7 or 13?

[Andyman]

Unfortunately, once you are 30 - 60 days late, it seems both Chase and BOA will raise your interest. It is probably just some computer program that creates the new interest rate. these companies deal with millions of billings each month, so you are just another account number.

You need a plan. Where do you see yourself in 5-7 years? If being debt free is your goal, then why not look into a BK 7?

My take is that you have a few months before the creditors move toward any "legal" action. With only two cards, you will receive nowhere near the calls that others on this board have had to deal with. BK 7 will give you a fresh start, but I'm not sure that this will clean up your financial situation unless you are willing to live within your means after discharge.

Check out some initial consultations with BK atorneys to get a feel for you particular situation. You should also keep in mind that BK attorneys business is just that, bankruptcy. Reflect on any information you gather and search this board for additional information.

I'm gonna be 58 next month. I want to retire at 62. I want to be debt free at that time. My biz is the only thing I have that I might be able to sell to give me some retirement money along with about $800/month from Social Security. The CC will eat me up forever. I was basically debtr free a few years ago but my divorce cost me about half of what I owe on my CC and a couple of huge vet bills pretty much added everything else up. I gross about $7K a month and it takes about $4-5K of supplies from vendors to make that. Then deduct other basic expenses and I'm broke pretty quick. Some months are better but the past two years my gross income has continued to go down. My biz is related to the housing and hobby market and we all know where the housing market is. Eliminting the two CC and freeing up $400 - $500 a month would really make things easier.

[Never_Again]

If you are the sole owner (note the wording carefully... not only sole proprietor, but also the only owner of an LLC or Corporation), I don't believe that you will be able to keep your business out of a bankruptcy. As the sole owner, your busienss assets will be considered personal assets, and the trustee will probably not view a business that nets you $1200 per month a viable business that is able to support you long term.

I assume that this is your business income "after taxes" (which really means after all of your expenses are taken out.)

It is not worth a Chapter Seven or Chapter 13 over $28K in debt! You will pay $1500 to $2000 in fees. And your income is still not going to support you, so you haven't fixed anything.

Bankruptcy is like a giant re-set button (or a self destruct button!) Make sure that you only push it when absolutely necessary! I think that you have some other ways out, and many are way too quick to recommend bankruptcy.

[fltoo]

Ok, so you have 2000. income after the vendors are paid. For tax purposes, you need to expense out rent, utilites, supplies, maintenance, etc.

So, again, why are you paying 1300. quarterly in taxes?? You don't have the income at the end of the year in your Adjusted Gross Income to pay that much in taxes. Who does your tax returns? You should also be getting the earned income credit.

Self employment taxes of 7.5% is all you should be paying. You should be paying no income tax at all. Pay the credit cards off with that money.

[Andyman]

Ok, so you have 2000. income after the vendors are paid. For tax purposes, you need to expense out rent, utilites, supplies, maintenance, etc.

So, again, why are you paying 1300. quarterly in taxes?? You don't have the income at the end of the year in your Adjusted Gross Income to pay that much in taxes. Who does your tax returns? You should also be getting the earned income credit.

Self employment taxes of 7.5% is all you should be paying. You should be paying no income tax at all. Pay the credit cards off with that money.

Ok, I just looked at my 07 taxes and my adjusted gross income was $20K. After deductions my taxable income was $11K. Not a lot when you divide it by 12 months.

[fltoo]

Ok, so you should be paying about 900 bucks in taxes plus getting the earned income credit.

Do you get a tax refund?

If so, stop paying so much and there is your extra money to pay the cc and then your credit will not be shot.

[Andyman]

Ok, so you should be paying about 900 bucks in taxes plus getting the earned income credit.

Do you get a tax refund?

If so, stop paying so much and there is your extra money to pay the cc and then your credit will not be shot.

On last years taxes, I'm paying about $1K per quarter to the feds and about $200 to the state. No, I did not get a refund. I can't really figure out the income tax forms so can't really give any more knowledgable info. Single and self employed I'm in the 35% tax bracket. Of course the quarterlies also include not only tax but social security and I think there was something else.

[fltoo]

Something not right. As it stands you are paying way more than 35% and you should not even be paying 35%.

Are you doing your own returns?

Also, the taxes include social security? That is what the 7.5% self employed tax is for.

You have some kind of tax problem that once alleviated, could give you some extra money.

[woeisme]

Self employed people paysdouble in Social Security and Medicare withholdings (their own and their employers share). I make about $57,000 a year and if I doubled my SS & Medicare amounts I'd be paying 17% for just those, not including income tax. If the 17% number is close to right, on the 20K the OP makes this would be $3400, add in some state tax and federal income tax, it could be over 1K per quarter. We don't think about how much tax we pay when it's gone before we ever see a paycheck, but for those that are self-employed, they see the huge chunk come out. My sister has a part-time job where she's self-employed, and has to hold back approximately half of her pre-tax income to cover the SS, Medicare, and regular taxes. She's in a higher tax bracket than the OP, but anyone paying over 50% of their income in taxes seems crazy.

