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CH. 7 with $75k income, $170k Student Loans, $55k CC Debt, and Disabled Child

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  • CH. 7 with $75k income, $170k Student Loans, $55k CC Debt, and Disabled Child

    Our family has had a rough couple of years. Better planning for the future with less reckless spending up to this point would have had us with proper savings and more equity & assets. But the damage is done and now we must survive and move forward for our children's sake.

    We have 3 kids, all below 10. One of them was diagnosed with a significant medical condition that is degenerative has them classified as permanently disabled. This requires significant investment in medical equipment, travel for therapy and appointments, and my wife's commitment as primary caregiver, keeping her from finding employment. We have been able to fund raise for many items and have deposited around $7k in contributions into an ABLE account over the past year. This is now down to $300. We still used credit cards to to support medical needs and make ends meet. We also used credit cards to charge past medical bills for surgeries, etc.

    Just this month we have reached a crisis. For the first time in either of our lives, we have missed payments on our credit accounts. 3 of our 13 unsecured accounts are now 1 month past due. Doing the math, it doesn't seem possible any longer for us to pay towards credit cards and provide for the family, especially our special needs child.

    We are considering Chapter 7 Bankruptcy and hope to keep our house, vehicles, 0 balance cards, and my retirement account. We need both vehicles since I use one for work and my wife uses the other for frequent medical trips. I don't expect to discharge student loans, they are all federal loans and I'm taking advantage of IBR and PSLF. We would like to make routine contributions to our ABLE account to support medical costs.

    Income
    ----
    $6,300/month ($4k net) (sole income, dad)

    Assets
    ----
    $56k in retirement account
    $300 in ABLE account

    Home / Autos
    ----
    House: 92k appraised, 68k owed, $540/month
    Auto 1: 11k value, 10k owed, $160/month
    Auto 2: 15k value, 9k owed, $310/month

    Debt
    ----
    Total CC Debt: $55,205, paying $1,300/month (will soon balloon higher)
    Student Loan 1 (husband): $150k, paying $150/month IBR (public employee PSLF)
    Student Loan 2 (wife): $22k, paying $22/month IBR

    QUESTIONS
    ----
    1) We know we will need a converted van in the next couple of years to support transport of a powered wheelchair. Will this be a possible purchase post-bankruptcy? They can run $30-50k.

    2) Our house is getting more full of medical equipment and leaving less room for us to live in. We have 3 small bedroom and only 1 bathroom. We desperately need more space, how long until we will be able to purchase another home post-bankruptcy?

    3) At what point can we stop paying on our credit cards if we know bankruptcy is our path forward? We haven't used them starting on October 1st but most accounts are current. We've tried to at least pay those accounts with the most recent activity.

    4) One account is for $5,500 and represents a new roof we had installed in July. We've made a payment on that account already and plan to keep it current.

    5) Is my retirement account, house, and cars protected?

  • #2
    One thing that stood out to me is wanting to keep your zero balance cards. That is unlikely. I just want you to be prepared for that. Most creditors will close your accounts as soon as they see you are missing payments and definitely when they see you've filed. In the rare instance that a card "survives" -- I've seen many here say that it got shut down when they tried to use it. *Not always.*. But you have to be prepared and in the mindset to live without the cards being there at all.

    I'm sorry to hear about your child and I wish I could be more help. It's definitely time to start talking to attorneys about your particular situation. So many questions can be answered in a free consultation -- and as you go to subsequent ones with other attorneys, you can get more and more answered as you start to get things figured out.

    Comment


    • #3
      Retaining the zero balance cards isn't much of a priority and, to be honest, I kind of like the idea of not having that convenient credit option for a while. I was primarily concerned with building my credit as soon as possible.

      Comment


      • #4
        Originally posted by grotesquity View Post
        QUESTIONS
        ----
        1) We know we will need a converted van in the next couple of years to support transport of a powered wheelchair. Will this be a possible purchase post-bankruptcy? They can run $30-50k. You will likely be able to get a car loan soon after discharge, but the rates could be high. The longer you are able to wait and build your credit before filing, the better the terms will be.

        2) Our house is getting more full of medical equipment and leaving less room for us to live in. We have 3 small bedroom and only 1 bathroom. We desperately need more space, how long until we will be able to purchase another home post-bankruptcy? FHA allows mortgages 2 years after discharge.

        3) At what point can we stop paying on our credit cards if we know bankruptcy is our path forward? We haven't used them starting on October 1st but most accounts are current. We've tried to at least pay those accounts with the most recent activity. Most recommend that you stop paying unsecured dischargeable debt as soon as you know for certain that you will file BK. It is best to consult with an attorney before stopping your payments. But, if you can't make minimum payments without using the cards to pay your living expenses, then you might as well stop paying on the cards.

        4) One account is for $5,500 and represents a new roof we had installed in July. We've made a payment on that account already and plan to keep it current. If you incur debt of $675 or more for luxury goods or services within 90 days of filling BK and the creditor files a complaint to have the debt declared non dischargeable, it is presumed to be non discharegeable unless the debtor can prove otherwise. The same is true for cash advances of more than $950 within 70 days of filing. If the debt doesn't fit those descriptions, a creditor would have to prove that you incurred a debt without the intent to pay in order to have it declared non dischargeable. For $5,500, they are unlikely to bother trying. A new roof his hardly a luxury.

        5) Is my retirement account, house, and cars protected? Your profile says you are in WV. You can read about exemptions at https://www.nolo.com/legal-encyclope...xemptions.html If your retirement account is a tax exempt plan, it is exempt in all states. My understanding is that ABLE accounts are also exempt. It looks like WV exemptions will protect the equity in your home and Auto 1. Auto 2 may be an issue. But, since as a couple you will only need half of the homestead exemption, you may be able to use the wildcard to cover what the motor vehicle exemption doesn't. You may want to trade in Auto 2 and buy that van now. You may still be able to get decent rates. If you buy a service plan and gap insurance (two things I would not normally recommend), you can get the equity lower if driving the van off the lot doesn't decrease the value enough. That is something you should discuss with a BK attorney, but do it soon before the effect of those late payments on your credit rating get worse.
        Your attitude about future credit cards is good one, however, since you want to be able to qualify for a car loan and a mortgage sooner than later, you will want to get a credit card as soon as you can after filing BK and use it and pay it off each month to start rebuilding your credit. You'll need to start being really careful to resist the urge to charge more than you have in your checking account to immediately pay off the card. I had several zero balance credit cards when I filed, the only one that survived was the American Express card.
        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

        Comment


        • #5
          I would take a picture of your disabled child in a wheelchair and then of a van that has all the equipment needed, and post your story to GoFundMe. Folks there really like to help out families with a disabled child. I would wait until the BK filing before setting up that GoFundMe account.

          Comment


          • #6
            Originally posted by LadyInTheRed View Post

            Your attitude about future credit cards is good one, however, since you want to be able to qualify for a car loan and a mortgage sooner than later, you will want to get a credit card as soon as you can after filing BK and use it and pay it off each month to start rebuilding your credit. You'll need to start being really careful to resist the urge to charge more than you have in your checking account to immediately pay off the card. I had several zero balance credit cards when I filed, the only one that survived was the American Express card.
            Thank you so much for your thorough response! We are scheduled to meet with a BK attorney this Wednesday and will discuss these items with them as well.

            Comment

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