Planning for Chapter 7

[Chrysalis]

Hello all. Thank you for being here, and I thank you in advance for any help you can offer.

My husband and I are just beginning to realize that bankruptcy is the ONLY way to see light at the end of the tunnel.

We are not late on any payments, and we never have been. But after I pay all of the minimums each check, there is not much left. We have been living on credit cards for awhile now. How long, I'm not sure. Too long.

We have consulted with two attorneys this week.

One, we had a bad gut feeling about almost as soon as we walked into the place and they handed us a stack of paperwork. (Yes, this was the most prominent name we see on TV and billboards, etc... I know, I know.) We filled out tons of info before we ever even talked to the guy. When we did meet him, I'll just say we were less than impressed. We felt like we were dragging information out of him, and honestly like he had something else he wanted to be doing. Like we were wasting his time.

One thing I did not like about this place ^ is that before we left -- when our brains were FRIED -- he had us sign a paper which had the different options on it and their fees. I said, "So we're just signing this saying you showed us our options?" and he agreed. But what it says in the paragraph above our names is: "The undersigned hires _____ for Chapter 13" (which is not what we were leaning toward, but he kept saying we could change it if we wanted to).

This just annoyed me at first. They also sent an email welcoming us as clients, prompting us to create an account on their website, etc etc. So I'm seeing all sorts of "thank you for choosing us" and "you've hired the right person" ... things like that. But the more I thought about it, I thought -- hey, we didn't "hire" you for anything. We came for a free consultation, to discuss our options. We left it completely up in the air, with more paperwork needed and more figuring to be done.

Does anyone see any legal repercussions from this story... If we decide to hire someone else? (Which, if we do this, we WILL.) There were many other forms we did NOT sign, because we did not even have the information they were requesting -- nor were we making an actual decision of any kind.

I feel dumb now. As if I wasn't already feeling dumb enough.

So the second firm was recommended to me by an acquaintance. They just finished their Chapter 13 and had nothing but good things to say. I talked to him (one of the attorneys who actually has his name on the building) and he is very confident. Been doing this 36 years.

And here is what we came up with:

1) My husband needs to make less money in order to file a Chapter 7. This is done easily by switching to a lower-paying job with his company, which he always has the option of doing (and being home a lot more).

2) We have to spend our kids' entire life savings -- which is the only money we "have". Like a moron, I just put it in our names because I NEVER would have thought I would be here today. Our oldest (15) could use his to buy his first car. The other two kids' savings would have to take top priority... We would need to reimburse them about $4000 after bankruptcy mess was all over.

3) He says to quit paying on the credit cards now, and use that money for living expenses instead of charging them. When they start calling, I am supposed to tell them we are planning to file, and give them his name & info.

4) If we want to keep our tax refund and a possible bonus in February, we wait to file until after those are already spent. He did not specify how long we had to wait... if there is a certain period of time.

I would greatly appreciate if anyone sees a problem here, or has questions or advice. Please let me know. I know I am brand-new, but I have used forums in the past and I find the support and information invaluable. I will definitely stick around and learn as much as I can, and hopefully be able to contribute and help others down the road.

[kberly69]

I think I can speak to numbers 3 & 4, at least based on my experience. Yes, stop paying. If you've made the decision to move forward with bankruptcy, you are only throwing money out the window by continuing to pay. Yes, wait. If your husband changes jobs, his income will decrease and this will be what's reflected in the 6 month look-back period by April. By then, too, your bonus and tax refund will be spent. I was really worried about my tax refund. I got mine in February this year and filed May 31. I was prepared to tell the trustee what I spent it on (a washer and dryer to replace our very old ones, wood pellets, car repairs, etc) but she never even asked. My 60 days was up last week and I am now anxiously awaiting my discharge (my district seems very slow from what I can tell).
It was really the best decision I could have made and the feeling of relief is enormous. I sleep better, don't dread the mailbox or ring of the phone, and I am now able to look ahead at rebuilding my credit to what it once was. Good luck to you

[Chrysalis]

Thank you, kberly69... As I'm sure you can imagine, this is what I am thinking about pretty much 24/7 right now. So I appreciate the response!

