Need advice ASAP

[stressednbroke]

Hi Everyone,

I'm new to this forum but I need advice fast and I hope someone out there can help me out.
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Baring my financial soul:

Our total gross income last year was under $21,000, of which over $20,000
came from my income

My wife and I have about $21,000 in unsecured credit card debt. I am behind
by a week on one of our cards. I've been using them for gas/food, etc
because we have been on the brink of disaster for going on two years now.
Last charges AND payments were this week and last week, in other words, all
cards have seen activity recently

THIS IS THE QUESTION I NEED ANSWERED MOST QUICKLY: This CC that I'm behind on is our largest unsecured debt at over $10K. Our interest rate is going to go from 3.9% to 21% because I'm late. There is no way we can make these payments. What I need to know is, What do I do NOW to prepare for an imminent BK? should I continue to try and make the payments or let them lapse? I am so stressed about this I can't even put it into words or think clearly.

Other information:

Our house is worth about $60,000 with approximately $17,000 equity.

We have a minivan (necessary for my wife's daycare business she is trying to get off the ground) worth about $7,000 but we still owe about $5,500.

A junker daily driver car I use to get to work worth about $200-500, paid off.

We have about $1000.00 in medical bills that I would like to NOT write-off as we will be able to pay those if we aren't making CC payments. Does anyone have any experience with doctor's offices after a BK has been filed but they were aid? At the BK newsgroup someone said that doctors tend to make you pay upfront but we really like our doctor and would like her to continue to treat us (medically as well as financially) as she has in the past.

We have about $800.00 cash in the bank (Xmas club account, which will go towards the BK lawyer).

I owe about $6,000 in student loans (and more to come)

I have no retirement savings/plans

My wife has about $15,000 in an OLD IRA account (no contributions for at
least ten years, almost all contributions were made prior to our marriage)

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Facts that may or may not be pertinent:

Family of four, two children under the age of seven

I'm a part-time student (1/4 to 1/2 time)

I'm looking at at least two more years before I see any return on my
education.

We've been making it on our own (no public assistance)

We live (such as it is) in Ohio.

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I'm on the treadmill and can't catch my breath. I see BK as imminent and I
would greatly appreciate advice on the following matters (and any other
matters you can think of that I haven't):

Because of our low income, how much will we be affected by the new laws?

What steps should we take NOW to prepare for the BK? How long should we wait before proceeding?

Will we be forced to sell our home? Car? How does re-affirmation work?

Opinions on whether we should attempt to get a home equity loan vs. BK

We are also about $4000 behind on our property taxes, which we could pay if we weren't saddled with the CC debt.

IF (big "IF" as this is by no means a certainty) we were to borrow $20,000 from a relative, what would the ramifications be for us and the IRS as far as
income/taxation is concerned? And how would the lucky relative bailing me
out deal with the IRS?

What will become of my wife's retirement account?
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Thanks in advance for any constructive advice offered I will be very grateful,

Mortally Embarrassed Me

[StaciMM]

The site I check for exemptions lists $5,000 as an allowed home equity exemption, and generally that can be doubled for filing jointly. If you filed BK, your home may or may not be safe. I have noticed that #'s at this site are out of date, but if OH does still allow only $10k (joint) then you have about $7k unprotected-but part of that would be eaten up w/ the cost of listing & selling your home if the trustee chose to. In the end, I'd estimate a low likelihood of that happening (as it wouldn't produce much $$ for the trustee) as long as your value estimate is fairly recent. (The property tax bill might even help you here, as I *think* the trustee would also have to pay that to successfully sell your house.)

Regarding the cars, that same site say $1000 allowed exemption in a vehicle-I don't know if that is for each of you. But on your wife's car, if they forced the sale of it, and paid her the $1000 exemption, they'd have next to nothing left after paying off the lien. And if your car is worth $200-500, they probably won't bother with it either.

To some of your other questions/comments. If you file BK, you have to list all creditors so you can't choose to leave out the medical. You could, however, let those creditors know that you intend to continue paying them as agreed despite the fact you dont have to.

The student loans won't be discharged in BK (you're probably aware of this already) and BK should not hurt you from seeking additional federal student loans.

Regarding your income/expense scenario, when you don't consider payments to credit cards, how much of your take home pay is left after paying rent, utilties, groceries, and other reasonable living expenses? With the income you listed, the new BK laws won't impact you other than by requiring a few more steps in the process.

If you are going to file, you can stop paying credit cards. If the only charges you have made lately is for routine, living expense sorts of things-that should not be an issue for you. If you've had cash advances, balance transfers, or large purchases then you should wait at least several months...

I think IRA's are generally exempt.

Taking out a home equity loan, to get out of debt, has some painful possible repercussions. It puts your unsecured debt into your home, placing your home in jeopardy if you can't make the 2nd mortgage payment. It also spreads out the time to pay the unsecured debt off, so you pay more for it in the end.

