Should I file Chapt 7?

[Duke77]

I am new to this whole thing. My husband and I bought our first house about 1.5 years ago. We have a 19 month old daughter. I have been a stay at home mom for all 19 months. Just this past week I took a part time job to make some extra cash to pay down our bills. We owe about 25k in credit cards. We owe about 17k on our car (only car). If the credit card debt was gone, we could make ends meet. Right now, we have bill collectors calling several times a day. It is very depressing and frustrating.

Would we even qualify for bankruptcy? Would we still be able to keep our home? Would we be able to keep our car? I know I need to (and plan to) call a bankruptcy lawyer and get solid info. I am just looking for a heads up because it is the weekend and I want a little piece of mind!

Thanks for any and all help you can give me.

[lrprn]

Welcome to BKForum, Duke77 - glad you found us!

Would we even qualify for bankruptcy? Would we still be able to keep our home? Would we be able to keep our car?

Before we can answer your questions, we need a little more information first....
- What state do you live in?
- Looking back for the last six full calendar months, how much income have you and your husband made from all sources?
- Are there any other adults or children besides the two of you and your daughter living in your house?
- How much equity do you have in your house? (Equity equals the house's current market value minus what you owe your mortgage lender or lenders)

We'll do our best to help you sort things out - hang in there!

[Duke77]

Hi, thanks for the reply. We live in Wisconsin. My husbands take home is $580/week. It would be more, but he is paying on old 401k loans (probably $200 a week).That is automatically deducted from his paycheck. I literally just started working a part time job this past week. I should take home about $400 per month. It is just us and our daughter living in our house. We really have no equity. The house would be valued at 198k (according to the appraisal we had when we purchased it a year an a half ago). We owe about 178k. I sure hope we qualify. I am literally sick to my stomach over the bills. I really don't know what else to do.

[Duke77]

Make that $630 a week..not $580. I forgot $50 automatically goes into our savings acoount (yeah...what a joke!). We always transfer the money to checking right away! I think we literally have 2 cents in savings.

[emoney]

Things I would do: the first is not filing BK as your debts are too small, next sell the car and get a clunker for under $4000. Then use the saving to pay down of the CCs. Contact the cards and let them know what you are doing. Ask for interest reduction.
If you are not on a budget set one up and them your money will know what to do.
There is a source on the radio called the Dave Ramsey show. Very good information for digging out of debt.
regards,
emoney

[PaKettle]

Can those 401k loans be paid off at a slower rate, until you get back on your feet?
I am no expert, but I tend to agree with emoney. You don't owe that much, compared to many of us who are filing, and if you could get rid of the car debt (how much is it per month?) and lower the $200/wk 401k debt, and then maybe you can figure out a way to make a little more money on the side... I'd try to avoid bankruptcy if I were you.

One thing I would recommend is to write down every single thing you buy for a month (even things under a dollar) and see how much you are spending and on what. This will help you see where you can improve your spending habits. Then look at ways to cut out unnecessary spending. Once you improve your income then you can increase your spending if you feel the need to (but also increase your savings).

[Duke77]

Thank you both for your information. I guess I am glad to hear it is not as bad as it could be....even though it is bad! As for the 401k, there is no way we can pay a smaller amount on them. We tried that route already. We even tried to get money out of 401k for a hardship and we can't unless if we are being foreclosed on. Fortunate for us we aren't....yet!!! The 401k loans will be paid off at the end of 2008, which is a good thing. You are right about the car. It is expensive and I too think it should go. We pay $579/month on it and have just under 3 years to go (I believe).

I am meeting with my dad tomorrow to go over our budget and see exactly where we stand. He is good in that area and he is willing to help us dig out of our hole. It is just embarrasing to be 34 years old and crawling back to mommy and daddy for money and help.

[PaKettle]

Thank you both for your information. I guess I am glad to hear it is not as bad as it could be....even though it is bad! As for the 401k, there is no way we can pay a smaller amount on them. We tried that route already. We even tried to get money out of 401k for a hardship and we can't unless if we are being foreclosed on. Fortunate for us we aren't....yet!!! The 401k loans will be paid off at the end of 2008, which is a good thing. You are right about the car. It is expensive and I too think it should go. We pay $579/month on it and have just under 3 years to go (I believe).

I am meeting with my dad tomorrow to go over our budget and see exactly where we stand. He is good in that area and he is willing to help us dig out of our hole. It is just embarrasing to be 34 years old and crawling back to mommy and daddy for money and help.

Many of us are much older that that and have gotten ourselves into hot water. Yes, it's embarrassing, but the main thing is you are young enough to start over and get things going in the right direction. Better to learn budgeting and money management when you are at your age, than later, or never!

I don't doubt you, but I find it hard to believe that a 401k loan would require you to pay $200 a WEEK towards it! I think if I were in that situation I'd talk to an attorney or someone about trying to change that somehow. It just doesn't seem right that you could be paying that much on a loan by law! If it's nearly forcing you into bankruptcy, there ought to be a way out of it!

Good luck!

[Duke77]

We took out a rather large sum of money fromt he 401k about 2-3 years ago. Apparently it was for something stupid because we really have nothing to show for it and I can't even remember why we took it out! Yes, it is a weekly deduction from my husbands paycheck. The payoff date is December of 2008. Basically every week we are losing $200 to this loan. My husband works for a privately owned printing firm (actually I think they are the 3rd largest in the world) and they have goofy rules for 401k distributions and paybacks. I 'd be happy to tell you more, but not on here on a public forum! Thanks again so much for all the help and information you have given me.

[leftyf]

Duke, hope you're dad can "consolidate" your debt for you. It's embarrasing when you're 38 also...your debt does seem manageable. I definitely considered mine manageable at $25K, but things are looking different now that it is up to $100K. If you can't afford your house, put it on the market now. If it doesn't sell in 4-5 months, walk away...that's my advice. I know foreclosure looks bad, but in hindsight, I should have just mailed in the keys instead of playing the cash advance game for two years while the house I couldn't afford sat on the market. I ended up getting what I paid for it...and borrowing the closing costs from our friendly cc companies. Boy, was that a scamble. I lost about 20 pounds in one month, but I really was scared of a foreclosure. Something about being kicked out my house seemed more devastating than a bankruptcy, not sure why...it's a strange feeling to be handling thousands of dollars of cash from ATM's to make the close. It really put things in way too much perspective. Good thing I sold when I did because I had just enough credit left to pay the realtor, title company, etc. God, I love America and the endless supply of capital.
I am assuming that the house is part of your financial issues and I'm just giving my opinion. Foreclosure has looked bad in the past, but in a few years you'll probably just be looked at as another casualty of the national housing melt-down...I expect bankruptcies to be following the same trendline. But, who knows? Good luck.
Lefty

[leftyf]

Just wanted to add...I have since gained the 20 pounds back. I really didn't need them back either. If I could pay off my debt in lard, I'd be debt free tomorrow.
Lefty