Anyone have experience with bankruptcy vs. judgements? - Mothering Forums
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#1 of 23 Old 04-02-2009, 06:49 AM - Thread Starter
 
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I think that the lawyer you are meeting with will be able to answer all your questions. We met with a bancruptcy lawyer when we were dealing with a short sale on our previous house (we moved, had the deal fall through at last minute and were stuck with two mortgages for 22 months). We ended up being able to short sale and not file bancruptcy.
Qualifying for chapter 7 vs. chapter 13 depends on your income, which I would believe would include your husband's income. I really don't understand how you could just file for bancruptcy by yourself, without including him. I am sure the lawyer would be able to talk to you about that. I know that the one car we own outright would have been seized if we had filed. I believe the blue book value was greater than what you have listed for your car.
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#2 of 23 Old 04-02-2009, 09:31 AM
 
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In my state it does not include your spouse's income. I filed separately from my spouse due to major issues with my ex. With a judgement they can and will come after you for the money. For years. Bankruptcy ends that.
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#3 of 23 Old 04-02-2009, 09:35 AM
 
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Judgement will not go away, they will always try to collect. Bankrupty will take the debt away and it won't come back.

Don't stress about this now, you have a lawyer appt on Monday, wait, find out the real facts from someone in your state that deals with this everyday. You are only going to get yourself more worked up about all of this now, let it go until Monday and let go of the stress until you are armed with the facts.
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#4 of 23 Old 04-02-2009, 09:38 PM
 
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First off, I'd like to say that I'm scared to ask this here. I've gone to some legal advice forums and been called some things that have me very upset atm.
So, if you don't agree with what I'm doing with my finances/life, please please refrain from judging me and just move on. Please. Thank you.

When I was in college I racked up a bit of credit card debt (about $9k total on two cards) and took out students loans about $80k - combo of private and govt. backed loans. These were all for education expenses (or living while going through college).

AFTER I incurred these expenses I got married, so I'm not worried about that cross-over. We live in NY, which is not a communal property state as well. So, I think I'm correct to believe that they can't go after my husband for my debt I incurred while out of the marriage OR the house we live in, which he did purchase after our marriage but it's completely in his name and paid for by him. If I am wrong, please correct me there! Would be very important to know!

So, long story short, I got pregnant unexpectedly during my last semester of grad. school and never got into the working world. We had twins (unexpectedly too!). We are done having kids now.

We have chosen for me to stay home with them for several reasons. Mainly b/c my degree is in Early Childhood Education (Birth-2nd grade) and if I were working, then I'd be spending most of my day with other people's children all day while mine were in day-care. This isn't the right fit for us.

So, in order for me to stay home we must live off just his income. I have tried to work from home and it's just too much - twins are a handful! (they are 20 months now) I will again work someday, but it maybe many years away as we are considering homeschooling. When I work again, I would want to pay off my debts, of course. I just can't right now for the sake of my children. It's very important to us that one of us is a stay-at-home for now.

We can't afford even the minimum payments for the loans or credit cards. As it is we survive off food pantries and a budget so tight we sometimes have to wait a week or two to buy groceries so we can pay the bills we do have.

So, I stopped paying my credit cards and put deferments up on the student loans.

Yesterday I got a court summons for a judgement from one of the credit card companies. I'm figuring I'll get one from the other credit card some day too. Not sure if student loans need to do that to secure their money or not.

I have 10 days to answer the summons if I'm going to. My understanding is that I should only answer the summons (with a written letter) IF I contest what they are saying I owe. Then I found other advice that says I should ask for proof of the debt no matter what - on the chance that they don't have proof anymore and then they have to stop collections by default. Anyone hear of this?

So, if I do answer it would be to contest it.
If I don't, then a default judgement is placed against me.

From what I understand (again, please correct me if I am wrong or missing pieces!) that means they will garnish my wages when I work again (that is fine), that they will seize any assets I have (I'll talk about those next), that they can take my taxes (anyone have details about this?), and that it can affect my ability to get a job (I doubt that one, unless I'm going for state employment or something) and to get covered by insurance (anyone ever get denied ins. coverage for bad credit?). I'd like to know what I'm getting myself into if I let them put a judgement against me, so if there's more than this, please let me know if you know anything else.

