Sometimes I just feel like screaming. We are currently in debt and sometimes it seems overwhelming. The last thing I want to do is file for BK, but sometimes the thought of a fresh start is very relieving. I keep reading about if you're going to do it, do it within the next 6 months. What's killing us is the $42,000 in credit card debt. While nothing is in collections, it seems like each month after paying the minimum amounts due we are just breaking even if that. Sorry to ramble. Just looking for opionions or options...
Do it Now no one is going to find out, unless you tell them personally. If you havent done anything totaly fraudulent, then your chap 7 bankruptcy will go thru smoothly. Just find a good bk attorney. Though the creditors meeting notice and bankrupcty discharge are sent to you home. You can always have your mail forwarded to a po box if need be.
touchdown, I would find and attorney ASAP and plan on filing bankruptcy as soon as you can get all your paperwork done. The idea behind bankruptcy in this country is the "fresh start" but with bk reform it's going to be more like debtor's prison house arrest. The bk reform bill was put off until Sept so it buys you some time but you must act quickly in order to get in before the laws change. Hope this helps, clc
before you file, try to get your auto insurance with someone who doesn't pull credit reports, if at all possible. If they do, your premiums will shoot up by 100% or more when it is time to renew. very very expensive result of allowing insurance companies to use CR's in their scoring models for customer rates Maggie75
With 42k in debt filing is probably a good idea. If you look at making the minimum payments it will take you on average close to 20 years to pay them off. What little extra interest you might pay after bk for a year or two is a lot cheaper than paying 42k plus interest.
Prepare... Before filing... Get an Amex card, Gold if you can. It will cost you a hefty annual fee, but you won't loose it in the BK. Use it for travel reservations, car rentals, and online purchases if needed. Get a good checking account with a Mastercard/Visa debit card. Use this to pay actual expenses. Get a line of credit on the checking account, but don't use it. If possible, get a basic and cheap Visa/Mastercard account. Do not put anything on it. You should be able to function just fine with those things after you file. I've been doing it this way for years. Max out your retirement fund contributions, including contributing to an IRA, and especially a 401k. These assets are exempt from BK. Do this even if it means not paying your credit card bill to fund it. Use the money you were going to pay the CC company to buy the services of the best BK lawyer in town. Trust me, the CC companies are gonna howl when you break the news to them. Note: I never actually filed BK. I only prepared to do so. I had about $40k in CC debt that I could not pay anymore, so I stopped paying it. My credit is toast, but at least I have my life back again. Cheers
Re: Prepare... Sorry all of your amex cards will be closed. As a matter a fact, all your existing bank credit cards will be closed. Thats what the trustee wants to hear and the lawyer will advise. No open cc cards. Look for the "best secured card" thread, about capital one. Dont worry, rebuilding will be easier than you think.
Re: Prepare... While Cable666 gives very good advice, I'd qualify a couple of items. As a genral rule, IRA's are exempt from creditor seizure in bk. However, many states have restrictions on contributions within a certain time period prior to filing. As to keeping cc's post bk. I think if you keep any, you just got lucky. AMEX will pickup the bk on their A/R sweeps and likely cancel the card. AMEX is kinda funny. They seem to leave you alone as long as you pay them regardless of what is happening with other accounts. But, you file bk they'll cancel regardless of your payment history with them. Bottom line, do see a good lawyer.
AMEX does not automatically cancel you with a BK. I think it depends on the account post filing--are you a long standing customer? have you always been current with them? etc. I am 2 years post ch 13 bk. I still have my AMEX, and it is in good standing. Guess what? AMEX knows! Yep, they pulled a soft inquiry on me for account maintenance 6 months after the filing. The next day they pulled a hard. They did not cancel me. This account is 16 years old and has never been late or delinquent in any way. Maybe that is why. Maybe they forgot to cancel me. Who knows? I just know it is not an automatic cancel. As a person who has been in your shoes and filed, be proactive. It will save you much money and anguish in the fall out. This is what I would suggest right now: 1. Change your phone number and keep it unlisted. There is no reason to endure the endless collection calls that are coming. Even after you file, it takes a while for all your creditors to know and respect the bk stay. Avoid the calls all together. No need to explain anything. 2. Apply for AMEX & a MC account now while your credit is still good. If you get denied, you have lost nothing. If you get approved, it will help you in the post bk period while you reestablish your credit. 3. Make sure that you are not relying on any ongoing services that have been paid for with your CC. For example, if you paid a year long premium for life insurance offered through your Visa, make sure you have alternative arrangements because that coverage is probably contingent on maintaining the account. 4. Take a long, long hard look at your budget. Is the debt really your problem or is it your spending patterns? If you honestly believe the bk will help you begin building savings, pay down mortgages, put your kids through college, etc, it is probably a good idea. If you plan to keep some accounts open after the bk and ultimately run them up again, you are actually losing ground. I bring this up because I didn't realize how much we relied on our cc's. I thought I was a good money manager, but actually I was just a good bill payer. It has taken us 2 years to really be comfortable with our new post bk budget and lifestyle. We have more free cash now, but unless it is carefully allocated, you lose control over it quickly. 