Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 3, 1994 TAG: 9312310023
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF
DATELINE: LENGTH: Medium
I filed bankruptcy, and they are refusing to discharge my student loans. I cannot get any information from the center, and my lawyer doesn't know what to do. A lot of people are in this situation, and they're not getting any help from anywhere.
A: Andrew Goldstein, a bankruptcy specialist with the Roanoke law firm of Magee, Foster, Goldstein & Sayers, said the law used to be that student loans were dischargeable under Chapter 13 wage-earner plans but not under Chapter 7 liquidation petitions. But that law has been changed.
Section 523(a)(8) of the Bankruptcy Code states that student loans coming due within the prior seven years cannot be discharged, he said. Older loans, those which came due more than seven years ago, can be discharged.
Goldstein said Section 523(a)(8)(B) states that the bankruptcy judge has the discretion to discharge any student loan if the petitioner can prove it would create undue hardship on the petitioner and his or her dependents.
Mortgage payoff
Q: In regard to prepaying a mortgage, is it better to pay an additional $200 each month or to put up $2,000 to apply at the start of each year? Is there a difference? Which would pay off the mortgage quicker?
A: You are proposing installment payments over the year that would total $2,400 vs. a one-time payment of $2,000. Your lender might look at your own account and payment schedule to determine the difference that the $400 a year might make over time.
Michael Hincker, local manager for Mortgage Service America, said that, as a general proposition, it would be better to pay the $2,000 if you can do it now. That would immediately reduce the principal on which you are paying interest and terminate payments more quickly. You would take advantage of reverse compounding. But if you have to save up the money so that you would be delayed a year in making the payment, it would be better to use the installment plan of $200 a month.
IRA ifs, ands, buts
Q: I'm 57 years old, and I'd like to quit work and start using my IRA account to supplement my Navy retirement check. I have been told that I can use my IRA account before age 59 1/2 without penalty, provided that I withdraw the same amount of money each year for five consecutive years or until I reach 59 1/2, when I would have the option of changing the amount of withdrawal.
If this is true, are there any special forms to be filled out or Internal Revenue Service instructions to avoid the early-withdrawal penalties?
A: It is true that you can withdraw from your IRA before age 59 1/2 if you take even amounts for the five years or until age 59 1/2, whichever comes first.
There are two caveats:
First, you must be age 55. You meet this requirement.
Second, the amounts must be based on your life expectancy according to the government tables. You may thus find that you can withdraw only a small amount each year.
Visit the trustee of your plan and ask to see the tables. They will show you the amount you must withdraw each year in order to deplete the account in the projected year of your death.
This calculation is no easy matter, and you will be subject to retroactive penalties if you make a mistake. One bank that administers IRAs said it will not guarantee the calculation for anyone under the age of 59 1/2.
A spokeswoman for the Internal Revenue Service said your trustee must properly code the withdrawal to show that you fall under this exception to the age rule. You also can file IRS form 5329 to show your withdrawals and the basis for your exception.
Worthy record albums
Q: On a recent national television news program, a reporter discussed the subject of record album covers that have monetary value as collectors' items. Can you give me information on this subject or direct me to a source which would be helpful?
A: A spokesman at Academy Records in New York City, which deals in old recordings, said the covers have no intrinsic value by themselves. They must be part of a package, with the original recording still inside.
"Condition is paramount," he said. The jackets must be "extremely clean," virtually in mint condition. Anything that has been taken on and off a shelf over the years has no value, he said.
Very few packages have value, he said. Those with value are usually old recordings that have not since been reissued. Or perhaps a jacket was used for only a short time, then replaced by a different cover.
If you want to ask about specific packages in good condition, you can write to Academy Records at 10 West 18th St., New York, N.Y. 10011.
Mag Poff will help find answers to your personal finance questions. Send them to her at the Roanoke Times & World-News, P.O. Box 2491, Roanoke 24010. Or leave a recorded message by calling (703) 981-3434 and when asked for a mailbox number, press 66639 (MONEY), followed by the # symbol.
by CNB