional leaders opposing in no uncertain terms the expected introduction of a so-called mortgage bankruptcy "cram-down" amendment to the Wall Street Reform and Consumer Protection Act. The amendment will be put forth by Representative John Conyers, Democrat from Michigan.

Many economists believe -- as do I-- that the only real way to put the brakes on foreclosures is to allow bankruptcy judges, in certain cases, the flexibility to not only reduce mortgage interest payments but also the actual principal of the loan. They already can do this for second vacation-type homes (meaning, oddly, the rich can take advantage of this should they face foreclosure on their second property) but , under current law, cannot touch the principal on primary mortgages.

Real estate prices have bottomed out. Depending on the market-- Las Vegas, Arizona, Southern California -- house prices can be insanely low.

In Broward County, Fla., for example, homes that once cost more than $200,000 can be had for as little as $30,000, many as foreclosures. Now that the days of high-profit speculation in the real estate market have come to a close, real estate investors are turning to another program that provides a more modest, but still reliable, return.

The Section 8 Rental Voucher Program is a federal endeavor that pays the rent of qualified low-income renters. The homes they live in are privately owned by everyday people, who receive monthly rent checks from the government on behalf of their low-income tenants. Considering rent is paid back at what amounts to something close to market rates, renting an inexpensive property to the Section 8 program can more than pay for itself.

WalletPop's Jason Cochran traveled to Broward County to meet with Suzanne Dunn, a real estate investor who has independently jumped on the Section 8 market. She gives us an overview of how it works for people who want to become landlords:

Americans are fat and are getting fatter. During the past 20 years there has been a dramatic increase in obesity in the United States. In 2008, only one state (Colorado) had a prevalence of obesity less than 20%. Thirty-two states had a prevalence equal to or greater than 25%; six of these states (Alabama, Mississippi, Oklahoma, South Carolina, Tennessee, and West Virginia ) had a prevalence of obesity equal to or greater than 30%.

This increase in girth is also fueling the increase in chronic diseases such as heart disease, several types of cancer and diabetes. According to a new study by researchers based at the University of Chicago, the number of people with diagnosed and undiagnosed diabetes will climb from almost 24 million this year to about 44 million in 2034. Over the same period, annual diabetes-related treatment costs are expected to increase from $113 billion to $336 billion in 2007 dollars. Medicare spending on diabetes is expected to jump from $45 billion to $171 billion and could exceed current projections for all Medicare costs.

On WalletPop's Big News Podcast, Jason Cochran and I chatted up Rick Harrison, owner of the Gold and Silver pawn shop in Las Vegas, Nevada and one of the stars of the History Channel's Pawn Stars. Rick told us how his store is doing in the deep recession, tips on how to pawn your stuff, and his hottest selling items. Apparently 2,300 year old coins are common -- who knew. As for celebs in his store? Well, he's seen his share of Super Bowl rings -- what stays in Vegas has to get paid for somehow.

Pawn Stars' new season begins tonight on the History Channel.

I'm one of those 30 million people without health insurance. I don't have it, my wife doesn't have it, my daughter doesn't have it.

The short version of the story goes like this. A couple of years ago, I received a note from my insurer that they were going to be tripling the monthly premium for my small business coverage. So I had no choice but to either go broke paying the new premium, or simply cancel the coverage. I canceled it.

In the meantime, I was hit by a car while cycling and fractured my T10 vertebra.

The Mortgage Bankers Association (MBA) reports that a record number of loans -- one in seven -- is delinquent, up from one in 10 a year ago.

Today's numbers also show that one in 22 families in the U.S. is in the process of losing their home, up from one in 34 a year ago. Based on these figures, we are now on track for 2.9 million foreclosure starts in this year alone.

The lenders' trade association is quick to blame this worsening trend on higher unemployment levels. But that ignores the fact that reckless lending precipitated the economic crisis and prolongs it each day with every new foreclosure, which forces down surrounding property values.