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Is Bankruptcy the only answer for me?

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  • hamchan
    replied
    Financial counseling, which includes creating a workable budget, is a requirement for anyone filing for bankruptcy for several years now. Granted nobody is going to force you to apply this knowledge after your discharge, but I felt like the financial counseling was pretty comprehensive and easy to understand.

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  • Gailete
    replied
    The OP needs more help than just a good bankruptcy lawyer. She needs help in learning to live on less than her income, how to NOT make the same mistakes that got her in trouble in the first place. The divorce sounds as if it took place recently and I would assume with a lawyer but I would question their competency if her finances are this messed up post divorce as many of these issues should have been addressed during the divorce proceedings themselves, most especially the house. No way in the world can anyone make ends meet if their house payment alone is almost half their income. thus my recommendation to live as cheaply as possible as soon as she can get rid of the house. git rid of everything possible that she can sell, even if she does it at yard sale prices (generally about 10-20% of retail). As part of this bankruptcy she needs to learn to live within her means and to live far below as much as possible until every bill is paid off and then she can start saving and having a few 'little' luxuries.

    A bankruptcy is only a bandage placed over a wound. It isn't a cure by any means. Infection can still get under it and cause more chaos. Sticking with a group that can coach her on the things the lawyer isn't going help with will help her stick on that straight and narrow.

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  • AnotherReader
    replied
    I changed the wording to "not necessarily appropriate..." Not trying to say everything said is not appropriate. Just that the OP needs professional assistance and she needs it ASAP.

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  • dczech09
    replied
    Originally posted by AnotherReader View Post
    The issues are numerous. Some suggestions, as rotating payment of creditors, are egregious.
    I gotcha. Yes, I do disagree with that item in general. However, that is how you manage these types of expenses in crisis. If you cannot possibly pay all of them, then pay the ones that you can. So in spirit of the post, I know what the poster was getting at.

    Originally posted by AnotherReader View Post
    Your financial advice generally makes sense, except I'm confused by your inclusion of $1,000 for the payment of personal loans in the proposed post-BK budget. My experience is that personal loans are usually discharged in bankruptcy (leading to a lot of broken relationships with family and friends...). Am I missing something?
    That was a mistake. I apologize. Yes, that should be a dischargeable item. So that would free up $1,000 more in her budget.

    Originally posted by AnotherReader View Post
    My concern is she needs advice beyond this, advice that's tailored to her specific situation, especially with regard to the bankruptcy. She's already made at least one unfortunate choice to pull money from her 401k to try to keep up with the payments. The divorce settlement may complicate the bankruptcy filing, and there may be joint accounts with the ex, it's not clear. The help she needs is beyond what a forum can provide. The best advice I can give is to get competent, professional help, and to do it now.
    I agree with this in general. Bankruptcy is definitely a very complex topic that requires specific advice and I do recommend that she seeks out that advice. However, she came to the forum as a "first stop" before she goes any further, so we provided her advice that she asked.

    And I don't think anyone here would argue that the 401k withdraw was an unfortunate decision. But what is done is done.

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  • AnotherReader
    replied
    The issues are numerous. Some suggestions, as rotating payment of creditors, are egregious.

    Your financial advice generally makes sense, except I'm confused by your inclusion of $1,000 for the payment of personal loans in the proposed post-BK budget. My experience is that personal loans are usually discharged in bankruptcy (leading to a lot of broken relationships with family and friends...). Am I missing something?

    My concern is she needs advice beyond this, advice that's tailored to her specific situation, especially with regard to the bankruptcy. She's already made at least one unfortunate choice to pull money from her 401k to try to keep up with the payments. The divorce settlement may complicate the bankruptcy filing, and there may be joint accounts with the ex, it's not clear. The help she needs is beyond what a forum can provide. The best advice I can give is to get competent, professional help, and to do it now.

    Leave a comment:


  • dczech09
    replied
    Originally posted by AnotherReader View Post
    soapgal04:

    It's possible bankruptcy is your best option, but your situation is very complicated and the advice being given here is not appropriate for your specific situation. Some of it is just plain wrong.
    We have given soapgal04 GENERAL advice based on the information that was shared. If you have a problem with anything that any of us said, then let's hear it. This is public forum for educational purposes, so if anything that we have advised was just "plain wrong," then please elaborate and explain. But please do not call anything we said wrong without supporting yourself. It is rude and not very helpful as we are trying to help this person.

    Of course it is recommended that she ADDITIONALLY seeks the services of a competent bankruptcy attorney. That goes without saying on a public forum.

    Thank you!
    Last edited by dczech09; 04-04-2014, 01:14 PM.

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  • AnotherReader
    replied
    Too Complicated for a Forum

    soapgal04:

    It's possible bankruptcy is your best option, but your situation is very complicated and the advice being given here is not necessarily appropriate for your specific situation. Some of it is just plain wrong.

    First, you need to consult with an experienced, competent bankruptcy attorney. You want some one that knows whether you need to file in your particular circumstances, not someone whose only goal is to get you to file. A good one will help you fend off creditors while you and s/he sort through the issues.

