I know they can garnish wages, but what about 1099 income?

[debtmonster]

I no longer have a day job, but I do side work and get paid via 1099 as an independent contractor. Has anyone heard about ever getting that kind of income garnished?

Let me tell you my recent story of two major disasters...

Last month I was on the hospital for having chest pains that would not go away. Everybody told me to go to the E.R. because it could be serious. The pains were non-stop for 4 days, but I did not have the symptoms that a person has with a typical heart attack, such as the pains shooting in the left arm, or the jaw, etc. So I went anyway as everyone recommended. I did not want to go because I do not have health insurance and cannot afford it. Anyway, what I thought was going to be a quick thing of them saying, "No, you don't have a heart attack." Instead, they kept me there for 3 days to run all kinds of tests, including a heart catherization.

They said there was no blockages. All they did was let me go and gave me a prescription for blood pressure medicine since my blood pressure was 161/96. Even with all that, I still had the chest pains for over a month and they would no go away.

Anyway, about 5 days ago I got the bill. The total bill came out to $43,300.00!!! They have a line item that says "Contractual Adj" and took off $11,700.

So now they sent me a bill for just over $31,500 that they want me to pay.

At the same time all of this stuff was happening with me, my wife's mother was also in the hospital. Initially they thought she had pneumonia because she had a heard time breathing and anti-biotics were not working. Her chest cavity had filled up with fluid and it turns out that she has advanced cancer spreading all over her heart and lungs. The tumors are causing a discharge of fluid. They have a tube put in her chest to drain the fluid. About 8+ liters of fluid have drained out of her chest so far. After my ordeal in the hospital, I went down to visit her and the doctor told me that she had about 3 days to live. That was just over 2weeks ago. As of today, she's still alive, but one of her lungs is all covered with tumors and I think she's only surviving on one lung.

Anyway... to add fuel to the fire, my wife, who worked at Macy's from October 2006 to November 2007, and then was re-hired from March 2008 to July 2008, had to leave to go see her mom in the hospital while she had the cancer. Macy's fired her for taking the time off work to be with her mom, which is illegal under the Family Medical Leave Act passed by Clinton.

See:
Family Medical Leave Act
Look at this question on that F.A.Q. link above:
Q: Do the 12 months of service with the employer have to be continuous or consecutive?
No. The 12 months do not have to be continuous or consecutive; all time worked for the employer is counted.

Anyway, now both me and her are now both unemployed. All I have is my side income for the 1099. But this income has swings of $2000 to $5200 per month.

The $31,000 hospital bill that came is the straw that's breaking the camel's back. I've been wanting to file Chapter 7, but in Florida the median income is $4200/mo. and we were making $5,000 to $7,000 between all 3 of our incomes. Now that we have one income, I want to file. But when it goes above $5,000, it re-starts the clock again for us having to wait the 6 months of showing under $4,200 in income.

Can anyone find out about this 1099 income that I get? Or do I have to volunteer it to screw myself?

If I gross $5,000 in a month and put away 15% for taxes, that leaves us a net of $4,250 to live on.

Between the cost of my business (which has about $500/mo. in expenses, that leaves us $3750), our cars, fuel, food, credit cards, mortgage, taxes, and all of the stuff all exceed this amount. And the $3750 is only when the $5,000 check comes in. Most of the time it's between $2,900 and $4,200 gross. I get paid once per month. The last check was $4900. We have about $300 left and this has to last another 20 more days. There's no way we can live on this. This is why we keep living on credit cards to break even and why we're in such a deep hole to begin with.

My wife is worried about us losing our furniture, surround sound, cars, etc. I am trying to be positive and tell her that it's no big deal and that we can buy it all again in the future... and this time FOR CASH and not credit. I've been fighting forever to go bankrupt and she doesn't want to go. This time, we're going to be defaulting on bills in the upcoming months whether she likes it or not.

