Filing for bankruptcy

[WindyCityMom]

Hello everyone!  The time has come where I feel filing for bankruptcy would be beneficial.

I just got laid off from my job.  The same day, I got a call from a law office who was planning to sue my husband for a $6,000 credit card debt.  They said that if we act now (next week) they'll settle for half.  We have to come into their office (need an appt though), sign paperwork that states the account and the matter are closed, and give them a certified check.  I'm iffy on all of this and will likely call to request something in writing on Monday.

Between my husband and I, we owe at least (and I say at least because I'm not sure about some of the accounts- interest and whatnot) $20,000 in credit card debt.  On top of being young and stupid, we charged a lot of our groceries and such so that we could make payments.  When the cards maxed out or were put on hold, we had to stop paying because we needed to put food on the table.

My husband makes very little, somewhere around $30,000 per year, but without the debt it is well within our means and do-able.  With my income before (slow season I was getting $400/mo, busy season as much as $1400/mo) it was even more do-able.  

My husband's name is on one vehicle, it's worth about $400.  Our main vehicle is in his mother's name.

I have an interview next week to get a Link card (food stamps) and medicaid should be kicking in again for all of us (I am the only one covered right now) within the next couple of weeks.

Right now, paying monthly payments is not an option- wage garnishment is something I fear greatly- where would we live?  I am fortunate to be getting the Link card, but still.. and utilities?  Eek.  

Bankruptcy is looking like a very real possibility.  Most of our creditors will be taking us to court soon, I think.  The sooner the process can begin, the better.
 

I really don't know where to start.  My mother had financial issues and filed a few times, as did my stepfather.  I'd like to call him and get info on who did it for him, how much it cost, etc.  I was told it was fairly expensive.  Is there a way I could represent myself, or is that a stupid idea?

Would my husband and I have to file separately? 

Anyone done this before and willing to share their story?

I realize that bankruptcy has it's repercussions, and I'm okay with that.  This is dire.

[zebra15]

I filed about 9 years ago.  I walked away from close to 50k in debt.  I had an atty and the total cost was less than 1k.  I would NOT do this with out an atty.  You need to pull your credit report and find all your accounts.  You will want to file with your husband most likely.  You will want to do chapter 7 and discharge all the debt, not ch 13, which is repayment plans.

About 6 mos after my court date I was able to get 'credit' again.

[WindyCityMom]

One more question?  Half of my tax return was going to go to that attorney, and half was going to go to my midwife.  Can they garnish our tax return yet?  Wouldn't they have to take me to court, review the case, and have the judge decide that?   

I'm wondering if I should just hold out, call the law office, and tell them that they should start the process of suing my husband.  Would Chapter 7 cover that?  Google isn't helping much.

According to Google, going to court will just garnish our wages and take our assets ... I'm ok with the $400 car going- but will they take my beat up laptop (which was a gift from a family member)?  Certainly they won't take our kids' beds, right?  That kind of stuff... I don't know what they mean by "assets".  

Holding off on paying the law firm would mean we'd be able to pay a bankruptcy attorney to get this process started sooner than later..  ideas?

[WindyCityMom]

Thanks, Zebra!  And goodness, credit is the last thing I want! (Good to know though)  I mean, sure I'd like to be able to purchase a new vehicle within the next 5 years- but with this debt, that's not happening anyways.  I can't see things being worse than they already are.  And the stress is nearly unbearable.

[mattemma04]

*****

Edited by mattemma04 - 4/21/12 at 2:22pm

[kitchensqueen]

Make sure you have any debt collection agency certify - provide you a written, legal statement - that they own your debt and have the right to collect it! Send them a letter through certified mail requesting this. A lot of companies out there try to collect on debt that they don't legally own, and even if you pay them, you're still on the hook for the money later down the road. Be very careful. 

Also, you can't get certain types of debts discharged anymore, as mentioned. I believe student loans are ones that you're stuck with paying. Since the new bankruptcy laws were passed a few years ago, getting a chapter 7 dismissal is pretty hard - most people have to go through chapter 13 repayment. You need to consult an attorney that specializes in bankruptcy/debt law. Do not try to navigate this alone. 

As to your question about assets - they can take houses, vehicles, money - I'm pretty sure they can't take stuff like common household goods, like your kid's beds. There's simply no market value in that stuff, frankly. They take assets in order to flip them so they recoup a portion of what is owed. 

[QuestionGal]

I've not read the whole thread, just the OP, and I'm not in your state/area so the laws might be different  but a couple of things jump out:

1- I've NEVER heard of a law firm acting as a debt collector. NEVER.  I have however heard of debt collectors flat out LYING to try and collect a debt and threatening things that are simply NOT possible or even legal. They get away with it because most people aren't aware of their rights when it comes to debt collections.

