The Dow is hovering in the 11,000s, and consumer confidence was up in March. Still, experts say the economy remains a mixed bag of good news, bad news. Daily bankruptcy filings in March, for example, totaled nearly 6,890, an 11.6% increase from February, according to Credit Slips. And who can forget the high unemployment rate?WalletPop experts respond to your burning questions about bankruptcy, inheritance and IRA conversions.
Question:
It will be five years in December that we filed for Chapter 13 bankruptcy from a lawsuit. When will our credit rating be cleaned out, so we can fill out Visa card applications without explaining that we did file for bankruptcy?
-- Kevin
Answer from Ann-Marie Murphy, co-creator of Quizzle.com, a website that helps you manage home, money, and credit issues:
The bankruptcy will drop off of your credit report 10 years from the date of the order for bankruptcy relief. In your case, it sounds like that will be in December 2015. However, just because the bankruptcy remains on your report doesn't mean it continues to affect your credit score the same way as it did when it first appeared on your report. If you practice responsible borrowing habits, the effect the bankruptcy has on your score will decrease over time.
Having a bankruptcy on your credit report doesn't necessarily disqualify you from getting new credit, like a Visa credit card. Qualifying for a credit card depends on whether you've reestablished good credit after your bankruptcy. Make sure to check your credit report to verify that accounts are listed as "discharged in bankruptcy" rather than open and overdue. If you have trouble qualifying for an unsecured credit card, consider opening a secured credit card to rebuild your credit. Finally, establish responsible borrowing habits, like paying your bill on time every month, using only a small amount of your available credit and only applying for credit you need.
Question:Having a bankruptcy on your credit report doesn't necessarily disqualify you from getting new credit, like a Visa credit card. Qualifying for a credit card depends on whether you've reestablished good credit after your bankruptcy. Make sure to check your credit report to verify that accounts are listed as "discharged in bankruptcy" rather than open and overdue. If you have trouble qualifying for an unsecured credit card, consider opening a secured credit card to rebuild your credit. Finally, establish responsible borrowing habits, like paying your bill on time every month, using only a small amount of your available credit and only applying for credit you need.
I have a question regarding mineral/oil rights. My husband inherited these rights in 2007. In 2008, the oil company re-leased these rights from us. Then in 2009, we sold the rights. We didn't pay anything (inherited), and we didn't own the property, just the rights. How do I determine cost for our taxes?
-- Debra
Answer from Barbara Weltman of The J.K Lasser Institute:
The basis of inherited property usually is the value of the property at the time of death ("cost" basis rules don't apply in the case of inherited property but the income tax form uses the word anyway). If the estate was required to file a federal and/or state estate tax return, the value of your property (the mineral rights) is listed on the form. You can ask the executor of the estate for this information. If you cannot find the information on the value of the mineral rights at the time of the person's death, you may have to report a zero basis, so that all of the proceeds you receive become taxable gain.
Question:
My accountant told me to convert my traditional IRA and SEP IRA into a Roth IRA by the end of this year. He says this would benefit my daughter. I thought by listing my daughter as a beneficiary, that would be enough. Why is he recommending this?
-- Dan
Answer from Gary S. Lesser, co-author of Quick Reference to Individual Retirement Accounts, 2010 edition:
The simple answer is to ask, why? For example, if distributions aren't ever needed (during owner's lifetime), a conversion would pass more benefit onto heirs, and likely create a larger estate (say at age 95). In an IRA, RMDs would be required to be withdrawn -- resulting in less benefit to heirs. Many other factors and assumptions need to be considered before jumping into a decision. Roth IRA conversions are neither good nor bad. But they can be good or bad.
-- Debra
Answer from Barbara Weltman of The J.K Lasser Institute:
The basis of inherited property usually is the value of the property at the time of death ("cost" basis rules don't apply in the case of inherited property but the income tax form uses the word anyway). If the estate was required to file a federal and/or state estate tax return, the value of your property (the mineral rights) is listed on the form. You can ask the executor of the estate for this information. If you cannot find the information on the value of the mineral rights at the time of the person's death, you may have to report a zero basis, so that all of the proceeds you receive become taxable gain.
Question:
My accountant told me to convert my traditional IRA and SEP IRA into a Roth IRA by the end of this year. He says this would benefit my daughter. I thought by listing my daughter as a beneficiary, that would be enough. Why is he recommending this?
-- Dan
Answer from Gary S. Lesser, co-author of Quick Reference to Individual Retirement Accounts, 2010 edition:
The simple answer is to ask, why? For example, if distributions aren't ever needed (during owner's lifetime), a conversion would pass more benefit onto heirs, and likely create a larger estate (say at age 95). In an IRA, RMDs would be required to be withdrawn -- resulting in less benefit to heirs. Many other factors and assumptions need to be considered before jumping into a decision. Roth IRA conversions are neither good nor bad. But they can be good or bad.
