I am getting very close to bankruptcy and am at least considering the option. I have massive credit card debt. Right now everything is current but I cannot keep it up much longer. All of the debt is mine. My wife has none. If I go bankrupt, it will be me solely, not my wife. I have a home with about $20,000 - $30,000 equity. We are not in a homestead state, so it is not protected. It is held jointly with my wife. Will the house be sold to pay creditors, or is there some way to protect it, such as reaffirming the debt? If it is sold, does my wife lose her share of the home also? I can afford to pay day to day obligations, but cannot handle the credit card debt any more. I've run out of money. I have two cars. One is four years old and almost paid for. I believe that I can transfer title to my wife solely so that it is not subject to sale, as long as it is more than 90 days before I file the bankruptcy. Is that correct? My second car is two years old, titled jointly with my wife, but used solely by my son. He paid $4,000 down payment and I have paid the monthly payments. Can I get a new loan on it in his name, and title it to him? Or, can I get my wife to cosign a loan for him, and take me off the title? Our agreement with him has been that it is his car, but we signed initially for the loan because he was too young and had no credit. The bottom line is that I would like to save the house and the two cars. Is that feasible? I looked at one of my credit card bills, MBNA. My monthly interest is $239. My payment is $240. I am actually paying down the principal at the rate of $1 per month. This credit card alone has a balance of $20,000, and there are six more. Any suggestions are appreciated. I know that I need to see a bankruptcy attorney at some point, but I need to know some of the options before I go in. Thanks
I would definitely see a BK attorney as soon as possible. Don't put it off any longer. New bankruptcy laws are working their way through Congress as we speak which are not considered to be consumer-friendly in the least. Once Bush signs this new legislation, it will become law six months later. So, again, it would be in your best interest to consult with an attorney ASAP. I filed a ch. 7 BK 8 years ago, but my case was much less complex than your's is (I had one car, didn't own a home, and wasn't a co-signor anywhere). Is there any way you could use some of the equity in your house to pay off debts? Or do you have any money in an IRA or 401-K you could tap into? I'm sorry I can't address any of your specific questions, but I wish you the best in getting through this!
No. Savings is gone. IRA is gone. I have enough to get by for a few more weeks. The equity in the home is not nearly enough to make a dent in the debts. And, we were paying more in rent than we are now paying on a mortgage (PITI). In other words, renting will cost us more, not less. That is one reason I am interested in keeping the house. And, my son needs his car for school and work. He lives at home to keep expenses down, but there is no real public transportation here. My wife and I share the other car for work.
I agree, see a lawyer for a consult to find out whether you'd be able to protect your home (usually with a chapter 13 you can keep even non-exempt property) and if filing alone will work in your case. Just because you have this initial meeting doesn't mean you have to file, you're just gathering information to make a more informed decision. You'd for sure know more where you'd stand if you did file depending on your states own rules. You can do research on your own states exemption allowances at http://www.bankruptcyaction.com/bankruptcyexemptions.htm Newstdt
You can also see several lawyers. Most will see you the first time for free. So, maybe go see 2 or 3 attornies and see what they all recommend. Then decide for yourself which path to take. Sorry I can't give you any better advice than that. My BK 8 years ago was a pretty simple one, but your's sounds more complex. That's why a lawyer would be the best option in my opinion.
