My situation and your opinions

[Confused33]

I would like to share my situation and get you all's input on what you think my best plan of attack is. I spoke with a lawyer today and felt a sigh of relief after talking to him. I apologize that this is so long!

I'm 28 (as of the 19th) and have been married since June. My wife and I have one vehicle in both names and plan to keep it. We were told that would be no problem.

We purchased our second home in May and will keep it as well. We are not in an equitable position on this home having only put 5% down.

The problem comes from me and my irresponsibility with my credit cards and big ticket purchases. I owe roughly $40K in credit cards & unsecured debts. I owe Bank of America, Discover card, and Citibank and my pay history is spotless.

I have a 2007 Dodge diesel that I could no longer afford and allowed a company to take over payments. They have been late once, and the truck is currently due for Nov 20th with no sign of payment or the vehicle. My credit went from a 715 to a 585 after this. The truck is going to end up reposessed and I owe nearly $41K on it. It is worth MAYBE $20K at this point at auction. I can not afford the payments on it and still pay my other bills.

My boat (I know...) is financed with the same company and I owe $59K and its worth about $45K. I have no hope in selling it and do not have the extra money to cover the difference if I did luck out and get $45k for it. Its been for sale since Jan of 08.

I work on 100% commission and my income has begun to plummet along with the economy. I have alot of years invested in the company that I work for and do not want to leave it due to my irresponsible spending habits.

All of these debts are in my name alone and I have been told that they will not effect my wife's credit report which I have been working hard to repair for the past 4 years.

Our yearly income is only around $60K together at this point and I have made more by myself for the past 3 to 4 years so we are in a serious crunch. I have stayed up to date on all of my payments and have robbed Peter to pay Paul a number of times which has just made my situation worse.

I have nothing in savings, no retirement plan, and nothing to show for my 12 hour days at work other than a stack of bills and a ridiculous toy.

We are very simple otherwise and pack our lunches every day, don't eat out, don't party, and spend alot of time at the house. We are trying very hard to get by but at this point I do not see the light at the end of the tunnel. I saw the light today when I spoke with the attorney and felt that I actually could do something about it all by filing Ch 7.

Am I doing the right thing by filing? Do I really just stop paying until I file? That scares the crap out of me for some reason. I feel like they are going to eat me one way or another.

[Never_Again]

If you have decided, after talking with a lawyer, and thinking about it for yourself, that it is the right thing for you, then it is.

You have almost $80K in unsecured debt (including the estimated deficits on the boat and truck), and are making $60K a year. Can you pay that off at that rate? Yes. However, I have two big concerns with your situation.

First, you have no retirement or savings. Now is the time for you to be putting some money away into retirement, because you have the magic of compound interest working for you for many years.

Second, is the fact that you have no history of late payments. It sounds like this is a recent development, the insolvency that is, and my concern is that you have not been through enough with this to have learned a lesson about financial management and debt. It is very easy to get yourself right back into the same situation again, if you are not prudent from this point forward.

You would want to stop all of your payments before filing. That is normal.

So, say you do file for chapter 7? You need to have a plan to emerge from it, and get stronger again. Here are a few pointers:

First, establish a written budget (or "spending plan" if you don't like budget.) You sound like you live a pretty simple life, other than some high dollar toys and CC debt. The written budget will be your guide, and plan for the future. Once your debt is gone, you will eventually find yourself with some extra money.

Second, use your extra money that you find in a budget to establish and fund an emergency fund. Most experts say between 3 to 6 months of expenses is adequate. This is an incredible security for you and the wife, and will do wonders for your situation, as you proceed.

Third, fund your retirement accounts. Strive to put 15% of your income into retirement, and you probably will never have to worry about retirement.

Fourth, make a vow to never incur debt again.

I personally felt that for me to do anything less than making the most of this "re-set button" hat I have been given, would be immoral. If you do the same, you will find yourself emerging from a bankruptcy stronger than ever.

[Flamingo]

So many people are finding themselves in your position with the same or similar circumstances. Reread your posting - reality hits hard and what has occurred is that you lived above your means for quite a while and it took an event as your drop in income to make you realize that. It's scary - we shed many tears and had many sleepless nights over the same situation. When you start robbing Peter to pay Paul, that is the first warning sign that you are at the point of no return unless you find a way to replace the lost income and are able to put a dent into the debt by cutting up the cards and changing your lifestyle.