I am guessing that we will be flushing over $140,000 to $180,000 in total debt including one of our cars. I'd want to re-affirm one car, the house and the furniture from Rooms to Go that she's complaining about. So our total will be $1700/mo. in debt payments if the Chapter 7 was to complete.

Right now my wife is 6 hours away from me staying with her mom helping her like a full-time nurse. Her mom was finally sent home to die, so I told her that it's best that she spend the remaining time with her before she passes as this time is most precious. Her mom cannot walk or do anything at all on her own. She's totally immobile from the disease.

Once again, can any creditor touch my 1099 income?

[AngelinaCatHub]

My wife is worried about us losing our furniture, surround sound, cars, etc. I am trying to be positive and tell her that it's no big deal and that we can buy it all again in the future... and this time FOR CASH and not credit. I've been fighting forever to go bankrupt and she doesn't want to go. This time, we're going to be defaulting on bills in the upcoming months whether she likes it or not.

[debtmonster]

Thanks so much for your thoughts.

Our house is small as it is. If we were to move to the city, the houses would only cost more, so we're stuck here. We're paying $821/mo. for our mortgage. To get that any cheaper, we would need to buy a house in the city and put $100,000+ down.

I would love to give back both cars, but that's not possible. We live 28-30 miles away from civilzation. I would give both back as long as we could keep one of them for 6 to 8 months without payments that way I could save cash to buy a used car.

I wish I could get an attorney to tell my wife the same things you tell us. She needs multiple opinions. I am the only one who takes the time to read this stuff. Her head is always in the clouds and she wants to ignore the problems as if they don't exist.

I was looking on Auto Trader and we could buy a nice, used 3 to 5 year old Mercedes Benz for less than the price of a brand new Hyundai Sonata.

Like you said... it's all just junk. I wish she would see it that way.

How can a company find out about your 1099 income? What database is available to a creditor to look up information on you based on that?

[AngelinaCatHub]

[HHM]

Sorry, I did not read your whole post, but to answer the basic question about garnishing 1099 income. The answer is yes, but it works differently than a wage garnishment.

Usually, a creditor cannot garnish 1099 on a continual basis like they do wages. Garnishment of 1099 income is like garnishing a bank account, its a one time deal. Thus, if a creditor issues a levy to the 1099 employer, the creditor is only entitled to that money that is due the debtor at that point in time (the date of the garnishment). However, here is the other "catch" to garnishing 1099 income, you probably do not get to take advantage of the wage exemption, which means the creditor gets the entire amount. Whether you can claim the "wage" exemption on 1099 income (essentially an account receivable) will depend on your states view of 1099 income.

[Tabbygirl]

HHM is correct; 1099 income is sort of a "luck of the draw"-type garnishment...except with the IRS: They can and DO levy/garnish 1099 income, especially with self employed people...but if the entity paying the 1099 income turns out to owe YOU something at the time of the garnishment, then yes, they could end up having to send the funds. (this used to be something I dealt with on a daily basis through work....)

I don't know about Florida; in Texas, creditors can't garnish wages (except for the IRS).

[debtmonster]

But how can they locate the source of my income? Where is the database that supplies this information?

I already did the low energy thing for the light bulbs. I replaced 50+ bulbs in our entire house (inside and out) to 15 and 20 watt bulbs. Our electric bill ranges from $80 to $140/mo. all year round. We have just over 1500 sq. ft. under air. Temperature ranges from 18F to 105F degrees where I live.

This is the kind of Benz I had in mind...

CLS 550. A car like that is usually very, very expensive new.

I tried checking local restaurants for used cooking oil and most people here use shortening. Diesel cars are very hard to find and very expensive due to all of the people making grease cars out of them.

So am I correct about waiting 6+ months to show a track record of making under the median income, right? I can't file now until that time frame has been built historically. In order for me to get another good paying job, we would have to sell our house and move to the city. The builder who built our house has been trying to sell 3 others just like it for over 2 years with no success, so fat chance in that happening. My wife loves our house as it's our very first one. Every house that is just as nice costs 3 to 4 times the price of what we paid for this one, so moving is out of the question, even in this horrible real estate market. The 6-figure income earners are killing it for all of us by driving the prices high.

