Finance Questions

Questions about the stock market and Finance.

Yes, any gain must be reported and will be taxed. Losses, while not required to be reported, should also be reported. Not reporting losses may raise a red flag with the IRS, making individuals more prone to a tax audit. You are also able to deduct up to $3,000 off of your income for losses you have suffered.

If you are trading through a large brokerage firm, they will provide you with the forms necessary to complete your tax documents. If you are trading through a small brokerage firm or through another source, it may be necessary to refer back to your sell slips. Sell slips will provide you with the exact dollar amount gained or lost. You can also contact the IRS or go to IRS website. See also, Resources.

There are two different ways in which capital gains will be taxed: short term gain and long term gain. Short term gain refers to stocks held for less than one year. Long term gain refers to stocks held for more than 1 year, and less than 5 years. A short term stock gain will be taxed at the individuals ordinary income tax rate. A long term stock gain has adjusted tax levels based on the individuals tax rate, with a cap at 20%.

If you forget to report a capital gain you should file an amended return with the IRS. If you do not report a capital gain, you are setting yourself up to be charged the normal tax rate of the capital gain, plus interest and penalty fees.

Questions about credit cards

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 has increased consumer rights regarding credit cards.

During the first year, credit card rates are unable to be changed. After the first year, credit companies are allowed to raise interest rates. Any change in rate must be presented to the customer 45 days prior to the new rate going into effect.

Consumers are given the right to opt-out of credit cards when faced with a changing rate. In most cases, opting out will require canceling your account. All the steps necessary to opt-out will be included with the form disclosing the changed rate.

Canceling a credit account will void your credit card, making it unusable. You will be required to make all payments prior to canceling the account. If you are canceling your account in accordance with opting out of newly suggested terms, you are not required to pay your credits in full. You will be given the option to pay the credits over a maximum of 5 years or pay the minimum payment each month.

Bankruptcy is a process which will remove certain debt. This can be done through filing either a Chapter 7 or Chapter 13 in the appropiate federal bankruptcy court. If a Chapter 7 bankruptcy trusteee approves your bankruptcy then most of your unsecured debt such as credit card debt will be discharged. A Chapter 13 bankruptcy sets up a partial repayment plan for certain credit accounts. With a Chapter 13 bankruptcy, after the repayment period has passed, the remaining debts will be discharged. It is important to understand the full credit ramifications that come along with a bankruptcy before filing for either a Chapter 7 or Chapter 13. Speak with an attorney prior to committing to either one of these options.

Questions about Student Loans / Debt

Student loans fall into one of three categories: Federal unsubsidized, federal subsidized, and private. Federal unsubsidized loans will begin to incur interest upon the delivery of funds. Each month the interest will add to the debt owed. Federally subsidized loans will not begin to incur interest while the student is still in school. Upon graduating or falling below 6-semester credits, a 6-month timer will begin. At the end of this 6 month grace period, the loan will begin to incur interest. Private loans come with varying interest rates and policies. Each private loan will be different and should be read carefully to understand the terms provided. (NCLC)

When it is time to start paying back student loans, your loan provider will offer you a number of repayment plans. Your payment first covers late charges/collection costs, then goes towards accrued interest. After both of these components are clear, your payment will go towards lowering the outstanding principal. (SLBA)

Certain government programs allow you to postpone your student loan payments. During this period interest will be charged; however, late fees will be waived. Deferments are given to those suffering economic hardship, serving in the military, or unemployed workers. A deferment will incur interest for both un-subsidized and private loans. Under a period of deferment, subsidized loans will not gain any more interest. (SLBA)

It is possible, but more challenging then removing other forms of debt. You must be able to show that these payments create an “undue hardship on you and your defendants.” Bankruptcy courts will often use the Brunner test to define undue hardship. The Brunner test looks at

  1.  whether you can afford a minimal standard of living with the loan payments;
  2. additional circumstances are in place which may make it more difficult to make payments; and lastly
  3. whether the debtor has shown good faith in trying to make repayments in the past. (SLBA)

If you miss 9 months of payments you will default on your loan. At the time of default, the remainder of the loan becomes due. Being unable to pay the default loan amount will not eliminate this debt. Defaulting on a loan will prevent you from acquiring new loans/grants, and allows the government to garnish your wages, and take a portion of your social security payments (until the loan amount is repaid).

A debt collector may be assigned to you following delinquency or default. It is important to remember your rights when dealing with a debt collector. Debt collectors are restricted from contacting you before 8 am and after 9 pm. You also have the right to prevent debt collectors from contacting you at work. It is recommended that you don’t completely ignore a debt collector, as you may be able to resolve matters through an initial conversation. (FTC)

There are two options to stop debt collectors from contacting you. The first option is to hire an attorney to represent you. If you have an attorney, the debt collector will be required to contact your attorney rather than you. The second option is to contact the debt collector in writing with a request to cease communications. While either of these options will prevent a debt collector from contacting you, they do not remove the debt owed, and you may still be sued by the debt collector. (FTC)