• Home
  • Bankruptcy in Brief
  • ABC’s of Bankruptcy
  • Considering Bankruptcy
  • True Stories
  • Chapter 13
  • Blog
  • About Us

Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box
  • How bankruptcy works
  • Mortgage Matters
  • Consumer Rights
  • Newsworthy
  • You & Your Lawyer
  • Small Business
  • Family Law

Why Credit Cards Win Clash of Titans

By Cathy Moran

Credit cards vanquish tax collectorIn the tug o war of which creditor to pay, why is it that credit cards win over taxes and child support?

I’m accustomed to clients who pay creditors rather than provide for their own health care, emergency fund, or retirement. That’s taking care of commitments to others before self.

But I haven’t figured out why embattled debtors choose to pay the credit card collectors instead of child support and taxes. Yet that was just what this week’s client had done: $10,000 in taxes and $24,000 in support for a child went unpaid, while he chipped away at credit card debt.

To a bankruptcy lawyer, this is insane, since both family support and recent income taxes are priority claims, not dischargeable in bankruptcy.

To an outsider, it’s still insane, since the IRS can simply take all the money in your bank account, without suing you first. And your child is dependent and yours, not to mention that failure to pay child support is the one debt that can get you jailed.

Those are the creditors to fear.

I have two theories of why people choose to pay credit cards instead of taxes or support.

  1. Terror of the Telephone: the credit card companies call, and call, and call if you don’t pay. They invade your personal space at home, and they confront you with your financial shortcomings incessantly. It’s hard on the nerves and the ego.
  2. Credit Report Obsession: fixated on credit reports and credit scores, clients focus on the immediate “damage” that credit card delinquencies can inflict, and set aside the more lasting damage that tax liens and wage intercepts can cause if you ignore the feds and the child support authorities.

Credit card companies can’t take your money without suing you first, so they have to use fear and shame to get you to distort priorities and pay them first.

We need to get that word out.

Who to pay when you can’t pay everyone

Debts that don’t go away in bankruptcy

Image licensed under Creative Commons, courtesy of Javier Kohen.

 

More from the Soapbox

  • So What If Debt Collectors Are Robosigners?So What If Debt Collectors Are Robosigners?
  • IRS Shakedown Happening In Bankruptcy CourtIRS Shakedown Happening In Bankruptcy Court
  • Five Tax Tips For Two CentsFive Tax Tips For Two Cents
  • Debtor Bites Collector Over Stale Debt Debtor Bites Collector Over Stale Debt
  • Zombie Debt Collectors Must Come CleanZombie Debt Collectors Must Come Clean

Filed Under: Managing Money, Taxes

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

About The Soapbox

You've arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said "try").

Here, I allow myself to tell stories and express strong opinions on how I think law should work for the consumer and small businesses when it comes to debt.

Moran Law Group
Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

How Bankruptcy Works

Bankruptcy Discharge vs. Dismissal

Dismissed and discharged. In a bankruptcy case, these two terms are at the opposite ends of the scale of results in bankruptcy. Yet they are often confused. A discharge is a win!  The bankruptcy discharge order wipes out your personal legal liability to pay a debt. A dismissal is usually a loss.  It means … Read more

More Posts from this Category

643 Bair Island Road
Suite 403
Redwood City, CA 94063
Phone: (650) 694-4700

Categories

All content copyright © Moran Law Group. All rights reserved.