I am really dreading getting any phone calls about our bills. This is not something we have ever had to deal with before. And I worry that if we stop paying now (say, October) and don't file until... March? That is at least 5 months of no payments. Isn't that enough time for them to DO something about it? We've never had any threats or action taken against us. I am not sure how to deal with it. Is it really a good idea to tell them you are planning to file bankruptcy? Giving them attorney's phone number? That is what he told me to do. Sounds easy, I suppose. But in my mind, it is huge.

I guess I could just keep my phone muted and ignore any numbers I do not recognize. I've heard/seen so many different opinions on this issue.

Anyway, thanks for sharing your experience! I am so happy to talk to others who have been there, done that.

[kberly69]

I felt EXACTLY the same way. I had a credit score in the high 700s before divorce, foreclosure and medical bills pretty much forced my hand. I actually ended up waiting years to file for the credit cards (I closed my credit card accounts with hopes of paying them off in 2011, foreclosure came in 2012, medical bills 2013-2015). Anyway, they called plenty and send letters as well. I answered every call for a while and cried a lot :/ I was embarrassed about it all and eventually let the calls go to voice mail. In 2013, I consulted with an attorney and eventually realized I didn't have the means to hire him at that time. He had advised me as yours did, put up with the calls and let them know you're filing. The creditors asked what chapter, if I had actually filed, and my attorney's name.
I eventually decided to file pro-se and did so in May of this year. You can see that's a long time from the point of me stopping payments to filing. I did not get any legal action from the cc companies and may have even been able to "ride it out" if it weren't for the foreclosure and medical bills. Even the foreclosure was iffy- I go the sense from what I have read that unless you have some major change in income, banks are tending to let it go. I could be wrong about that and I wasn't going to sit around for 10 years wondering of they were going to come after me.
I don't know if things have changed, and I don't know if some companies are more apt to seek garnishments but it would seem to me that it would take longer than 5 months to make that all happen. They end up selling your debt to collection companies and that doesn't happen overnight. Do some research on that and hopefully someone in here knows better about timeframes and the earliest possible that they can seek a judgement. I would just be surprised if it were that quick.
Just FYI, I can tell you that in my experience, the credit card people were decent. However, when my debt started being farmed out to the collections people, they could be shady and downright nasty. One spent a long time trying to tell me I didn't need to file bankruptcy and giving me all kinds of interesting "legal" advice. I hung up on her
The thing that's kept me upright in all of this is the realization that this is a business decision, not a moral failing. I have learned a TON throughout this process and have lived without credit cards for years now. I feel like this has taught me to have a healthy relationship with my money now. Anyway, keep reading these forums and get the NOLO book (even though you're not filing pro-se, it is a gold mine of excellent info, will ease your mind, and helps you be a better advocate for yourself if necessary). Knowledge is most definitely power

[Chrysalis]

Thanks again kberly. I just want to make sure I do things in the right order and don't make any huge mistakes along the way. I agree that knowledge is power! I research everything in life way more than those around me, it seems. Some may call it "obsess" ~ but it generally eases my mind about whatever it is I am contemplating, and helps me be much more confident in my decision.

THIS is one it seems there is no going back from. We've got 20 years of good, solid, established credit with nothing late -- ever. That is a large part of why we are in this mess. They give us SO much credit! It is way too easy to make emotional decisions in the moment.

My husband generally relies on me to do my research and make good decisions for us. I have been telling him for at least a couple of years that I needed his help. I needed the accountability. I think it's sad that it is going to take something as drastic as bankruptcy for us to get on the same page -- but we will. We ARE. This is going to be a major life change for us in so many ways. A complete restructuring... and as you said, a more healthy relationship with our money. It has to be. There will be no more "I will figure it out" ... I think those days are gone. It has felt like the weight of the world on my shoulders for too long. On his shoulders has simply been working as much as humanly possible. Being forced to slow down, take a lower-paying job, spend more time with his family and re-evaluate what we both really WANT out of life -- what's important, and what is fleeting -- that will be huge for us.

Anyway ~ rambling.

He gets paid on Friday, and I just figured up the unsecured debt payments. These are minimums. He gets paid every 2 weeks. Just our minimums on Friday 9/30 total $1251.52.

I won't stop paying them until we have been able to discuss this and he is 100% on-board with the plan. But MAN, that is a lot of money we could be spending on other necessities.