My assets - I own nothing really, except our car. I've paid for in full and own it completely. Just me. It's current wholesale value is $2700. Anyone know if that falls under the allowable property value? If it does, then how do I protect it from seizure? Do I have to do anything to protect it from getting taken? I think the allowable value may be close to that, so if it's a tiny bit off, then what will happen? (ie, the allowable value is $2400 and the car is worth $2700)

Again, our house is in my husband's name and I contributed no money towards its purchase. Is it safe?

So, lastly (I'm so sorry this is so long, it's really tearing at me...) I am wondering if bankruptcy might be a better option for me.
I would only qualify, if at all, for Chapter 7, as Chapter 13 involves payments and I can't make any with no income.
But what benefits would I get from filing Chapter 7 that I wouldn't get from allowing judgements to be placed on my credit?
I know student loans can't be forgiven by a bankruptcy. There is also no SOL (statutes of limitations) on student loans.
The SOL on the credit cards is 6 years and after 7 years it will come off my credit. How long does a bankruptcy hang on your credit record for?
I guess that doesn't matter since my credit will be botched b/c of the student loans anyway.
Hhmm...guess I just can't see why spending the money on a bankruptcy now would be better in the long run instead of judgements that fall away in 7 years. Maybe the benefit would be that if I DO starting working before 6 years is up, then I don't get my wages garnished for the credit cards, only for the student loans.
hhmm...

Oksie, this was WAY longer than I anticipated! If you made it this far, thanks for listening!!! I really need someone to talk to as much as I need advice, so it's all appreciated.

BTW, I am meeting with a lawyer on Monday and will report what he says for others reference. I just am sick to my stomach with worry in the mean-time and so would love any advice from someone who's been there or knows about these things before then so I can get a little peace of mind or at least know instead of worrying about the unknown.

Thanks so much!

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#5 of 23 Old 04-02-2009, 09:45 PM
 
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Well I was going to tell you to find legal counsel but you are already doing that. The only insight I can give is that I'm 99% sure that if the house deed is in his name then it cannot be seized to cover your debts. I also think there might be homesteading laws that your home couldn't be taken from you in a bankruptcy settlement even if your name were on the deed (unless it's that the mortgage is in default). I am not sure on this though, maybe some others have better advice. Good luck.
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#6 of 23 Old 04-02-2009, 10:37 PM
 
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I've been taken to court over a student loan in the past (I think it was a Perkins loan), but I payed it off before they garnished my wages. Just wanted to let you know that it's possible. Good luck with your situation - I've been there.
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#7 of 23 Old 04-02-2009, 11:34 PM
 
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So long as your student loans are in deferment, they will not negatively affect your credit, and they will not come after you. Just keep deferring them. You are eligible to defer them so long as you don't have a job, although interest does continue to accrue.

I have never heard of a credit card company garnishing wages, I don't know if that is a new thing because of the current economy, or what. Student loan companies can go after tax returns and garnish wages (after default), but I was unaware CC companies could do that.

As for how bad credit affects you - not being able to get insurance (or paying more for it - talking car insurance here), not being able to get a bank account, not being able to get a job (many jobs do background checks now that include a credit check), not being able to get credit when you need it. I'm sure I'm missing something, but those are the ones that affected me personally.

I would most definitely not allow a judgment to go through uncontested. Chances are good the cc company sold your account to a collection agency and that's who's trying to collect. I would demand proof of any amount owed at the very least. How long has it been since any activity on the cc? This may be their way of restarting the SoL, since the original SoL on the debt is 7 years from last activity - a judgment will probably restart the 7 years. Do not pay them a penny right now, as that will restart the SoL. Demand proof and get your attny's opinion on how to proceed.

As for bankruptcy - the SoL on that is the same as everything else, 7 years. The only things that can be reported beyond that are federal debts like federally backed student loans, IIRC.

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#8 of 23 Old 04-03-2009, 05:15 AM
 
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I'm not very knowledgeable in either matter but wanted to give you big hugs. It will get better. I know money issues are so stressful and can seem so consuming but just try to focus on what you do have, wonderful babies, a loving DH,etc.

