Tuesday, April 26, 2011

...ALWAYS read the fine print

Sometimes, being "careful", [OK,OK... anal...] has its advantages.

If I hadn't compulsively forced myself to read all the pages of the Chapter 13 documents I recently signed, I wouldn't have found what might have been a costly error.

I had filled-out l-o-n-g financial disclosure forms for the lawyer and had a long meeting, discussing my answers, line by line. We discussed one problematic entry and I thought that we were "clear" that that monthly deposit by a "holding company" for the school district was merely a reimbursement for the monthly medical insurance premium taken by "the state"health insurance provider from my state teachers pension check, which the "district" will continue to pay, monthly, until I'm 65.
I received no W2,W4 or 1099, since it wasn't considered income, just a benefit agreed upon by the district and the teachers union years ago. I couldn't choose to receive a cash payment if I wanted to. They agreed to pay the "lowest" monthly premium for my medical insurance until I'm 65, period.

When we had a different insurance provider, they sent the check each month for me and all my colleagues under 65, directly to the provider. However, when we changed to the "CALPers" health insurance plan in November, 2009, things became, "complicated"...

Complicated, because my teachers pension is paid by CALSTRS, also a statewide organization. So CALPers insisted that all monthly medical premiums for their insurance paid by current retirees, be deducted from the CALSTRS benefit check,
before the monthly check was mailed or direct deposited. That didn't really bother me but school districts, like my former employer, now had to put aside the premiums they were paying for us into a holding company, which would reimburse us for the amount withheld by CALPers from my monthly CALSTRS pension payment, and the fun began...

Since these premiums were always paid directly to the insurance provider, there was no danger that they might be misunderstood as income. The IRS doesn't even require them to be reported. But apparently, the clerk, whose job it was to transfer all my financial info onto the Chapter 13 forms, had never seen anything like it before.
She reported my gross CALSTRS pension[including the amount deducted], as well as including the "reimbursement amount" each month, ballooning my "annualized income" from $25 K to over $32 K... so I called the lawyer's office.

It took some time for the lawyer on the phone, looking at my papers to understand the problem. I told her that I had had my 2010 taxes done, since we met, and could prove that I didn't make anywhere near $32 K... then she saw the problem. The reimbursement was reported as income, while listing the gross pension amount before taxes, deductions, etc... so they are doing an,"amended financial statement", which I will be going in to sign before my court date on May 4. At that time, any creditors can show up and complain about the settlement, but once the judge accepts the settlement amount, it stays for the 36 months as long as I pay the amount on time each month. At the end of 36 months, all the debt is expunged, although my credit rating will be bad for another 5 years. If I hadn't caught this mistake now, the case might have been contested for a larger settlement, which I can't afford, or the papers might have had to be refiled, which is expensive.

It has been a long, strange & frightening trip... and it's not over yet. I'm SOOO not looking forward to the court date. If creditors show up, it will be unpleasant, to say the least, but I'm told that often, no creditors show and the judge accepts the case into Chapter 13 with no real drama. I could use a little less drama.

More news as it becomes available.


Mousie and Christy's Mommy said...

I will be praying for you on
May 4th. The Lord is in control and will not let you down. This has been a very long journey but it looks like you are finally at the end of it! How great will THAT be???

catsinger said...

...thanks M&CM... as of this moment, I STILL am waiting for the lawyers to call me to come in & sign the amended financial document... & the court date is the day after tomorrow...