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He Enjoys a Good Time, but He Can't Dance Around Debt


When it comes to his finances, Yancy Whittaker has just three problems: his past, his present and his future.

By his own admission, Whittaker, 42, has been extremely irresponsible about managing his money for all of his adult life. Earned or borrowed, if he could get his hands on it, he spent it. When the bills arrived, he sometimes let them sit unopened.

"I always liked to have a good time," said Whittaker, a restaurant manager. "In the past, I was a dancing machine who spent too much time and money clubbing around."

He was already in a tough spot financially when a bicycle accident laid him up for several months in 1995. Without work and social activities to occupy his mind, he had plenty of time to think about where he might be headed if he didn't change his ways.

He now is almost $30,000 in debt--including $20,000 in student loans, $5,000 in back taxes and $2,000 in medical bills--some of which he has not made a payment on in more than a decade. Whittaker has no assets to speak of. He rents his Palm Desert apartment and does not own a car. He has no investments and in fact no savings at all. His phone service was even cut off three years after the unpaid balance ballooned past $1,000.

"I guess I'm just lucky that there's no debtors' prison," he said.

His job pays him about $2,000 a month. After taxes and $500 in rent, $1,000 remains for groceries, utilities, pet food, bus fare and other necessities, plus entertainment. "I barely meet my cost of living," he confessed.

"There's never anything left over for savings or to pay my debts."

Whittaker aspires to eventually own a restaurant. And though he's painfully aware of the distance between his current financial state and his goal, it's an ambition he holds dear.

"The prospect of owning my own restaurant sort of justifies my life," he said, "but I'm not sure if it's just a pipe dream."

Setting lofty long-term goals can be a good financial-planning tool, but Whittaker needs to first address more immediate concerns, said Delia Fernandez, a fee-only financial planner in Los Alamitos. Unless and until he gets on steadier financial footing, she said, owning a restaurant will indeed be a pipe dream.

"I wish there were some magic bullet to solve your problem, but there's not," Fernandez said. "You need to look at what got you into this situation and take the necessary steps to get out of it, although it won't be easy."

After an Injury, Time to Think

The facts appear straightforward enough. Shortly after his discharge from the Air Force in 1979, Whittaker settled in Santa Barbara. He worked part time as a waiter while for five years he attended Santa Barbara City College--a school he admits he chose more for its tennis courts than its classes. He had help from the GI Bill, but once that ran out, he took out $5,000 in student loans.

He then moved to Arizona with the idea that he would study to be an engineer at the DeVry Institute of Technology. He got more student loans, but a year and a half short of graduation he exhausted his student-loan eligibility as well. He dropped out and headed to Palm Springs, where he had family.

But Whittaker's modest wages from restaurant work did not keep up with his lifestyle, which included regularly dining out and visiting nightclubs. By the early 1990s, he had fallen behind on his federal tax obligations as well as his student loans.

Whittaker might have continued on his merry way had he not broken his leg badly in a biking accident in 1995.

He was laid up for several months, he said, giving him a lot of time to think about a debt burden that by then was approaching $20,000. His phone service was disconnected after bills went unpaid. Only the kindness of a landlord who allowed him to defer some rent payments prevented eviction.

"When I had the accident, I took a hard look at myself and said, 'I'm broke,' " Whittaker said. "I had hit bottom and I'm still pretty much there. I've barely got my nose above a very wavy ocean."

Whittaker has worked at his current job since 1996, but he has not tackled the student loan or tax problems.

Whittaker has been mulling his options for some time. One is filing for bankruptcy protection. He might have looked seriously into that by now, he said, but he's been feeling overwhelmed and discouraged by the situation, figuring that tax and student loan obligations can't be discharged in a bankruptcy proceeding anyway.

Chapter 7 May Be an Option

But according to bankruptcy lawyer John Merna of Lozano & Merna in West Covina, Whittaker may in fact be able to free himself from these debts in a Chapter 7 filing.

For Chapter 7 to apply to federal and state tax or student loan debts, Merna said, several conditions must be met.

Among them for back taxes:

* The debts must be at least 3 years old from the due date.

* The debtor cannot have a tax lien filed against any property.

* The debtor must have filed tax returns for the taxes owed.

* No fraud may be involved.

Among the conditions for delinquent student loans:

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