When to Stop Paying Credit Cards??

[WayTooMuchDebt]

I have read so many posts now and I know I read something along they way so please be nice if it is answered somewhere already! My head is spinning from reading so many posts and trying to absorb it all! And then trying to go back and find the posts I thought we very helpful.

I have come to the point where I realize we will need to do something! I am assuming we will be 13 as we make about 128,000 combined and my mom lives with us and she gives us 100/wk (she helps with daycare so we do not have to pay that which saves us some $).

We are a family of four. Me, husband and 2 children.

We are in Boston MA area.

I am going to try and get an appointment with a lawyer for the end of August. I know who I will be going to but mentally have thought the end of August would be best timing for us. Mostly because I don't want the kids to hear too many phone calls etc and they will go back to school first week of Sept.

Our two mortgages are around $3200. First 2032 (balance of around 240,000)and second aorund 1200 (balance of 141,000 - interest only adjustable and this is the interest part- Horrible loan that I tried to make things work with but only made it worse!!!). We are upside down about 40-50 k but we want to keep the house. Rents are crazy around here if we try to find a place for all 5 of us and we really do love where we are.

Our car payments are 110 and 360.

So for the real questions...

I have been using the cards for groceries, gas, oil and utilities the last two months. I can't stop using them and still make the min payments.

We (I know stupid but live and learn now that I have read so much!!) did a balance transfer of 1,000 to one card and 2,500 to another just two weeks ago so I realize now I should not even file until Oct 1 maybe later. We also did some balance transfers in March just switching balances around for 3500 and 5500. I think we had a cash advance of about $300 in the last three months as well.

So I figure I need to at least make payments on the two cards I made transfers to until we file but when do I make the switch to not paying and using that money to pay for the items I usually charged? From reading I think this will be the next BIG step. And a hard one. We have never been late on anything. I know a big game but we have yet to be late.

I can't believe we are in this mess but it is time to face it and make a plan!!

We also took out a BOA loan on 2/8 for 19,000 (thought everything was great then! Got a tax refund, great bonus and this loan had tons of money yeah right!!) So we did a home improvement project for like 13-14,000 (have contrators bill and checks I gave him). Does anyone think this will be a problem?

I am sorry I started by asking one question and then gave a book! I guess i needed to get it out!
Thanks!

[keepmine]

If BK is inevitable, stop paying all debt you wish to discharge now.
I'd rethink keeping that home. Not only are you upside down but, have a really bad mortgage.

[BigJohn]

If you can get an appraiser that handles bankruptcies to appraise your house for under $240K, you will be sitting pretty.

[Flamingo]

You can stop paying on the credit cards at any time if you know for sure you are going to file. Continue to pay on your mortgages if you want to try to plan to keep the house. Do not be late on any secured items if you want to keep them (i.e., cars). The interest only second mortgage is bad news. When does that kick in to pay principle along with the interest? What will your payment be when that occurs?

To give you a rough idea of how things will go down with a Chapter 13 and stopping CC payments, we were not late on anything when we retained our attorney in 2/01. He advised us immediately to stop paying all credit cards and vehicle payments since our two vehicles were going to be crammed into our Plan. Our mortgages would be paid outside the plan and we were to continue to pay those. Our first late payments started to come in March 2001. Be prepared for incessant phone calls from creditors, reminders either via email or snail mail. You don't have to answer them and it helps if you have caller ID. When you retain your attorney, your attorney will give you his contact information to provide to calling creditors which will put them at bay for a while as they wait for your filing information. But since you even haven't seen an attorney yet and want to stop CC payments now, be prepared for the calls. It can get overwhelming and nerve racking and once you get things organized with your attorney as to what you are going to do and actually file, it gets easier except for the lifestyle change you will encounter and have to adjust to (not easy if you are used to a lot of money coming in and free spending) because you will be on a tight budget. Note - when you stop your CC payments, you will have extra cash which will seem like a dream come true. Don't let it go to your head - save it to pay for your attorney and get those car repairs done or whatever repair that needs to be done to the house because finding money to do that in a Chapter 13 plan will be tough during the coming years.

As stated by the previous poster, you may want to really think about your house since you are so upside down right now and have that bad second mortgage. Discuss it with an attorney before you make any decisions.

[liz417]

...Do not be late on any secured items if you want to keep them (i.e., cars).

Hi Flamingo, beside the obvious, how come you shouldn't be late on payments? I retained an attorney and stopped paying the cc that day. You would think that I would have all this extra money, but I was paying $1,500 min to cc and now I have those payments ($1,200) to my attorney! So I have no extra money and have been late (couple of weeks) to the mortgage company the last couple of months. Will this look bad at my 341???!!???
If I didn't have to pay the attorney, yes, I would have an extra $1,500 per month!

Thanks!

[WayTooMuchDebt]

My second is actually a HELOC and we just did it in 2006 so it will be until May 2021. My first is good 5.375 for 25 years from 2003.

I looked on Zillow and it actually has 289,000 for a value. How accurate has this been? I also pay taxes on a value of about that but houses used to sell for much more then the tax value.

I still don't see us getting close enough to 240,000. I never thought I would be wishing for my house to be worth less then 240!!! Oh well. Do they take the actual sales price as a value or do they figure you would only walk away with like 90-93% of that after realtor fees?

Any chance of loan modifications? Anyone have anything like this happen. Even if I could just get the balance to be a fixed loan instead of interest only I would still feel so much better! Anyone ever try to work with their lender? I wonder if they ever get scared if they see the values dropping and then add to that a bankruptcy.

Thanks for your responses! I know I have a long journey ahead of me!