[fltoo]

Self employeed do not have "employers". They do not pay double for themselves. It didn't seem like Andy has any employees, I might be wrong, but he should only be paying approximatley 7.5% for himself. If he does have an employee, he is only paying withholding tax on that salary alone, not on his total income.

You are talking about a self employeed person with an employee. The owner pays the 7.5 for the employee and then his 7.5 share. It is actually a tiny bit more than 7.5, but it is not double since he IS the employer.

[WhatMoney]

Self employed must pay the full 15.3% SE tax. You pay this 15.3% SE tax even if you do not pay income tax. Only if you are NOT self-employed do you pay 1/2 of the 15.3%, while your employer pays the other half of your SE tax.

SE tax rate. The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Maximum earnings subject to SE tax. Only the first $102,000 of your combined wages, tips, and net earnings in 2008 is subject to any combination of the 12.4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax.

All your combined wages, tips, and net earnings in 2008 are subject to any combination of the 2.9% Medicare part of SE tax

Self-employment tax deduction. You can deduct half of your SE tax in figuring your adjusted gross income. This deduction only affects your income tax. It does not affect either your net earnings from self-employment or your SE tax.

[woeisme]

Self employeed do not have "employers". They do not pay double for themselves. It didn't seem like Andy has any employees, I might be wrong, but he should only be paying approximatley 7.5% for himself. If he does have an employee, he is only paying withholding tax on that salary alone, not on his total income.

You are talking about a self employeed person with an employee. The owner pays the 7.5 for the employee and then his 7.5 share. It is actually a tiny bit more than 7.5, but it is not double since he IS the employer.

Yes, self employed people DO pay double, they pay their own share and the "employers" share, since they are, in fact, their own employer. If yuo work for a business you never notice that the company pays half the SS and Medicare tax for you, when you are self-employed, it's a big shocker that you have to pay twice as much.

[fltoo]

Self employed must pay the full 15.3% SE tax. You pay this 15.3% SE tax even if you do not pay income tax. Only if you are NOT self-employed do you pay 1/2 of the 15.3%, while your employer pays the other half of your SE tax.

SE tax rate. The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Maximum earnings subject to SE tax. Only the first $102,000 of your combined wages, tips, and net earnings in 2008 is subject to any combination of the 12.4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax.

All your combined wages, tips, and net earnings in 2008 are subject to any combination of the 2.9% Medicare part of SE tax

Self-employment tax deduction. You can deduct half of your SE tax in figuring your adjusted gross income. This deduction only affects your income tax. It does not affect either your net earnings from self-employment or your SE tax.

Exactly, and we are talking about his taxable income on AGI, he gets to deduct half, so he should just be figuring on half of the 15%

Woe, a self employeed person does not pay double. This half gets a deduction on taxes, so it is moot. (Changed this, was getting wordy)

But, back to the OP, he is paying too much in taxes. Looks like almost 50%.

[Andyman]

Exactly, and we are talking about his taxable income on AGI, he gets to deduct half, so he should just be figuring on half of the 15%

Woe, an self employeed person does not pay double. Maybe it is semantics. He pays the employer share(himself) and then for the employee, just like a big company.

But, back to the OP, he is paying too much in taxes. Looks like almost 50%.

Going back over my 07 tax return, my adjusted gross income was $20,362. Standard deduction was $5350. My quarterly taxes are based on my 06 return which I had about 30% higher income. don't know if this means anything or not. The fact remains, I can't pay my CC payments...not enough money coming in. I can pay my rent, buy food, a few clothes now and then, pay my truck payment and insurance and a doctor bill once in a great while if I have to go.

[fltoo]

The worst part of this situation Andy, is having no health insurance. It didn't bother me before. I am about the same age as you, and being self employeed at our age with no decent health coverage is scary.

Best of luck in whatever you decide to do.

[Andyman]

The worst part of this situation Andy, is having no health insurance. It didn't bother me before. I am about the same age as you, and being self employeed at our age with no decent health coverage is scary.

Best of luck in whatever you decide to do.

Yes...I saw the doctor last month about a spot of psorisis and for $125 and 2 minutes of his time he said "just keep using the cream".

On another note...my worst fear is that I could be forced into selling off my business and then what? The good thing is that I don't own any of my vendors anything and keep current on all of my net 30 accounts with them. I've never used the CC for business but I don't know if that has a bearing on anything. Thanks for all the replies!