Property & Student Loans in Texas

[texlady]

I do not qualify for Chapter 7 bankruptcy, so my only choice is Chapter 13. I have two concerns and I know I will need to speak with an attorney, but I'd like to get an idea of where I stand before then.

My fiance and I own the house we live in. We are each 50% owners and both our names are on the mortgage/title. There is no chance we will be married before bankruptcy is filed (if it is filed). I do not pay any of the mortgage, taxes or insurance; it is automatically deducted from his bank account. He claims all benefits on his income taxes and I do not repay him the money in any other way.

Anyone have any idea how he will be impacted if I file for Chapter 13, given that I'm not actually making any payments? Will I be forced to start paying towards this mortgage that I have never made a payment on? (Amount owed on house ~ 125k, tax appraised value 138k.)

My second question has to do with student loans. I have about $65k in student loans that are currently in deferment as I finish my graduate studies. I will graduate in January and payments will begin in July. I'm already -$800 per month now and living on credit cards due to my credit card companies jacking my rates from 13 to 28 percent, and when my student loans come due, that's another $500-$600 per month that I simply do not have.

I want to repay my student loans; however, I'm nervous about lumping them in with all my other debt because I do not want to hinder my ability to get another student loan if I decide to keep going on to a PhD. I would simply like to pay them.

So.. in a nutshell, (1) will I be forced to put the student loans in with the unsecured debt, thereby destroying my ability to get student loans again for many many years or do they even count since they do not come due until 7/2010, and (2) is my unusual property ownership situation going to fork me by forcing me to contribute financially towards this mortgage or fork my fiance in any way?

Thanks.

[optimistic1]

If you default on your credit cards, and they try to sue you, they would be wasting their time.


Why you ask?

Texas Wage Garnishment Law

Wages cannot be attached or garnished, except for child support.

Income that is not a wage can be garnished or ordered turned over to a receiver.

Bank accounts, rents and royalties can be garnished.

Exemptions include social security benefits.

They cannot collect anything from your paychecks except for garnishing your bank accounts.

So just have your employers cut a paper check, and cash it at your bank, but don't deposit anything.


I would just stop paying on the credit cards and celebrate. I wish I lived in Texas, because that is exactly what I would do. Use the extra cash to pay your mortgage and student loans, and live life.

[texlady]

Not an option

That's not an option for a number of reasons:

1. I consider that unethical.
2. I don't want to live in Texas forever.
3. I cannot get a paper check from my employer, so my bank account is vulnerable.
4. If all goes well, I should be published some time in 2010, so that means my royalties are vulnerable to garnishment.
5. I don't want to be pestered by collection agents and lawyers.

[sassiebaz]

If you are considering filing BK, how do your ethics justify that? Just out of curiousity? Either you stop paying them now, or you file BK and stop paying them then? I don't get it....and what is preventing you from a chapter 7? Your income?

[Pizza]

I live in Texas also:

Anyone have any idea how he will be impacted if I file for Chapter 13, given that I'm not actually making any payments? Will I be forced to start paying towards this mortgage that I have never made a payment on? (Amount owed on house ~ 125k, tax appraised value 138k.)

I don't think the mortgage company or anyone else can 'force you' to start paying on the mortgage. That's between you and your fiancee, and if your name isn't on the mortgage, they will be looking for him to continue making payments if the two of you want to keep the house.

My second question has to do with student loans. I have about $65k in student loans that are currently in deferment as I finish my graduate studies. I will graduate in January and payments will begin in July. I'm already -$800 per month now and living on credit cards due to my credit card companies jacking my rates from 13 to 28 percent, and when my student loans come due, that's another $500-$600 per month that I simply do not have.

Bankruptcy would take care of your credit card payments, but not your student loans. You will have to create a steady source of income to keep payments up on the SLs or may need to ask those issuers to grant you a hardship forebearance. If you're having a lot of difficulties with the student loans, though, I wouldn't even try to keep up with the credit cards. Dischargeable debt should never take priority over non-dischargeable debt.

I want to repay my student loans; however, I'm nervous about lumping them in with all my other debt because I do not want to hinder my ability to get another student loan if I decide to keep going on to a PhD. I would simply like to pay them.

By this, do you mean consolidation? You're best not lumping the debts together, it would just overcomplicate a bankruptcy.

So.. in a nutshell, (1) will I be forced to put the student loans in with the unsecured debt, thereby destroying my ability to get student loans again for many many years or do they even count since they do not come due until 7/2010, and (2) is my unusual property ownership situation going to fork me by forcing me to contribute financially towards this mortgage or fork my fiance in any way?