    Second, there are two types of bankruptcy, Chapter 7 and Chapter 13. Chapter 7 will allow you to wipe out most of the debt. Chapter 13 requires a payment plan. You would prefer to avoid a Chapter 13 if possible. In fact, you would prefer to avoid filing altogether, and you may be able to do that through settlement and other techniques. This is why you need a competent, experienced attorney.

    Third, you are a party to a divorce settlement. You may have obligations under the settlement. It is important that you review the divorce settlement with the bankruptcy attorney. You don't want your ex hauling you back into divorce court for non-performance.

    Fourth, you have no equity in the house and it's costing you too high a percentage of your income. Is your ex-husband on title? Is he on the loan? Was the house made a part of the divorce settlement? If the house and the loan are in your name only, a short sale may be the best option. Again, if this is the case, how to time the sale should be based on your attorney's advice. If your husband is still on title and/or on the loan, and the house is specifically addressed in the settlement, a short sale could be much more difficult. The attorney will suggest options in this case.

    Fifth, once you retain a bankruptcy attorney, you no longer talk to your creditors. The only thing you say is I have retained an attorney to handle this, and his/her telephone number is X. Unsecured creditors will stop calling and writing you after they learn you have retained a bankruptcy attorney. Generally, they will not sue you, because they know if they get a judgement, that will trigger the bankruptcy petition and their efforts will have been wasted.

    Sixth, talk to the IRS about setting up a payment plan. If the ex did not handle the taxes correctly and you were unaware of his misdeeds, you can try for penalty relief as an "innocent spouse." This is complicated, and the bankruptcy attorney can probably refer you to an accountant or tax attorney if a lot of money is involved.

    I have watched a number of people go through this after the recession. One in particular is relevant to your situation. He retained a bankruptcy attorney over six years ago and still has not filed. In the interim, he paid off or settled his wife's medical bills for over $100k of uninsured cancer treatment. He paid off or got rid of the cars. Because the credit card companies never sued, the statute of limitations expired and they are barred from collecting. He is now working on settling the second on the house.

    So yes, it's possible to avoid bankruptcy or get through it with less damage than most folks by getting a good attorney that understands the process and is committed to helping you. I urge you to find one immediately and get started on solving your problems.
    Last edited by AnotherReader; 04-04-2014, 03:18 PM.

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  • hamchan
    replied
    Mine went down a whole 40 points. By one year after my discharge I had it rebuilt to a higher score than I had before filing, and have added another 50 points in the last year since. I have found that the effect on your credit is vastly overstated, usually by people who do not have any personal experience with bankruptcy. If you already have a lot of late payments and accounts in collections you will rebuild your credit faster with a bankruptcy than without one. And regardless of what Ramsey says, your credit score does matter. Even if you do not plan on opening any new accounts. I was also able to get unsecured credit less than a month from my discharge, and that is pretty common these days.

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  • Gailete
    replied
    Your credit will take a hit in the short term
    No matter what she does her credit score is taking a huge hit and probably falling like a boulder in water. That would be the least of my concerns.

    Until you get another job to help out, lots of blogs out there that you can read about other's crawling out from under that same burden. Also you might want to sell what you can on-line and I'm not recommending eBay which is very problematic for many of the sellers there now, but on Amazon you can resell all sorts of things and I sell on ecrater which you can list on for free and you might have to pay a .29% selling fee, but it is an easy place to list on and you will need to promote your store, but if you got a blog going and flogged your stuff there with a link to its listing on ecrater you might be able to sell things that you never knew you could. In other words do a write with pictures about whatever you listed that day to help get you out of the dog house financially and the direct link. Just some suggestions for making some money without basically leaving the house.

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  • hamchan
    replied
    Regardless of what you do there will be big adjustments to make. I would personally go ahead and file. Your credit will take a hit in the short term, but likely it will rebound more quickly than it would if you kept making late payments. Talk to a bankruptcy attorney and see what they say. Sounds like you'd be doing a a chapter 13.

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  • soapgal04
    replied
    Thanks for all the replies...

    No offense taken at any of your replies. Finally had a chance to read them. I asked for advice and brutal honesty and suggestions and insight. So thanks. The $3500 is take home pay. These expenses piled up the past few years after the loss of income, which eventually led to separation/divorce. We had a high income at one time, which I won't go into here but after his job loss, he was not interested much in anything. I don't see Bankruptcy as a way out, or a fresh start at all. It sounds as if I am going backwards and appears pretty humiliating, a letdown to everyone, and gives me a creepy, weasly feeling coming on top of a divorce from someone who was not too keen on trying to find a better job to help out - hence, d-i-v-o-r-c-e.

    By skipping payments - don't creditors get tired of that and sue you? I agree - some money is better than no money, but if credit counselors are saying - don't bother, that kind of made me see BK as the only option. Even the IRS seems agreeable to a payment plan, so that's a relief. I am still looking for a part time job - I haven't given up yet.