I would definitely see a lawyer first and foremost. Are you not able to pay the mortgage payment? Have you considered trying to sell the house to get out of that debt? You may come up with more then the equity you currently have if you try and sell. Have you set yourself on a budget so you don't rack up more debt? Sounds like you may need to cut up those CC's and pay them off. If you can't do that then by all means research chp 7...the laws are gonna change and you may have to go thru mandatory credit counseling if you can afford it so I would suggest you get your ducks in a row and figure out either you hunker down and pay off what you can...or you file the chp 7. Have you tried calling the CC companies and requesting lower finance charges? That may help cut the debts down quicker. And, if you do file chp 7 you need to learn how to handle debt cause you don't want to be in this same situation years down the road and have more troubles. I filed chp 7 in 1991 due to me and my husband losing our jobs, no emergency savings, nothing of value, we rented, etc....it was done thru a paralegal at a legal office and took about 6 months to discharge after we filed. We learned that CC's are to be paid off each month, debt is for responsible people who can handle it so we've stayed away from alot of CC's...we bought a home and a car and have a few CC's (Visa, MC, and Texaco)but we pay them off each month so our only debt is our home and our car payment which is .9% financing. It took us a long time to get our credit back on track after filing and it can be a credit nightmare. You have to weigh your pros and cons about filing and by all means seek professional help. As you can see by my scores I'm still in the 600 club even after the chp 7 fell off last year! It is a long hard road. Good luck!
I was in a very similar situation as you. The extreme danger you are in right now is that the next small disaster is going to push you over the edge financially. In short, you need to get advice from a good BK attorney. Budget between $1500-$2500 for this. He/She can answer the questions you have for your state and BK court. What I did was stop making payments to all my credit cards. I then took that payment money and used it to pay my BK attorney. When you stop paying your CC's you have about 90 days before they get REALLY nasty. So if you do the car title thing, they can occur before you file. A bit of advice about the cars. They are just cars. Don't get so emotionally attached to them. Keeping a roof over your family's head and keeping them fed and healthy is the highest priorty. It would be a shame to risk your financial future for a pile of steel/plastic/glass in the driveway. There is nothing wrong with driving a used car that is paid for. There is nothing wrong with making your son use that $4k to pay cash for an older used car, or as a 50 percent down payment for a reliable used car that HE pays for now. What ever you do, do not tap your retirement assets. In fact, I would max out your IRA and 401k contributions. There is nothing illegal about that. Remember, no matter how bad things get, no one can get their paws on that money. (Sort of.... in some states, IRA's can be garnished to various degrees). So at least if you loose everything, you can still eat when you are old. The most important thing is get your budget under control and to build an emergancy fund. Do you know exactly where all your money is going? Are you tracking it? I installed Quicken and starting getting reciepts for EVERYTHING. No matter how small. Even a 25 cent newspaper would be noted. Once a day I take all the receipts and enter the info into Quicken. Within 3 months I saw that my assumptions about my budget were wrong, really wrong in some cases. This is very soboring and something you really should do for a while. If you have cut back as much as you can, then you have to choice but to cut the CC payments. Buy the book "Money Troubles" by Nolo Press. It is worth every penny. It is possible to not pay the CC's and not declare BK. But it is risky and stressful. That is what I ended up doing. It worked for me, but I can't claim it would work for you too. Unlike you, I had no home or equity at risk. I suppose chapter 13 BK is a possiblity. I would never consider it, and most people who have been through 13 regret not filing 7 and getting it all over with. What else? Plan on a credit-free life. Learn to budget and pay cash for everything you need. It is actually very nice to pay cash for something you used to have to charge, wondering if you have enough credit left on your card. Feel free to ask more questions, here or via email if you want privacy. Good luck.