I would pursue consolidating the student loans to bring the payments down. You should still be able to receive student loans regardless, but more than likely through federal rather than private institutions. If it is already seeming very difficult to pay these back, out of curiosity why would you want to add to the debt? Is it necessary? I'd consider the situation long and hard before adding more.

Texas is a community property state (do a search on that to get the gist of the laws), which seems to have a few pros and cons when it comes to bankruptcy. On the other hand, I agree with optimistic about the generosity of Texas' exemptions. Your house, it's contents, your vehicles (1 for each of you), and your wages are generally off-limits for unsecured creditors (ie credit cards).

[texlady]

If you are considering filing BK, how do your ethics justify that? Just out of curiousity? Either you stop paying them now, or you file BK and stop paying them then? I don't get it....and what is preventing you from a chapter 7? Your income?

My entire reason for having to declare bankruptcy is due to predatory lending practices, so I feel little to no guilt at sticking it back to my creditors. I carried a heavy debtload, but was making my payments on time and making substantially more than minimum payments every month. I was making excellent progress at paying down my debt, which was at interest rates of 13% or under. Most of my cards were with smaller companies/banks, so got gobbled up by the bigger ones. Every time that happened, I got a new contract with new terms that basically say they can do whatever they want, my interest rate went up and/or my credit limit went down. My credit score went down because my credit limits went down, which prompted all my other creditors to raise my rates and lower my interest, and so on, and so on.

I figure if I wind up in Chapter 13, I'll end up paying them, in the end, what I should have paid them if they left the contracts at their original terms and weren't trying to be such greedy SOBs.

As for what's preventing me from Chapter 7, it's my income plus other sources of income. I've got 2 kids that my fiance declares as his dependents on his taxes. I don't want him to lose that ability, and I'm concerned that the Federal government might not be too happy if both of us are declaring them as dependents. But, that's also a question for an attorney when I go in for a consultation.

And, if I wind up in Chapter 7 and get the debts discharged, I still won't feel much, if any, guilt because for the past couple of years all I've been putting on the cards are food, gas, clothes, and medical expenses because I can't afford to pay them out of my wages because all my wages go towards 28% interest on credit cards.

[texlady]

I don't think the mortgage company or anyone else can 'force you' to start paying on the mortgage. That's between you and your fiancee, and if your name isn't on the mortgage, they will be looking for him to continue making payments if the two of you want to keep the house.

My name is on the mortgage, though, so I'm concerned that my payments to the trustee would include payments to that debt.

By this, do you mean consolidation? You're best not lumping the debts together, it would just overcomplicate a bankruptcy.

I was under the impression that in a Chapter 13 bankruptcy, student loan debt and credit card debt would be lumped together in the 5 year repayment plan. I could certainly be wrong about that.

If it is already seeming very difficult to pay these back, out of curiosity why would you want to add to the debt? Is it necessary? I'd consider the situation long and hard before adding more.

A PhD could allow me to make substantially more money and would pay for itself in 2-3 years of getting a promotion or finding a better job. And, it has the added bonus putting me in deferment status.

[optimistic1]

I suppose it is unethical, but, discharging the owed debt in a BK would almost be on the same playing field, except that you are utilizing your rights as a consumer.

You would not need to live in Texas forever, the Statute of Limitations is as follows,

The Texas Civil Practice & Remedies Code provides a 4-year limitations period for types of debt. The SoL begins after the day the cause of action accrues, (Section 16.004 (a) (3)).

I don't see why any employer could not cut you check, I have never even heard of that, that sounds quite strange.

The royalties, there is no getting away from that I suppose.

Any lawyers or collection agents would be wasting there time to even pick up the phone to call you. Just change your phone number or have a relative open a new phone line at your house for you, and if they call you again, laugh at them and tell them they cant collect a dime from you according to state law.

I'd say at this point, give yourself some immediate relief and stop paying your credit cards at 28% interest, the companies are stiff arming you and are playing games with your mind.


Are you behind on the mortgage?

[texlady]

The Texas Civil Practice & Remedies Code provides a 4-year limitations period for types of debt. The SoL begins after the day the cause of action accrues, (Section 16.004 (a) (3)).

That's interesting... I will have to look into that more, just in case.

I'd say at this point, give yourself some immediate relief and stop paying your credit cards at 28% interest, the companies are stiff arming you and are playing games with your mind.