2- Not sure about where you are but where I am from bankruptcy laws have changed. It no longer eliminates the debt you had previously incurred. What happens here is that your finances are analyzed and you are put on a strict living allowance/budget based on your income. You will be allowed enough to live off of with NO frills. No cell phone, cable, dry cleaning, eating out, ability to move. As in you will have to save for several months to even afford a single ticket to the zoo. (that is all 3rd hand information).  The financial restrictions will be in place until you have paid back all the debt.  The plus side is that (I think) your debt will not continue to accrue interest (it is frozen at it's current value). However, any additional income that you bring in (new job, raise, 2nd job, etc). Will automatically go towards paying off the debt. Your living situation will be frozen until the debt is paid. ETA; What KitchenQueen said.

3- have you heard of Dave Ramsey? He is fairly hard core and unsympathetic towards somethings but he knows his stuff, knows how to handle debt collectors and offers sound advice (if hard to swallow).  

4- along the lines of #4. Are you involved with a church? I ask because many churches offer all types of help for these types of situations. They may have food programs, financial assistance programs, financial advisors who will help for no charge, child care, etc.  The Dave Ramsey program is offered at many churches and it called "FInancial Peace University" many churches will offer it free to those who need it. 

[Drummer's Wife]

The trustee will not take your only vehicle, worth $400. In all states there are exemptions, in the thousands; it's how people keep their belongings, cars, boats, and even houses with equity in bankruptcy. Most states allow you to choose between federal or that state's exemption - whichever works out best for your situation. You can keep your tax refund - this years and next years... you will just need to exempt and count it as an asset - chances are the day you file it won't still be sitting in your accout, right? Depends on the state, but some do allow for so much cash on hand. It would be best, of course, to pay your attorney and any bills like rent ahead of time so the money is spent.

Look to see if you qualify to file for free - if you qualify for food stamps, you probably meet the income guidelines to waive the filing fee. You could file pro-se, yourself, and many people successfully do so - especially in uncomplicated cases such as when there is no businesses owned or a mortgage. It means understanding every single schedule and form. Hours and hours of work.

Talk to an attorney - a consultation should be free. Otherwise you are just going off what others (myself included), are saying. there is some misconceptions in this thread already. You don't have to cut out all spending; you just need to not be using credit cards, usually it's 90 days thy look back on. No one is going to care if you spent $50 going out to dinner or got a haircut the month before. They are looking for big purchases and money or property transferred - as in, hidden bank accounts or a Ferrari you gave away as a gift last year.

JMO, but $20K is a low amount to file BK, since you wouldn't be able to file again for 7 more years. What if something major happened, since you say your DH does not have health insurance?

Also, check out creditboards.com and bkforum.com for BTDT stories.

[WindyCityMom]

I'm in Illinois.

We will all have health insurance in the coming weeks.  There is just NO way to pay the $20k in debt without sacrificing our rent/utility/gas expenses.  We are on a very tight monthly budget.  

I spoke to my stepfather who just filed chapter 7.  He advised me to not pay the law office because of the reasons you all stated above.  *And* because I'll need that money to file for the bankruptcy... I didn't know you could qualify to file for free if you're low income.. I will look into that.  (Though I *do* remember my mom found a pro-bono one when I was a kid because she was disabled, had low income, and was a single parent.. that worked out for her). As soon as our income tax return comes in, I plan to pay the midwife, pay my March rent ahead of time, and most importantly go find a bankruptcy attorney.  I'll be looking for free consults, since a lot of firms charge a consult fee that they will waive only if you sign with their expensive practice.  not really what I want to do... I don't want to be baited in.

I'm just crossing my fingers that they're not in the process of garnishing my tax refund :(  I stupidly gave them my DH's account number, but we're transferring his direct deposit into a different account now.

[erigeron]

I don't know a lot about this, but I have heard that it's not a good idea to file until you are sort of through the worst of times and are starting to climb back up. I'd see a bankruptcy lawyer and ask them if you'd benefit from filing now or from waiting. It sounds like you are worried about this $6k from the other law office, but I wouldn't rush into filing because of that--make sure it wouldn't be better for you to wait.

[hrsmom]

I just filed chapter seven and it was easy and a huge relief. I don't check back all that often but feel free to pm me. All my debt is being discharged. You can keep some assets, especially a car worth under a certain value, even some savings. I'm sure it varies district to district but BK is federal so my experiences will be similar to what you would experience.

I did use an attorney because I own a business. You could also look into a paralegal. Go with your own comfort level on that one.

I was being harassed by an attorney debt collector. I think some threats to take you to court are just threats, but you don't know who is bluffing and who isn't. Extremely stressful.

[hrsmom]

You file together with your DH. I'd go at least a paralegal or low-cost attorney. I found one online that charges after you file a one time fee of $900.00 or a monthly payment option. I paid the $900 do I don't know the details.

Once you file, there is an automatic stay and no one can try to collect a debt from you during that time. There are debts that can't be discharged (like if you've had a judgment against you as in you injured someone, and there are a few others, not credit card debt) After you file you have to go to a meeting with the trustee which seems scary but is not a big deal AT ALL.

You have to take a credit counseling course before you file. This can be done online and can cost around $12.00. Then another course before final discharge of debt. I really enjoyed the second course.