5. Get the best attorney that you can find. There are no bargains here. Someone else mentioned forgoing your payments to the CC's in order to pay your legal fees. I think this is a very good plan. Ask around. Ask this board if there is anyone in your area and who they used. Were they happy with them? Any issues/problems? 6. Make sure that you include anything and everything that might come back to haunt you later. Really put some thought into this. We had a year long contract with an exterminator who absolutely sucked. I got bills all the time. He never did the work. I included him in the bk. I don't know if he would have ever pressed the issue or not. I just eliminated any chance he had for it later. He had the right, before I did this, to bill me for the remainder of the contract. Think of all of those types of issues. 7. Make sure you max out your contributions to 401K, retirement, IRA, etc. SOmeone else mentioned this. This is vital. 8. Make sure you are current on your mortgage. If you do not live in a "homestead friendly" state, that can be a real problem. Make sure you know what your rights are in regard to your home & any equity you may have in it. 9. Do you require your automobile to get to/from work? Where I live, it is an absolute necessity to have good, reliable transportation. We had two cars that were limping along. We had resisted putting the money into them to get them back in shape because we didn't want to incur any more debt. The CC's came first, cars second. These cars were not yet paid for. We traded them in for two new cars. Our financing rates were still very good. Our payments did not increase and we had five or more years of trouble free driving guaranteed. You don't want to be in a position to need a new car a year from now. Even if you can find someone to finance you, your rates will be awful. Car financing is not nearly as forgiving post bk as some others are. Plan for this. 10. Have you decided for sure that you are going to file? If so, quit paying on the cc's. No need in throwing any more money into this. Put it in savings instead. 11. Our attorney suggested opening a new checking account the day of filing. We closed the old one and opened a new on that day. Makes for a good paper trail if it comes into question later. I didn't mean to be preachy or turn this into a book. Sorry! Be smart about this and plan well. You are the only one that is going to look out for your best interest. Good luck to you. I feel for you and wish you well. I have been there too as many on this board have. There is life after the BK! Lisa
Thank you VERY much to everyone for the responses to far. One thing that is holding me up right now to file is our current housing situation. We are in a 2 bedroom condo that is way to small for my expanding family. We are trying to sell it to get into a bigger house and something with a yard. This is what I would like to do, but would this be considered fraudlauent? 1. Sell this condo within the next 3 months hopefully 2. Purchase another home (we've already been pre-approved for up to $150k) 3. Get settled into the new home and then file for BK I don't want to file now, because then we would be stuck in this condo for 7 years and it is already tight in here with our newborn baby and hopefully another one in a couple of years. Another question, can just myself file and not my wife? We are in Michigan Thank for your guidance so far!
Hi Touchdown, I am little confused on your scenario. By purchasing a bigger house (usually more expensive) how will you will able to afford it, if you are contemplating BK? Is the house the same amount as the condo? Have you taken into consideration the additional cost of living in a larger home - higher electric bills, higher taxes, higher insurance costs, etc ? Dani
Dani, Thanks for the reply. We are figure that with the money we'll make on selling this condo, the lower interest rate that we would get that our mortgage payment would be probably about $100 a month more than what we are paying now. So we are thinking we can make that happen without too much of a burden. And then once we moved and got settled if I did file for BK that would free up that much more cash to use towards savings, my daugthers college fund, etc. I've learned my lesson with CC's. Yuck
Touchdown, this is exactly the kind of planning that I was urging you to do. If you can't stay in your condo for, at a minimum, 3-4 years longer, you need to make any move necessary NOW. I am assuming that your credit is still very good, but you are just over your comfort level to the point that you dont see any way to ever pay this stuff off. I may get tons of people who disagree with me, but I would never file another CH13 again. What is the point? I had this grand notion that it was a means to repay the creditors and satisfy my obligation to them. Listen, they don't care!!!! More than 3/4 of them never even filled out the paperwork to be paid under the trustee's plan! They didn't care enough to fill out a sheet of paper and fax it in. Because of my grand illusion, I am stuck with a 36 month obligation to pay the trustee my monthly payment. Now, I don't mind this. I do feel I owe it. I hate being under the watchful eye of the Trustee at all times. This guy is worthless. They don't help you in any way. He is just an impedence to any progress. Furthermore, like CLC has mentioned, CH 13 is not thought of very well. At least with a CH 7, you pull the trigger and that's it. Your financial life starts over right then. In a CH 13, you are "in BK" for a minimum of 3 years up to I think it is 5-6 years. Who wants to relive this every day for 5-6 years? It is your choice, but it has not been a bed of roses. Also, on your credit report, the creditors can still carry a balance for the entire time you are in the plan. In a 7, they zero out the balance immediately. Everytime I run my fico, it says "balances in proprtion to limits are too high." I have no balances! It is all of the old stuff that continues to report. A Ch 7 wouldn't have to deal with that.