As has been advised in this forum thousands of time, go get a free initial consultation at a BK attorney in your area to find out your options so you can learn from all this, get a new start and move on. A large financial article during the past few months described a credit card as a "snake in your pocket." Remember that phrase in the future if you decide to use one again.

[spell]

I'm not sure I got all of the details, so some of these wires may be crossed. But I think the general message still applies.

You bought stuff you couldn't afford.
You bought cars you couldn't afford.
You bought trucks you couldn't afford.
You bought boats you couldn't afford.
You bought two housees you couldn't afford.

Even if you could afford some but not all of these, you clearly weren't thinking well when you assembled this house of cards.

LET IT ALL GO!
Get a clean break and start over from scratch.
Don't consdider reaffirming a single thing.
Yes... the car too.
Yes... the boat too.
Yes... your house too.
Yes... your second home too.
Yes... the diesel too.

If you do that, plus never incurring unsecured debt again, you'll be amazingly wealthy.
I bet you've been sending at least $40k to your creditors every year.
Why not buy stuff with that cash instead?

This year, you can buy two nice cars.
Save for 2 years and you can buy a house..... in full!
The next year, you'll have a boat in the water again.
Year 5, you'll be trading up to two sweet, nearly new cars.
Year 7 or 8, you'll have that vacation property you wanted.

[Confused33]

Thank you very much for the responses, they are more than helpful and I'm glad I found this forum. Its kind of like therapy in a way. LOL

Just to confirm, I don't have two houses. I sold one and bought a less expensive one after living in an apartment for a year and saving. You're dead on with the rest of things though.

Spell, your advice brought about a thought. The car that I drive is an 03 Tahoe Z71 which I purchased last year used. You say let everything go, don't reaffirm anything. Well, thats not an option with my wife's Jeep, she saved for a really long time for it and will not let it go. I wouldn't expect her to be punished for my actions, she has no debt besides the Jeep.

That being said, if I'm upside down on the Tahoe due to the gas prices killing resale, but I have a 5.9% interest rate, am I better off letting it go, or keeping it? I don't know how I'd get another vehicle if I let it go as well. What are my options?

Thanks again for the help! VERY appreciated.

[PoorGrammyinBK7]

Thank you very much for the responses, they are more than helpful and I'm glad I found this forum. Its kind of like therapy in a way. LOL

Just to confirm, I don't have two houses. I sold one and bought a less expensive one after living in an apartment for a year and saving. You're dead on with the rest of things though.

Spell, your advice brought about a thought. The car that I drive is an 03 Tahoe Z71 which I purchased last year used. You say let everything go, don't reaffirm anything. Well, thats not an option with my wife's Jeep, she saved for a really long time for it and will not let it go. I wouldn't expect her to be punished for my actions, she has no debt besides the Jeep.

That being said, if I'm upside down on the Tahoe due to the gas prices killing resale, but I have a 5.9% interest rate, am I better off letting it go, or keeping it? I don't know how I'd get another vehicle if I let it go as well. What are my options?

Thanks again for the help! VERY appreciated.

I think Spell's reply was well-intended, but way too simplistic for you. Of course you want to keep your home if you can still afford it, and maybe a car. You will sort this out I am sure - its not a quick fix.

[spell]

she has no debt besides the Jeep.

I think it's time to get out the DVD from your ceremony. I don't know about yours, but at mine, our families got joined. For better or for worse. We were even asked specifically on these points.

There are no more "hers" and "his" they're all "ours" from here on out.
Truth is, that car's dropping in value by a good $5000 this year.
Your family has a bunch of other goals that $5000 would be better suited for.

Next time, try saving even longer and even harder... Few will be able to argue against you affording a truck that you have the title to.

[Confused33]

I have a couple of other questions that have come up since I read through all of the paperwork that my lawyer gave me.

Say I stop paying my credit cards and the boat which are both going back. I'll have roughly $1300 per month not going out any more. What do I do with this money besides spend it on groceries and the necessities that we have struggled to purchase? Do I need to put whats left over in a separate savings account in my wife's name since she is not filing? Is that illegal? I feel like that sounds weird, but if I've got an extra $1300 a month and I'm used to living on $200 extra I'm not going to go wild and spend all of it.

What about the Tahoe that I mentioned earlier?

How long should I wait to file if I have a charge up situation within the past 30 days? Lawyer says I have two options: refi in wifes name and pay off the card, file now. OR make 6 months payments on this debt alone and then file. What would you do?