Anyway, please tell me in detail how a creditor is able to track the source of one's 1099 income.

[debtmonster]

I don't know about Florida; in Texas, creditors can't garnish wages (except for the IRS).

We're in Florida... but it sounds like we need to move to Texas!

As of now, I don't have problems with the IRS, but if I continue to keep going and not paying quarterly.. we will. When I have to set aside $500-750 per month to put towards paying the IRS, my wife says, "No! You have to pay our bills!" In reality, it's now July and we have not put away a dime for the taxes all year. We've been paying our creditors instead out of the "gross" income.

She doesn't understand how bad the consequences are for not paying the IRS.

[lrprn]

You have an answer regarding your 1099 income - now let's tackle the other health-related comments you posted.

So now they sent me a bill for just over $31,500 that they want me to pay.

Talk to the hospital and doctors. Explain your situation. Often they will be willing to work up a payment plan for you. The other option is to be sure that you have received ALL the bills, then file Ch 7 listing the hospital and doctors as creditors. These bills are not secured, so they can be wiped out in full.

Macy's fired her for taking the time off work to be with her mom, which is illegal under the Family Medical Leave Act passed by Clinton.

Did your wife apply for a family leave to care for her mom by filing FMLA forms through Macy's HR dept? If she didn't, then there's no protection under that law.

But when it goes above $5,000, it re-starts the clock again for us having to wait the 6 months of showing under $4,200 in income.

You aren't thinking this out the right way. What matters is looking back six full calendar months from the date of filing. In other words, if you file Aug 1 the six months are Feb 1 through July 31. If you file Aug 30, the six months are still Feb 1 through July 31.

If at any point your combined income looking back six calendar months drops below the median, you can file. With both of you now unemployed, that is going to happen before six months passes.

And it's possible even with incomes showing above the median to file Ch 7 - it all depends on your secured debt load.

We're here to help you any way we can, but we don't know your local bk court customs and we don't know all the details about your financial situation.

You need to talk to 3-4 experienced bankruptcy lawyers in your area. There's no obligation and usually these initial consultations are free. You'll learn a lot about what's going to be possible in your situation and what isn't.

Go find out from experienced professionals who know how things will go in your local court because they know the customs and what the trustees are looking for. Start making calls and set up those appointments! Come back and let us know what you find out, ok?

[Tabbygirl]

But how can they locate the source of my income? Where is the database that supplies this information?

I am guessing that with a creditor, they'd pull a credit report to see who you listed as an employer on an application or who you reported you worked for, back in the past when you weren't worried about being called or garnished. With the IRS, the "list" is generated when the employers or businesses send in their 1099s and W-2s at the end of the year, listing everything/everyone and how much they were paid.

[debtmonster]

That's what I am going to have to do is talk to many lawyers and see what they say.

The thing is, that sometimes this 1099 income can jump above and beyond $5,000. While that is neat to happen, it's not good to happen when you're trying to qualify for a Chapter 7. Since this is self-employment income, I have a lot of business expenses. I pay a lot of money for advertising and mail out literature to a lot of people every month.

The only way we can afford to make a payment plan with the hospital at this point is simply by not paying another creditor. If we pay all of the minimums that we're supposed to, we don't have money for food or gas to last until the next pay period. I get paid once per month on the 1099 income. When the money runs out, we have to survive on the gas cards. How can I call a bunch of creditors and say, "Do you mind if I don't pay you for a while since I have to start paying the hospital?" How can we get other creditors agree that we don't pay them in favor of another creditor? That would be a hoot, wouldn't it?

I had a tire go bad on my car 2 weeks ago and the other 3 were bald, so I charged $450 on Sam's Club credit. I now owe Sam's Club like $1200 or so.