Thanks for all the imput. I can make all the payments now, but have used up all my savings, including IRA,, to do so If it was not for the credit card debt, I could meet all my payments, including the house from salary. Basically, CC payments came from savings. Savings are gone, no more money to pay credit cards. I got here because of two serious illnesses, losing my job, and disability. i have always handled everything responsibly, but this time I screwed up. The bottom line is that I can only pay the minimum on credit cards. That means not much more than interest. The principal will never go away. A second job is not an option. I can barely work one job with my disabilities. The credit card debt is in my name, not my wife. That is why I am thinking of filing bankruptcy for me, not her. Also, in the future, she could get car loans, so me having screwed up would not be a big problem If I sell the house myself, with no realtor, I might get $20,000, which is not enough to pay down much debt. Would not help much. And, rents here are higher than my mortgage payment. I do not use the credit cards. Have not for 18 months, when I used them up. I have asked for lower rates, only Citi helped. Nextcard (now Merrick) FUSA, and MBNA said no way. A lot of the problem stems from them jacking my rates to an average of about 20%. That is why I do not really feel bad about filing bankruptcy and wiping out their debts. I don't think I am attached to the cars. Mine is four years old, almost paid for. I feel that it will last a lot more years and it would be wise to keep it. I got rid of my car to pay bills and share now with my wife. I know nothing about cars and am afraid of getting an older car because I do not know how to fix it. Even if I sold it, it would only make a small dent in the debt. We have thave something to drive. The sons car is a different issue. We paid for the college of his older brother (before the problems) at a very nice school. Son #2 agreed to pay his own education and live at home if we would foot the bill for a new car. I agree he needs to take over payments. He has a long way to school each day and a long way to work, so he needs a reliable car. And, he goes to see his girlfriend every coupld weeks in another city. And, there is very little equity in his car. But, I agree he needs to stop making payments. Even though I took the last of my IRA money last week to pay credit card debt, I have a very good retirement account that I will never touch. I will get $3500 per month when I retire. The other problem is that my family is not at all supportive in this. My wife feels that I got sick, I got in debt, I should have to work it out. She will never file bankruptcy, and she does not want to lose the house. She is not being realistic, and there is nothing I can do about it. If the house goes, I will be gone too, living on the street. The house is more important to her. She is very much into financial success, and if the assets go, so does she. Any more suggestions? Your help is appreciated.
What state you reside in is critical. The amount of equity in your home that is exempt in bk proceedings varies from state to state. Also, if you live in a community property state, you may have problems filing solo.
When you file a chp7 you are allowed to keep a certain amount of equity in your home(exempt) varying by state laws. I filed a chp7 6/02 and it was just discharged 9/02. I kept my car and my house. I've owned my house for 5 years and my attorney used the state equalized value to determine the worth. By the time that I would sell my home, pay the real estate company their 6%, the equity left would be exempt ($18,000) from paying the creditors. I owed a lot more than $18,000 so if there would have been more than that amount, I would have been forced to sell my home and give whats left to the courts to distribute to my creditors. So just make sure you get an experienced attorney that deals with real estate bk laws. I paid my attorney by using the money that I would have paid my creditors. I'm not going to tell you that it is easy to get through because it is not. It is a stressful situation and an uphill battle. But at least now I have a little room to breath. You will be able to clean your credit with time if you file a bk. I would stay away from a chp13 if at all possible because I tried it prior and then converted it to a chp7. Stay here on the board and read, read, read and learn, then do what you have learned. Be patient and diligent with your plight and time will heal your wounds.
We are not in a community property state. I checked the link someone posted here yesterday, and my state gives me $5,000 equity in my home.
Not good. Being able to exempt only $5K means you'll have to file a Chapter 13 if you wish to keep the home.
What is the difference between Ch 13 and Ch 7? Does it mean that I will have to pay back some of my credit card debt? Is it worse? Going back to my original post, can I keep the house by reaffirming the debt? Or, would the creditors be entitled to the equity? Could we keep the house if my wife bought out the equity? Like I said, there is probalby only $20,000 equity, and $5,000 of that is exempt. And, I would think that half of that is hers. Or, is it all subject to claims of my creditors? One last thought. If we can salvage the house somehow, can the mortage holder (a bank) accelerate the loan because of the bankruptcy? It is with a good bank that we have a long term relationship with, and they are reasonable.
First of all, do no property transfers unless your lawer says it's OK. You'll be asked if you transfered any property in the previous year. Just do nothing until you have legal counsel. A Chapter 13 is nasty, expensive and, time consuming. Essentially, you, your lawyer, and a trustee decide how much you can repay unsecured creditors over a 36-60 month time period. The trustee will receive a portion of all payments as a fee.