I have a golf cart that is paid for, we use it in the neighborhood and at my parent's beach house quite a bit. I have the title for it, but its still in the previous owners name. I feel guilty keeping it considering the situation and could sell it for about $4000. Say I do sell it. What do I do with the money if I'm planning on filing? I was told any payments made at this point are a "waste of my money". Can I spend it on next year's home owners insurance, auto insurance, ect? What if I put it toward my vehicle that we spoke about having a negative equity situation? Would that put me in a possible equity situation and make the car an asset? Ahhh this is confusing!

I'm really scared about just up and not making payments all of the sudden. One of my credit lines is about $28,000 owed and I'm scared to death of what is going to happen. Nothing could happen where I would not be able to file, correct?

Thank you all so much for the time you have taken to post here and share your experiences. It has been a TREMENDOUS help to me.

[njguy1972]

Confused-

I think you should talk to at least 1 if not 2 lawyers for free consultations.

They will probably tell you to:
1- stop paying the cards
2- decide if you will keep the house
3- stop paying the boat
4- decide if you need the 2nd car, if not stop paying

The key is creating a realistic budget and seeing what is a must have vs a nice to have.

I am working through mine currently:
Nice to haves were:
1-premium cable stations
2-gym membership
3-drive to work vs mass transit (extra hour of commuting time a day)

I am personally working to keep my car and house. I was told to try and keep a house since it is an asset that can appreciate and you may not be able to get a mortgage for 7-10 years. Also, you need a place to live anyway and the cost may not be too much different renting vs. owning.

[Confused33]

Confused-

I think you should talk to at least 1 if not 2 lawyers for free consultations.

They will probably tell you to:
1- stop paying the cards
2- decide if you will keep the house
3- stop paying the boat
4- decide if you need the 2nd car, if not stop paying

The key is creating a realistic budget and seeing what is a must have vs a nice to have.

I am working through mine currently:
Nice to haves were:
1-premium cable stations
2-gym membership
3-drive to work vs mass transit (extra hour of commuting time a day)

I am personally working to keep my car and house. I was told to try and keep a house since it is an asset that can appreciate and you may not be able to get a mortgage for 7-10 years. Also, you need a place to live anyway and the cost may not be too much different renting vs. owning.

Thanks! He told me pretty much exactly what you just did. I'm just getting first hand info because I don't want to bother the lawyer and this seems like a quick reply here.

He told me the following:

Stop paying the cards
Stop paying the boat
Stop paying the Dodge Diesel

Keep paying my Tahoe
Keep paying the Jeep
Keep paying the House & all utilities

[Never_Again]

Sounds like your lawyer is right on... keep paying on anything secured that you will keep. Stop paying on anything that is unsecured, or that you will be turning in.

If the Tahoe is upside down, do NOT sign a reaffirmation. Just keep paying on it, and see what happens. That way, if you get into a a situation where you are having trouble paying for it later, you are not liable for any deficit portion.

You will probably have to wait at least 90 days since charging, unless the charges are for a low amount for items that are not considered luxuries.

[Confused33]

After speaking with my lawyer and paying the initial $550 to get things rolling I have more questions.

First off I have a charge up. Its $6000. It was for something that I didn't need but plan to keep. Looked into refinancing it in the wife's name but it didn't work out. Lawyer says I can keep the debt, keep paying the note and I will basically just be responsible for the debt and it will not be discharged. He also said I would be given either 12 or 24 months to pay it off at a near 0% interest rate. This is what I plan on doing, but sounds too good to be true. It also sounds like a horrible idea and getting into the same predicament I was in before. Now I'm trying to explain myself out of embarassment....

I'm getting him the last of whats required tomorrow and he is performing a means test based upon my income and expenses as of Nov 31st. Does that mean we are filing this month? (December)

I still feel like I have no idea what is going to happen to me. Is this normal? Even after reading and reading and reading and re-reading I feel this way. I've asked TONS of questions, but I'm not getting any advice that I'm not asking for.

What is the next step? Where do we go from here?

I feel like I cannot create this budget right now though because every penny I make is going to the lawyer and to my house note and then the two vehicles, then electricity...oh hell.

How long will it be before I actually feel relief? When the lawyer is paid off? The day I file? What about post filing? Can I save money if I have extra money? Is it ok to put it in a bank account if so or do I have to start digging holes? (haha) I read somewhere on here that once you go to 341 Meeting your trustee has a "snap shot" of your financial standpoint and they do not revisit your accounts. Is this accurate info?

AHHHH! I'm sorry for all the questions.