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  • EmzieAtInfinity
    replied
    Spend as little as you can, and pay the minimum on all of your payments that you're able to pay. If you can't pay a few credit cards this month, pay them next month and let a few other ones fall back for that month. Take turns on your credit cards, for example if you can only pay 6 credit card payments a month, pay your 1-6 credit cards, then next month pay your 7-13, then the month after, pay your 1-6, then 7-13. This is NOT good on your credit at all, but at least you will be getting your payments paid. Also, you should look into making some extra cash online in your free time. I make all of my earnings online, there is multiple free ways to make money online, and their is ways to invest a small amount and turn it into more. Message me if you are interested in anything to make some extra money online. I can give you some free programs to help you make a few hundred a month. I know of one website that literally pays to write articles, you can write articles on anything you would like and get paid 1 cent per view, comment, or like. The website is REALLY active. I made a article that took 45 seconds to write and got a dollar in views/likes/comment in less than a hour.

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  • dczech09
    replied
    Well said, Gailette!

    soapgal04, I hope you are getting all of this and paying attention. I want to emphasize that none of us are trying to berate you or beat you down. We all want to help you with this. But in order for you to be helped, you need to understand the gravity of the situation.

    Please do not take bankruptcy as a "fresh start" or a way to walk away from your troubles. If you take that approach, you will simply be back to square one in a few years. Once you file bankruptcy, you CANNOT file again for 8 years! So if you file and do not learn from this experience, you may find yourself homeless down the road. Scary thought!

    I don't think any of us here want that for you, and I am sure you don't want that.

    Bankruptcy is a "redo" or a "mulligan." It is not a license to cheat. As I have illustrated, life will not be glamorous after you file.

    You have not replied back yet, but I do hope you understand what we are driving at!

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  • Gailete
    replied
    I have had to take on a lot of debt due to my ex losing his job and divorce following.
    This is what caught my eye (on top of those that referred back to your last posting). Quit making excuses. Why should your ex losing his job make you go into debt? Does he owe you money? Or he didn't contribute his share of joint expenses? If the divorce is final, why did you leave yourself stuck with a house you couldn't afford? It is possible to always find excuses for spending money you don't have. I know I married a man that got us into $42K worth of credit card debt in less than a year. By the time I divorced him our monthly credit card bills were $1100 and I brought in only $1800 and while he told everyone he made $800 a week, he made $800 a week 2-3 times a year. The rest of the time his paycheck ran around $300 depending on how many cash advances he took while on the road. I played the flip the credit card game, but I wasn't putting anything new on the card for almost the last year. I was so happy to be rid of this money sucking maniac and go back to my frugal dependable ways of handling my money. Selling our house we got enough to pay off the credit cards with about $1000 left over. You can get out of a hole like this but only by taking the hard steps. You may have to live on beans and rice for awhile, no new anything, cut out all luxury items, no new clothes (I currently have on a skirt I made close to 10 years ago--clothes rarely wear out for adults, you just get tired of them), get rid of that house, get rid of that car, get rid of whatever you spent all that money on. Unless you spent it all going out to eat, surely you have something to show for all your spending. As the others have said, much of this debt won't get discharged in a bankruptcy, assuming you can even afford the lawyer to file. The longer you wait start divesting yourself of every bit of excess you can the harder it will be but you need to do it and do it now. Unless the $3500 is your take home amount, you don't 'make' that much, you make what your take home check says you do, somewhere around $2000 most likely. I made that much in my last job and I knew I could only afford a house for around $650, but you shouldn't try to buy a house when you sell yours, you need to find the absolute cheapest place you can find and rent until your bills are paid off. Sorry to say this, and I know not everyone would agree, but when a bankruptcy is filed for overwhelming credit card debt (not medical bills, etc.) to me it is just a legalized way to steal from the people that you 'bought' things from and the people that allowed you the loan with the understanding you would pay them back. The last time you pulled a credit card out of your wallet for whatever reason, how long ago was it? If in the last day, week, month, you know you had no intention of paying it off but hoping a bankruptcy would cancel it. I had a co-worker that did that. Right before she filed for bankruptcy she bought $100's worth of new summer clothes knowing full well she couldn't afford them or would pay them off.

    It will be a long hard battle, but you can succeed if you want to. I knew a man that back when the big Lincoln cars when out of style and the new economy ones came into being, his car dealership went into bankruptcy. But to him that didn't mean he didn't owe the money. He literally spent the rest of his life paying off each and every debtor what he owed them. That takes courage and stamina. He died a few months after his last bill was paid off but he wouldn't have wanted it any other way.

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  • JulieAlbright
    replied
    Yes and no on a Bankruptcy effecting employability. Companies cannot ask for personal financial information without cause. Many companies skate the line by justifying with "character reference" type of arguments and they will at the minimum pull a credit report. Other positions have strong reasons to investigate job applicant financial history -- such as my job which requires a Surety Bond be issued or my husband's job which requires a security clearance.

    As for the OP, I wish I had some better ideas or more encouraging words for you. As I'm sure you already know, the numbers just do not add up well in your favor. I hardly ever say this, but at this point I would agree with the recommendation that you wipe as much of that out as possible through bankruptcy and selling and just try to start over and better.

    The house and the car need to be sold, short sell the house if possible.

    Even post bankruptcy you are going to have quite a bit of obstacles with the student loans and back taxes. I wish you the best and I hope the next couple of years brings bigger and brighter hope for you.

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