Hang in there...it might get worse before it gets better BUT it WILL get better!

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#9 of 23 Old 04-03-2009, 08:30 AM
 
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Quote:
Originally Posted by cristeen View Post
I have never heard of a credit card company garnishing wages, I don't know if that is a new thing because of the current economy, or what. Student loan companies can go after tax returns and garnish wages (after default), but I was unaware CC companies could do that.
They or the collection agency sues you within the SOL for the amount owed plus interest, penalties, and court costs. If you lose and don't pay up, the court will garnish your wages to pay off the judgment by the guidelines set by the state. It is not some new thing and something to take seriously. States have different laws on garnishments. Need to read up on the rules.
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#10 of 23 Old 04-03-2009, 09:03 AM
 
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There is a ton of info on creditboards.com, they have a student loan forum also.
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#11 of 23 Old 04-03-2009, 10:07 AM
 
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Uhoh! In editing the thread I accidentally lobbed off some posts. And in returning them, now the post orders are messy.

I'm so sorry and especially embarrassed since I'm usually the tech geek girl. 10 years working with vbulletin and I have no idea why I did that. :

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#12 of 23 Old 04-03-2009, 12:04 PM
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with your ece background, would you consider doing childcare in your home? Or working a second shift job? I'd hate to see you declare bk over 9000 in cc debt.
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#13 of 23 Old 04-03-2009, 12:48 PM
 
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If I am understanding this right you want to declare bankruptcy over $9000? I think that would be a terribly stupid thing to do from a financial/credit standpoint. Your credit will be destroyed and it can and will have an impact on you and your family as other have mentioned for many years to come.

The smart thing to do would be to just suck it up and get a part time job when your husband is home and able to watch the kids or do in home daycare. Working part time you could easily pay off the CC debt in a year or less. You could pick up some dinner shifts or weekend AM shifts a few days a week at a decent family restaurant and have it paid off in no time. If waitressing is not your cup of tea most chain grocery stores offer very flexible scheduling and are union so they pay well above minimum wage.
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#14 of 23 Old 04-03-2009, 03:39 PM
 
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Wouldn't a part-time job cause the student loans to no longer be deferred though? How could the OP continue to defer the student loans while paying the credit card debt?
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#15 of 23 Old 04-03-2009, 04:06 PM
 
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Wouldn't a part-time job cause the student loans to no longer be deferred though?
I have no idea but it is not worth it to file bankruptcy over $9000. My husband filed bankruptcy years ago for debt he incurred before we were together. It does impact your life in a very negative way for a very long time. If it is such a low amount that could be paid off very quickly it should be avoided at all costs. The student loans will need to be paid off eventually, might as well be proactive rather than have that looming over your head indefinitely.
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#16 of 23 Old 04-03-2009, 08:27 PM
 
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People seem confused, so I just wanted to clarify.

I have about $9k in credit card debt and $80k in student loans.
If I'm going to pay off one, then the other will want money too - ie - if I'm working they'll all want payments.
So, although $9k is very little, $80k not, and I can't pretend one doesn't exist. It's all or nothing - at least that's how it seems.

So, my theoretical p/t job would take me away from my kids but only add enough income to pay part of the bills. Even if I only paid the CC, my credit would still be ruined for 7 years or more b/c of the student loans.

In fact, I've been in default for almost a year now, so I'm pretty sure my credit is horrible for 7 years anyway, just not devastated. But that doesn't really bother me.

As I said before, I am very well aware and okay with having bad credit (contrary to popular belief, it is not the end of the world) and I am okay with having my wages garnished one day if/when I do start working again.

Thanks to the poster who suggested daycare in my home, but until I can manage my 2 comfortably that's not an option :P May in a year or two

Thanks for the helpful advice and support so far!

Anyone know the answer to the question of how exactly a judgement is played out and whether I will have to physically go to court over it or not?

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#17 of 23 Old 04-03-2009, 08:41 PM
 
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Are you in default or deferment on your student loans? If you do decide to work and aren't in default you could look into the income based repayment plan. If you aren't making a ton of money then you won't have to make very large payments, here's a link http://www.ibrinfo.org/.