Two things on Friday that I am unsure about (if we were going to stop paying as advised):

1) A Prosper loan, which comes automatically out of our checking account (on the 8th). The website says if we need to change auto-pay, we have to call them. So we call them and say what? "Please stop taking this payment out of our account?" ...Do I just CLOSE the account, and not give them any new info?

Because then that brings me to the next thing --

2) One of our credit cards is with the bank where we have our checking account, where his paycheck is direct deposited. I could see them being able to just take the payment out of our checking account if they wanted to.

We have another checking account with a bank where we do not have any conflicts I can think of. I guess I am answering my own question here. We should probably have his direct deposit changed to our other account, and close the one where I am anticipating problems.

[AllMyDefault]

Free attorney consults can be a real hit and miss. Mostly misses. Sounds like you got a very aggressive one there.

I also worried about having to talk to creditors or collectors. Mostly I simply didn't. Caller ID is a wonderful thing.

[Chrysalis]

Hello AMD ~ do you mean that "very aggressive" is a good thing, or bad?

He was very confident in his answers. I guess when you've been at this for 36 years, you would tend to be.

[AllMyDefault]

I meant aggressive in trying to make you his client.

I had free consults who were not forthcoming because in my opinion they really don't want to waste time on them.

FYI some attorneys will try to get a downpayment or retainer to make clients commit to hiring them. Unscrupulous ones will try to keep the money even if a client decides not to file or not to file with them. My understanding is that's not legal. They are supposed to put retainers in trust accounts and refund any unused portion after charging for any actual work done, if any. Most will try to snag at least $100 for the "free" consultation. One way they do that is to charge a "document fee."

I wish you the best of luck. It's a stressful situation, but it can get better.

[leonel9]

Two things on Friday that I am unsure about (if we were going to stop paying as advised):

1) A Prosper loan, which comes automatically out of our checking account (on the 8th). The website says if we need to change auto-pay, we have to call them. So we call them and say what? "Please stop taking this payment out of our account?" ...Do I just CLOSE the account, and not give them any new info?

Because then that brings me to the next thing --

2) One of our credit cards is with the bank where we have our checking account, where his paycheck is direct deposited. I could see them being able to just take the payment out of our checking account if they wanted to.

We have another checking account with a bank where we do not have any conflicts I can think of. I guess I am answering my own question here. We should probably have his direct deposit changed to our other account, and close the one where I am anticipating problems.

1) Regarding Prosper, you can give them a call and ask them to stop automatic payments. It should be pretty easy, as long as you provide enough notice (usually 3-5 days before withdrawal). With some other creditors, you may need to put the cancellation request in writing (though that's never a bad idea). If anyone asks, just tell them you want to be in control of your payments.

2) You should move your banking to a financial institution where you do not have credit -- and do it soon. Banks have a right of setoff, which will allow them to take payments from one account you own (your checking account) to pay off another that you are past due on. Automatic payments or not, their collections department will almost certainly do this.

I would try to cancel as many automatic payments as possible to avoid non-sufficient funds (NSF) fees from your bank. Then after the account is at a $0 balance and everything is transferred over (i.e. infrequent deposits and withdrawals), close the account. You don't want NSF fees charged to your current account to spiral out of control, resulting in your checking account being closed and reported to Chexsystems. That would only make it more difficult to open checking accounts in the future.

[Chrysalis]

AMD ~ I realized last night that he didn't even take down my name, phone number, email address -- nothing. He definitely did not try to get any money out of me (although he did tell me what their fee was for Chapter 7, and what all was included -- which was counseling, court costs, "everything" for $1530). <-- That is HALF what the other guy quoted us.

He encouraged me to talk to my husband, and if we were 100% sure we wanted to proceed, I am supposed to call back and set up a time for a 10-15 minute phone call, where he will gather more information and we will go from there.

I am doing some calculating today and I am just not sure if I can get these numbers where they need to be. I sat here and meticulously filled out the entire means test (although I was unsure on a couple of items) ... and my husband's income is going to have to come down WAY more than he is used to. I am having trouble wrapping my mind around how it is that we feel SO strapped all the time... like we never really have money to do anything... yet the numbers on the government sheets make it look like we are loaded.

leonel, thanks for your advice! All good info to know.