1. You need to determine whether or not you're in a community property state. If you are, it doesn't matter that your credit debt is in your name alone, your wife is jointly responsible for it, and you would need to file bankruptcy jointly in order to get rid of that debt. Otherwise, it just gets dumped on her. 2. If your house is jointly titled with your wife, she owns half, and only half the equity is exposed. Houses are valued in a number of different ways. You need to talk to an attorney to find out how much equity the court will think you have. My house was $175k comparable sales, $155k to dump it, $130k tax assessment, my state accepts tax assessed value. You may have no equity that the court will bother going after. They must be able to pay all mortgages, plus cost of sales, plus exemption amounts to you, before they can sell. 3. Don't transfer anything. Any INSIDER transfers (to family, for example) are invalid if they happen within a YEAR of filing, not 90 days. Given that one car is titled partially in your wife's name, you can probably keep both if the equity isn't too high. You can't keep a house or a car in a Chapter 7 unless your payments are current, so if you have to start blowing off bills, don't blow off the mortgage or the car payments. And if you're behind, catch up on those. You don't want to do a Chapter 13 if you can avoid it. It's best to file a Chapter 7 if you have any plausible reason to do so, then see if the court buys it. You can refile a Chapter 13 if they deny the Chapter 7 on the grounds of "substantial abuse" (e.g., they think you can pay enough of the debt back to make it worth administering). Talk to some lawyers, and get moving.
Oh, you're not community property, OK. 4. You can't keep the house by reaffirming, the only issue there is whether or not there is excess equity that can be used to pay off unsecured creditors. Reaffirmation is a bad idea in general, ask an attorney whether there is any reason to bother. 5. Yes, your wife is entitled to half, if she's on the title. 6. Your company can in theory accelerate the mortgage, but they won't.
That is good info. The house is worth $200,000 based on comparable sales in the neighborhood, and assuming it is not a fire sale. On the house, as I understand it, you are saying that before they will order the sale, they will subtract out the mortgages ($175,000), pay me my $5,000 exemption, pay my wife her $5,000 exemption, and figure in the cost of sale (a Realtor, I assume) probably $12,000, plus closing costs. If the sale makes sense (that is, there is money left over for the creditors), they do it. If there would be no money left over for creditors, they won't do the sale. But, I am assuming they don't do a orderly sale, it is probably more like a fire sale, so it is likely there will not be anything for creditors. Am I on the right track here? Like I said, I want to know some answers before I go see the attorney. I don't think there is a lot of equity in my sons car. I don't know how they would handle the fact that the $4,000 down came from him (I have his cancelled check), but that title is in the name of my wife and me because he was too young at the time. Thanks for the imput
A couple more thoughts. You said that only half the equity in the home would be exposed Using the figures above, it does not look like it makes sense to sell the house. Also, I checked the link posted yesterday. I can exempt $4,000 in personal property. I may be able to save both cars, if they consider my wife's equity to be half.
Since you are not in a community property state maybe your state recognizes holding property "Tenancy by the Entirety". I am still struggling to understand the benefits of holding title to your home this way but I think it would be worth asking your lawyer about it since if I am understanding it correctly the home cannot be sold for unsecured debts of one spouse without the consent of both. Again I am not sure this will help you but I thought I would throw it out there. If you are in a Tenancy by the entirety state then you may already have some protection for your home. Tuit
"The other problem is that my family is not at all supportive in this. My wife feels that I got sick, I got in debt, I should have to work it out. She will never file bankruptcy, and she does not want to lose the house. She is not being realistic, and there is nothing I can do about it. If the house goes, I will be gone too, living on the street. The house is more important to her. She is very much into financial success, and if the assets go, so does she. " It sounds like your wife is not honoring her vows, I can't believe she would blame you for "getting" sick & disabled. Maybe she doesn't deserve any part of that $3,500 retirement in the future. That would be my thoughts. At any rate; You should have no problem bringing the house through a BK-7, as long as you can demonstrate that you can pay for it. Your wife, by the way, is not required to file. What is your Gross Annual income? What is the total CC debt??<100k?> It's possible, but may not be plausible, to negotiate, by playing hardball with your CC's, I know most will work with consumer if push comes to shove.