On one car we owe $14,000 and the other one the payoff is $37,000. To let both cars go we slam $51,000 in debt in the bankruptcy.

My wife keeps telling me, "If give back both cars, then what will we drive?" I told her a "$1,000 beater." Then she argues with me about how we tried that before and every used car we buy we have to spend thousands in repairs. Plus since we live out the middle of nowhere, if the car breaks down, there's no cellphone coverage. So if you break down, you're up the creek with no paddle.

I would need multiple lawyers that we consult all demand that we give back both cars. As long as she hears this from multiple sources, it will eventually convince her to give both of them back.

I was looking on Craigslist and Auto Trader and as long as you have $10,000 to $15,000 cash, there's a TON of beautiful cars on there.

[debtmonster]

I am guessing that with a creditor, they'd pull a credit report to see who you listed as an employer on an application or who you reported you worked for, back in the past when you weren't worried about being called or garnished. With the IRS, the "list" is generated when the employers or businesses send in their 1099s and W-2s at the end of the year, listing everything/everyone and how much they were paid.

Let's say I was a creditor and wanted to know, what phone # could I call to get somebody to give me this information?

So it sounds like I need to go apply for credit and put bogus employment that way they update the credit report with another company to send these companies on a wild goose chase.

[Tabbygirl]

Let's say I was a creditor and wanted to know, what phone # could I call to get somebody to give me this information?

So it sounds like I need to go apply for credit and put bogus employment that way they update the credit report with another company to send these companies on a wild goose chase.

The creditor could just pull a credit report--like, I know Citibank does "monitoring" credit pulls periodically. There is a specific name for this which escapes me, but it's a soft inquiry that the creditors can do to "protect" their interest and make sure we're being good little debtors. (yes, it's legal--that's how they can find out if you're defaulting on other debts)

I wouldn't go out and add bogus employers, though...that might not be a good idea!!!! (but I wouldn't add anything either to update your reports)

[ThreadsSnapping]

This is the kind of Benz I had in mind...

CLS 550. A car like that is usually very, very expensive new.

I'm just wondering why you feel you need a Mercedes when you are considering filing a ch. 7 bk? Why can't you get a 3-5 year old American car? YOu don't really need to drive a $1000 beater but you can easily get a good, reliable car for $3-5K. Probably, a heck of a lot cheaper to insure also.

Also, think of it from a trustees point of view when you show up at your 341 and you bought a Mercedes a few months ago? Just seems a little over the top no matter how great a deal you get.

TS

[debtmonster]

I'm just wondering why you feel you need a Mercedes when you are considering filing a ch. 7 bk? Why can't you get a 3-5 year old American car? YOu don't really need to drive a $1000 beater but you can easily get a good, reliable car for $3-5K. Probably, a heck of a lot cheaper to insure also.
TS

I would not buy a car like that until long after after everything was discharged and then I'd save up cash being that I don't have multiple thousands of dollars going out the door every month. The current car I have now is a piece of crap Saturn and I paid thousands more for this car than that nice Benz.

I'm done with American cars. I don't ever want to buy another one again. I only want to buy German-made cars from this point on. I've owned a lot of American cars over the past 20 years and they are all low in quality compared to the German cars. The safety, quality and handling of an American car can't hold a candle to a BMW, Audi or Mercedes.

Anyway... instead of going out and spending $13-15k on a new Hyundai, Saturn, Honda, etc... I could simply buy a "temporary" crappy car and drive it for a year while saving for the Benz.

My wife also wants to go to college. She's already seen what happens when you don't have a degree. She's been at the bottom making $6-8/hr. and it's too hard to live on that in today's new economy without going into debt the whole time.

I want to do what many people here have done... flush it all and then learn to live WITHOUT credit the rest of my life. Instead of paying car payments + interest... I want to buy a nice car for cash and invest. We have no IRA, Mutual Funds or any type of savings whatsoever right now. I was hoping to put away $500+ per month into our future for retirement.