Good luck, Mama!!

[WindyCityMom]

Thank you all!

I am so less stressed after looking into this option.  My DH is on board, he wants the calls to stop, and he is just incredibly stressed.

I'm actually looking forward to trying a credit counseling course.  We need all the help we can get!

[Imakcerka]

My Mil just did this.  I can tell you she is so much happier.  When she did it they promised not to take her house or car.  And she still has it all.  Just no longer has debt.  The new debt laws make it pretty easy for those who make under 40k.  Good luck and I certainly hope things start looking up.  Can't wait to see you on here with less stress!

[fresh_veggie]

My father in law is an attorney that does exactly those types of lawsuits (debt collections, etc.) If they are contacting you, they own the debt or they are acting on behalf of someone that DOES own the debt, so the call is not just something out of the blue. Going through the bankruptcy process is stressful and whatnot but if you go to court to work out the debts, the lawsuit can end sometimes in the positive for you guys, as well. If they get your settlement down to a low monthly and eliminate interest in the courts, you can avoid the bankruptcy situation and your credit report won't be GREAT, but after about a year of hell with the bills, you guys will probably be in MUCH better shape than a formal bankruptcy. You might even be debt free (which 20k of debt is NOT bad especially if you can work part-time and your husband makes the kind of money he makes.) You have to pay for the debts you incurred, but you will be less likely to jump into a situation that could lead to future financial troubles. Plus, bankruptcies can cost a lot more than a thousand dollars.

Another option would be to get a personal loan from the bank for whatever you owe on all your debts and to use it to pay off all your credit cards in one swoop if that would still be a possibility. Then you'd have one payment to make (it wouldn't be a GREAT interest rate, but it would probably be less than what you currently pay on your credit card interest rates to where you would be paying WAY less than what those are currently added up together for the month to month. Good luck, even if it's a bankruptcy option you guys choose. 

[CorriJ]

My husband went through a bankruptcy almost 2 years ago. I can't remember the specifics but it cost about $1000, the majority of his debt was medical bills. You have a lot of great advice here so I'm not going to touch on the bankruptcy. 

What I do want to comment on is the calls and the stress from creditors, which more then likely wont stop right away after the bankruptcy. Ours took about a year to taper off. But there are a lot of laws and regulations they have to follow when they contact you. Times they can and can not call during, how often they can call, if you state that you do not wish to receive anymore calls they must next address you by writing. After the bankruptcy is finished if they call you only need to inform them that you have gone through bankruptcy and the name of the lawyer who handled it, it is their responsibility to get the information. 

http://www.ftc.gov/os/statutes/fdcpa/fdcpact.shtm has all the information about the Fair Debt Collection Practices Act. 

[AlexisT]

If you are on the verge of bankruptcy I strongly urge you to reconsider your birth plans. You have pregnancy Medicaid that will pay 100% of your costs. The last thing you can afford now is to spend thousands on a midwife.

Do not pay anyone a dime until you get independent financial counseling. Maybe someone on MDC can hook you up with help in your area. I am honestly worried that you will wind up in the same position again with no recourse. Bankruptcy is good at erasing debts that are overwhelming your income; they will not help if your expenses continue to outpace your income, such that you are putting groceries on credit.

[JollyGG]

Oh wow. There's a lot of fear-mongering in this thread that's not even true.

In your situation a Chapter 7 is likely an option. The first requirement in filing bankruptcy, either 7 or 13, is that you attend a pre-bankruptcy counseling session. I would recommend that you find and attend a session near you and that will answer a lot of questions and help you figure out if this is the right option for you then you can decide how to proceed. If you call the courthouse in your town they should be able to give you listing of places that can do this counseling.

[iowaorganic]

I filed Ch 7 for a very weird situation- it was to separate my name off a business- I had no personal debt to forgive- and the business debt wasn't forgiven either.  But you are allowed to keep 10K in assets.  You kids bed is worth about $15.  You are using garage sale values here- not what you paid for it.  Your laptop is worth about $50.  A household worth of stuff isn't worth very much.  So- don't worry about that.  They will ask you to list everything you did in the past 6 mo.  So writing out a check for a midwife is probably not a great idea.  My attorney and fees was $1800- but that was for more than just the ch 7.  not sure what he charges just for a chapter 7.  I think both credit counseling courses were about $60 total.  But stashing your tax return to pay your attorney is a very good idea.  Don't do this until you have a good working budget going for you that you have made work for a couple of months.  I would go with a medicaid paid birth and save your money- we didn't have any insurance or medicaid so we had to have a cheap home birth while I was going through this...  I am totally home birth- but a free medicaid one might be better in this case.

[Mulvah]

Originally Posted by AlexisT 

If you are on the verge of bankruptcy I strongly urge you to reconsider your birth plans. You have pregnancy Medicaid that will pay 100% of your costs. The last thing you can afford now is to spend thousands on a midwife.

If this is your situation, please, please, please utilize your Medicaid to pay for your birth.  Anything else is beyond foolish.