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Should I file BK or fight it out w/ OC/CA's? Did I commit fraud?


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Hi everyone! I've been searching and reviewing this site for weeks, and I've learned so much. Thank you!

A little background: I'm in Texas, and my husband an I are approx. $50k in debt. We had PERFECT credit up until last July. My husband recently got his real estate license, but also has a full time job, so the real estate thing will be part time. I am a stay at home mom to 2 young children, and I also watch 2 other children in my home for additional income (about $700 a month combined.) I have been doing this for 3 years, and have NOT reported my income to the IRS. (am I screwed already?) Basically, long story short, we've been supplementing our income with credit cards. The first half of 2006 I had to pay elec, groceries, clothing, gas, etc. with credit. Stupidly, I believed that once DH got his RE license and had a few closings, we would pay them off. Didn't happen. Here's the kicker: we had one BIG line of credit from MBNA (now Bank of America) for $20k. When I filled out the credit app I put that total household income was $70k, when it's really only $38k--according to our income tax returns. But at the time, I thought I would include FUTURE real estate income from closings, and it would not be an issue, since we would pay them back. The other credit accts we have are similar, to a degree. We obviously will pass the means test for Ch 13, as we are barely making it with credit cards. We have a mortgage & 2 owned cars. If we file for BK, will the BK attorney/court pull our checking acct statements? So I will need to prove where my income comes from? And will they check that against our income tax returns? Which in turn, they will see that we DID NOT make $70k, as stated on our MBNA/BoA credit app? Is it possible to go back and amend the past 3 yrs tax returns to include my income? What will happen, will I go to jail for credit fraud???? It REALLY was not my purpose, but the law may not care. Alternately, to avoid the BK/credit fraud route, do I just fight it out for YEARS with OC's/CA's? Since I'm in Texas, I know that they can't take my house, cars, or garnish wages, right? Any help in appreciated, I'm so sorry to be so lengthy....I'm just so stressed, my blood pressure in skyrocketing.

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Take deep breaths...you'll get through this...its not the end of the world.

Most important things first...you're not going to jail. Fraud? Ehhh...probably not. Almost everyone embellished income just a bit. And...many, many people (me included) base their spending habits on what should be instead of what is...

Anyway, I'd suggest you go talk to some BK lawyers and investigate your options. Obviously, you're carrying more debt than you can manage. Get some legal advise...

As far as the tax thing...it, too, is questionable. At worst, you had about $8400 a year in income you didn't report...but you also had expenses that you didn't claim. Again, ask your lawyer...if it were me, I'd be inclinded to call it a wash. (You should also check on any licensing requirements that claiming "day-care" income might bring up).

It does sound to me like a BK 13 might be in your best interest. It will put you in a financial straight jacket for 3 to 5 years, but, it will get you out of the hole you've dug.

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Willingtocope gave you great advice. Many on this site have felt the crushing feeling of debt burdens we can't handle. One way or another it will pass...and life will get better again!

I'd get with a few BK attorneys and feel out your options. You may be a candidate for BK and then you can move ahead and discharge much of this debt. If not, after a consultation or two, at least you'll know where you stand.

Regarding day care income, you likely have tons of writeoffs that offset your income anyway as Willing said. I would only bring it into the mix IF you decide to file BK. Your attorney should know where that money was coming from that probably showed up in bank statements. The worse case scenario is that you go back and amend your tax filings and pay some additional tax. But I can't see that happening.

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BK is a known and has a beginning and an end, and everyone understands it. Debt consolidation has too many loose ends. We're 3 years past BK and there is life after it. As part of your atonement, learn to live without credit. Pay cash or use a debit card. There's a good feeling there and you'll requalify for credit down the road. Shouldn't have been using credit cards for living expenses, but I'm telling you what you already know. Good luck, hon.

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