I don't know anything about bankruptcy, but I'm in the middle of applying for life insurance and one of the questions is have you ever filed bankruptcy, so it's something can follow you for longer than just the 7 years.

Good luck with what ever you decide to do.
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#18 of 23 Old 04-04-2009, 09:10 PM
 
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bankruptcy doesn't do a thing to federally backed student loans...you still have to pay them back no matter what chapter you file...its all in the small print of your student loan master promissory note...

So it does sound like you would be filing for $9K in CC debt...unless your private loans might be able to be rolled into a bankruptcy...

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#19 of 23 Old 04-04-2009, 09:43 PM
 
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Quote:
Originally Posted by mamayarn View Post
Wouldn't a part-time job cause the student loans to no longer be deferred though? How could the OP continue to defer the student loans while paying the credit card debt?
No it wouldn't actually. They offer economic hardship deferrements and basically they look at overall income. Based off my own student loans (over 100K) and what I earn, I don't see their being an issue with deferring her loans for a while longer.

I agree that I would not ruin my credit for years to come over less than 10K.

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#20 of 23 Old 04-05-2009, 10:59 AM
 
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No it wouldn't actually. They offer economic hardship deferrements and basically they look at overall income. Based off my own student loans (over 100K) and what I earn, I don't see their being an issue with deferring her loans for a while longer.
If that's the case for the OP's student loans, then working an off-shift job from her DH might be a viable solution.
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#21 of 23 Old 04-05-2009, 04:19 PM
 
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regarding student loans, if you are in default they WILL OFFER RECOVERY!!!!

you make payments for a certain amount of time and they consolidate your loan, be very careful about the interest rate you consolidate under, but once you do this they erase the fact that you ever defaulted from your credit
record, it just says the debt was transferred.


i did this and it totally works.

if you are in deferment then you can get back on the income contingent plan or economic hardship and you don't have to pay if you aren't making enough.

judgments are serious in quite a few states and i would contest the debt immediately. check out the credit info site listed previously. also, i'd not declare bankruptcy over $9 k either. the student loans will never go away and you can get a settlement amount for the cc. though, 7 years isn't terribly long if you already have a house and a car....

eh. who needs a signature?
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#22 of 23 Old 04-07-2009, 11:55 AM
 
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Okay, I am following up on this now.

I saw the lawyer yesterday and here are all the correct answers! (for NYers, at least)


1. Bankruptcy stays with you for the rest of your life, not just 7 years b/c applications and other forms ask "have you EVER filed bankruptcy" and you have to answer "yes" legally!

2. Judgements last 10 years and can renewed (although seldom followed through on) for 10 more. So, a judgement will stay with you for (worse-case) 20 years. Very few, if any, applications/forms ask "have you ever had a judgement filed against you".

3. Student Loans do not get written off in bankruptcy (private or govt). I knew this, but some ppl on here did not.

4. Student Loans - government - easy...I am just signing up for the Income Based Repayment plan that another poster recommended, under that we owe NO PAYMENTS with our current income!!! THANKS A TON!!!

5. Student Loans - private - not so easy. They won't take "don't have the money now" for an answer as long as the government loans will. The lawyer said I should call them and be honest with them about my ability to pay and they will do what they will to collect or they will defer.

6. I am collections proof - my car and my bank account have so little value that they are protected by law. I have no other assets other than these.

7. Our house is perfectly safe b/c it's in my husband's name, not mine.

8. The credit cards may place judgements on me and then the most they can do is call alot and send an offical form asking for all my assets. I have to answer that honestly and send it in, but they will only see that I'm again, "collections proof".

So, yeah...that's about it.
I did mean to ask about taxes, but I forgot. I'm going to email him about that. If you have any questions regarding any of this stuff, I'd be happy to help, just PM me!

Bad credit isn't the end of the world, really. Not in our situation. My husband has prime credit so when our car dies, it'll go in his name. We already have our house. We are all set for quite some time. If anything ever happens to him, then yes, I'd be in some trouble perhaps, but we'll have to take that risk so I can stay home with the children and we can have a good start for them.

I feel good about my decision and at peace b/c I know who benefits from it.

:

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#23 of 23 Old 09-29-2011, 03:52 PM
 
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On further reflection, removed content.

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