[BassBoy]

Taking out a home equity loan, to get out of debt, has some painful possible repercussions. It puts your unsecured debt into your home, placing your home in jeopardy if you can't make the 2nd mortgage payment. It also spreads out the time to pay the unsecured debt off, so you pay more for it in the end.

StaciMM has a good point here. Stay away from the equity loans if you can. I had a similar experience when I lost income do to my previous employers loss of work (reduction of salary and reduction of working hours). When I returned to "normal" working hours, we took out an equity loan, to get out from under CC debt that we incurred during these periods. Then, it bit us in the a$$ in a few months later when my hours got reduced again and we were in the negative every month. I recently got a new job, but the damage has already been done.

But anyways.......

If your already having troubles, an equity loan may not prevent the inevitable.........just prolong it (if things don't work out like you had planned).

[bezoar]

It's never a good idea to trade unsecured debt for secured debt, unless you've got a 'sure-thing' salary, or the means to pay it off some way in the event of crisis. That is the one and only thing that I did right. My atty said that most of his clients came to see him after going the 2nd mortgage route and then getting behind on that - not good!

Start interviewing attorneys, if you can. You might be able to work out a payment plan for your property taxes and add those to your monthly expense worksheet - don't know for sure...

If your income is $21K for a family of four, sounds like you're probably OK under the new laws - it'll just be more expensive and a pain in the bum to get thru it.

Check out this thread, too:

http://bankruptcyforum.com/showthrea...ighlight=means

[Minnymouth]

Consult with two attorneys (free consultations) and see what options are open to you.
They are right the 2nd mortgage idea is not a good idea. For some reason or another, it really never seems to work out the right way....
Sounds like your case would be about the same under either set of laws,
Let us know what you decide,

Minny

[HHM]

I dunno minny, I think the time of the free bankruptcy consultation may be coming to an end

[Minnymouth]

HHM,
You probably "right" about the "free consultations" from now on...
Used to lawyers had to beg for clients......now they will just sit back and wait......and charge their large fee.....even for consultations...

Yep - TIME'S ARE CHANGING.............

Minny

[stressednbroke]

[BassBoy]

Calls will eventually cease

Does anyone have any advice as far as what to do when the inevitable phone calls from collectors start pouring in? My gut feeling is to change our home phone number but that won't keep them from harassing me at work.

Well, the calls do not stop immediately. Once you have decided to go forward with the BK and have an atty working your case, you just tell the creditor that you have an attorney working a bankruptcy case and here is the name, phone and record number. It is okay to tell the creditor if your filing Ch.7 or Ch.13.....but only if they ask. The phone calls will not cease until your case is filed and the Automatic Stay is in place. Your atty (if you have one) will be able to advise you of what to say and what not to say.

As far as being contacted at work, simply request that they only contact you at your home number and that only in the event of an emergency are you allowed to be contacted at work. That should put an end to that.

[Minnymouth]

Stressed & Broke,
Calm down there!!! Take it as it comes..... it will all be okay in the end. Yes all of us are used to paying our bills, but sh*t happens (as my brother says) that changes our lives.....
So get your paperwork together, get it turned in and filed....
The phone calls will stop soon, and life will be quieter......
Just be patient, it will all be OKAY...........
Got questions, we have answers for ya.......(we hope)......
Don't get too stressed out and sick over this (I did-am paying for it now).......so try to stay COOL, CALM, AND COLLECTED....

Minny

[bezoar]

Mr. Redford might pay you a million dollars if you promise to never, ever, ever say that again.

Actually, we had very little trouble. The original creditors were much more difficult to get the point across to than the secondary collection agencies. MBNA, and especially Discover had to be told several times, but they weren't really nasty - just kind of like car salesmen, trying to get you to make a deal w/ 'em. I've heard that Citi can be a little ugly, though. Generally, if you retain an atty, they will behave themselves a little better. I always recorded my conversations w/ OC's and CA's and told them up-front that I was. Some hung up - others were cordial and to-the-point.

It's not all that bad - really. My only regret is that I waited so long and spent my savings and 401(k) trying to stay afloat with my creditors. Thousands of dollars paid to them and it did no good, other than to put them off for a couple of years. The rough part is that at 48, I need to get my rear in gear & start saving again for retirement.

Good luck.

[StaciMM]

Stressed-

You don't have to be 2-3 months behind to file.

[Minnymouth]

I filed before I got behind in payments that way I elminnated all the "late payments" on my credit report.
Though it says "discharged in bankrupty" - it really did not affect my credit score that much.... I was really amazed...
Whether filing while I still had good credit helped?? I don' know!!

Just my thoughts,

Minny

[stressednbroke]

[StaciMM]

From what I've heard, using the cards for things you mentioned would be ok-but keep in mind that once you file, that is out. If you want to keep your house & car, you'll need to be current on those by your 341. (Unless you file 13, then the past due amounts go into your plan.)