The only problem with that is if I do not declare bankruptcy quickly, I will have completely screwed up my credit for no real reason and subjected myself and my family to harassing phone calls. While I prefer not to continue on like this, I can do so until the consumer credit reform laws kick (proposed 7/2010) to keep from having universal default and other crap kick in, at which point I can selectively choose which accounts to stop paying.

Are you behind on the mortgage?

No. I'm not behind on anything.

[optimistic1]

True, defaulting on your accounts will dramatically lower you credit score, as opposed to staying current, and then quickly filing a BK. My argument to that, is, why care? Do you need a good score, so that you will go into debt yet once again after receiving a discharge? Understand that no matter what your score is, auto lenders particularly, will always try to charge you a higher interest rate, regardless of your score, based on the simple fact that you filed a BK, they are crooks.

The phone calls, in the beginning will be very minimal, not harrassing at all. I would just tell them that you are in the process of filing a BK, and are actively looking for an attorney. They will get the hint, and stop calling most likely.

The legislation that is in process of becoming a law, will not let your interest rate change until you have made 6 consecutive payments on time each month, only after the law is in place.


If you are not behind on the mortgage, then, your mortgage is paid outside of your Chapter 13 plan, and your concern would be completely nullified.

[biotechsolution]

I do not qualify for Chapter 7 bankruptcy, so my only choice is Chapter 13. I have two concerns and I know I will need to speak with an attorney, but I'd like to get an idea of where I stand before then.

My fiance and I own the house we live in. We are each 50% owners and both our names are on the mortgage/title. There is no chance we will be married before bankruptcy is filed (if it is filed). I do not pay any of the mortgage, taxes or insurance; it is automatically deducted from his bank account. He claims all benefits on his income taxes and I do not repay him the money in any other way.

Anyone have any idea how he will be impacted if I file for Chapter 13, given that I'm not actually making any payments? Will I be forced to start paying towards this mortgage that I have never made a payment on? (Amount owed on house ~ 125k, tax appraised value 138k.)

My second question has to do with student loans. I have about $65k in student loans that are currently in deferment as I finish my graduate studies. I will graduate in January and payments will begin in July. I'm already -$800 per month now and living on credit cards due to my credit card companies jacking my rates from 13 to 28 percent, and when my student loans come due, that's another $500-$600 per month that I simply do not have.

I want to repay my student loans; however, I'm nervous about lumping them in with all my other debt because I do not want to hinder my ability to get another student loan if I decide to keep going on to a PhD. I would simply like to pay them.

So.. in a nutshell, (1) will I be forced to put the student loans in with the unsecured debt, thereby destroying my ability to get student loans again for many many years or do they even count since they do not come due until 7/2010, and (2) is my unusual property ownership situation going to fork me by forcing me to contribute financially towards this mortgage or fork my fiance in any way?

Thanks.

You won't have anything to worry about getting future student loans because your student loans will non-dischargeable.

You could pay them through your plan but the catch is you would have to pay them off at 100% in the 5 years.

More than likely they will be in deferment for the Chapter 13. You can't usually include them in your means tests because they will go into deferment during your Chapter 13.

[texlady]

If you are not behind on the mortgage, then, your mortgage is paid outside of your Chapter 13 plan, and your concern would be completely nullified.

Aha! That's what I was looking for... Thanks.

[Pizza]

My name is on the mortgage, though, so I'm concerned that my payments to the trustee would include payments to that debt.

Ah, sorry, I must have skimmed over the co-ownership part at the beginnng.. I think in the case of that, you just keep paying your mortgage as usual to keep the house, though if you filed Ch. 13, it provides some benefits in that respect. My dad actually lived mortgage-free for a while during his Ch. 13.. I wouldn't advise it myself, but it's something to look into.

I was under the impression that in a Chapter 13 bankruptcy, student loan debt and credit card debt would be lumped together in the 5 year repayment plan. I could certainly be wrong about that.

I don't think that's the case, but double-check me on that... from what I've understood reading the posts here, since SLs are non-dischargeable, it's just business as usual for those payments while other debts may be discharged.

[woeisme]

In a CH 13 plan, your payments are based on your disposable income. You want that number to be as small as possible, so want your expenses to be as high as allowed. This in mind, not paying any housing cost is a BAD thing in a CH 13 plan, not a good thing. Your concern that you will be forced to make payments on the house that you've never done before is totally off, you WANT to have house payments, utilities, whatever, coming out of your paycheck to lower your disposable income. Much better that the $ goes to your house payment than to your unsecured creditors, it's going away to somebody, better if it's towards something you are co-owner of at the end of the plan, if you know what I mean.