ARE YOU SURE? Touchdown, why not take out a home equity and pay off the $42K? Or why not sell the condo and rent an APT and pay off the $42K? Hell, you would have STELLAR credit to get that new home in 6 months, after you saved up a SMALL downpayment? I do not think you need to file BK - you have LOTS of options that would completely liquidate all CC debts.... A YR from now, you would not have a BK on your record for 10 YRS...... just a thought - I DO NOT think the courts will like you buying this new house then - BAM.... I would structure it with an attorney for certain. aarrff - dogman
Okay, here's my question. You mentioned in your first post that you were still current and nothing was in collections, but you were barely making payments. Is there a way we can set up a budget for you? I have a feeling you're going to run into problems if you purchase a new house and file BK afterwards. You said you have been preapproved up to $150K and I am assuming at a prime rate. I just hate to see you have to file BK and going through all that it involves. At the end the choice is yours and what you feel comfortable with. But, if you would like to set up a budget and see if there is any thing we can get rid of or maybe decrease, I'll be happy to help. Or you could always do the LK plan. Clean credit and no BK. Dani
Actually, dogman made some great suggestions. If you were able to sell the condo and payoff the credit cards...would you still have a sufficient downpayment? Dani
Thanks for the suggestions and the OTHER side of the coin. Obviously I would like to avoid filing BK if possible, but sometimes it feels like I'll never be able to get out of debt. Our main priority right now is getting out of this condo. It's way to small for us. So if BK is to happen, it won't happen until I sell this. I already have a Home Equity LOC, so taking one out is not an option. I also have an 401(k) loan, so taking out one of those isn't an option either. I make about $45k a year, and my wife makes about $31k a year. We're both looking for higher paying jobs. Here is a typically budget for us. Maybe this is a start. I hope the formatting comes through ok. If not, I have it as an Excel spreadsheet I can post to the web somewhere PERSONAL BUDGET & CASH FLOW Income Husband Take Home After Taxes $2,294.36 Wife Take Home After Taxes $1,600.00 eBay/other $75.00 Expenses $3,969.36 Housing Mortgage,Dues,Taxes $814.00 Electricty, gas, and oil $75.00 Phone $25.00 Internet $42.00 Total Housing $956.00 Food Groceries $250.00 Total Food $250.00 Transportation Honda $253.00 GMAC $506.00 Fuel $160.00 Maintenance $10.00 Total Trans $929.00 Personal Care Sundries $40.00 Haircuts $20.00 Other $10.00 Total Personal Care $70.00 Credit Cards & Loans MBNA $175.00 AT&T $175.00 FUSA $175.00 World Perks $175.00 Preusers $50.00 Mom & Dad $150.00 Grandma $100.00 Huntington $75.00 Cap One $30.00 Marshal Fields $30.00 Total CC & Loans $1,135.00 Entertainment Movies, concerts, etc. $0.00 Vacation and travel $0.00 $0.00 Health Care Doctor hospital visits $10.00 Prescription drugs $0.00 Dental and vision $0.00 Therapy $0.00 $10.00 Insurance Premiums Condo Insurance $25.00 Auto $95.00 Health $0.00 Life $0.00 $120.00 Other Day care $424.00 Total Day Care $424.00 Summary Total Income $3,969.36 Minus Expenditures $3,894.00 $75.36
Touchdown, I am working on this now. Your gross income is actually the same as my household and our expenses are pretty similar. Concerning the credit cards are these the minimum payments? Or what you send to them each month? Do the credit cards total $42K or is that your total debt (not including autos)? What are your total balances on each credit card or which ones do you prefer to payoff first? Usually, the highest interest rate or lowest balance is the way to go. My husband and I recently paid off $15K in credit card debt (I went a little furniture happy when we moved into our new home last year). Dani
Dani - Thanks for your help And any others. Here is a little more information on the CC debt Card Total Debt APR Typical Min $ AT&T $9,281.65 11.9% 170.00 FUSA $11,462.97 19.9% 229.00 US Bank $12,042.67 9.9% 250.00 MBNA $9,357.42 16.9% 179.00 The total CC debt is $42,000. All the cards are in my name only except for the AT&T which is with me and my wife. Let me know if you need anything else.
GOOD WORK Touchdown .... It looks like you really have the debt on those cards - they are costing you $800 month - which isn't really hitting the balances. My thoughts - which one DO YOU CHOOSE TO START PAYING OFF? When I did this, I looked at all the interest rates, and the highest got most money each month until clear. What's the story with the home equity? When - any net amounts? Cars? Any net amounts? Keeping drilling this down - TEAM? aarff - dogman
