Ummm...well...ur...okay...please help?

[JustMeJaneD]

We live in MD and I talked for the first time to an attorney about filing BK. We are 90 days down on our rental property...upside on it to boot. We have used ALL of our savings over the past 10 months fixing up the house, making repairs and carrying the $3500 mortgage after our tennants trashed the house and moved out.

My income has been reduced by more than half in the past year and my husband just finished his PHD and has yet to find a job...which as it may turn out could not be a bad thing.

To date we have yet to miss a payment on a credit card, loan etc...but I am running out of things to sell on ebay...lol...and have really no way to pay next months bills....no savings...no cash reserves except 19k in my 401k I guess I could tap if I needed to? Sigh...

The BIG BIG problem is I dont think I can pass the means test to file Ch. 7 and the attorney said we had too much unseccured debt to file 13. My husband has 150K in student loans on top of our CC debt...and our 2nd mortgage is apparently unseccured as well. Is it possible that we just can't file at all? UGH! What am I going to do?

Now WHY can't I pass the means test even though I have no money and my income is awful?...well...I filed both my 2006 and 2007 tax returns in April and because I took such a loss on my business and rental but my witholding was high because I am strictly commision and they withhold at a high rate when you only get paid once a month...so I got a WONDERFUL 2 YR refund (20K) in May and June on both federal and state...that I immediatly used to pay my delinquent mortgage on the rental and back property taxes on both homes! ...and which I now know counts as income.....I also sold a bunch of stuff on ebay to pay bills...I really really have been trying hard NOT to file and to keep our heads above water.

I just don't know what to do. They are going to foreclose on the rental soon I guess. Its been on the market for 6 months but (shrug)...I have no more money to fall back on and I'm 100% commision with little in the pipeline. If I have to wait until December to file what is going to happen if I stop paying on all those bills? Should I take out a loan from my parents and try to keep paying on my credit cards until Dec? Cash in my 401k to do the same? If I stop paying on my CC then the interest rates will go up into default rates...right now they are all pretty low...some even 0%...but if I don't find something else to hock I may not have a choice....what if I can't ever file BK 7 or 13...does that happen? Okay...I'm babbling not...

Thanks for any input. -JaneD.

[AngelinaCat]

Hi Jane: welcome to this wonderful Forum. IMHO you are way over your head. My best advice is to go to nolopress.com and purchase their C7 book. You can get it online as a download, or a print version that is about 1/2 price of what it costs in retail bookstores. It is written in plain English--but still can be daunting.

Your situation sounds very much like ours. We were trying for a 13, though the credit counselor--there is a mandatory pre-file course you must take, and a different post-filing course you must take--advised that with our income and outgo, we were more suited to a 7. When I lost my FT job, the 7 became necessary.

Good luck to you and let us hear back.

[liz417]

Hi Jane,
First of all, you need to breathe....
Now, whatever you do...DO NOT TAKE MONEY OUT OF YOUR 401K!!! That $$ is exempt!!! I think you need to seek a few more free consultations with other attorneys. How much is "too much unsecured debt" to file ch 13???? I don't know about that, but someone else will come along and be able to answer that question.
Next, it dosen't matter if you default on the credit cards, I have "wonderful rates" and was NEVER LATE, but my cc's raised the interest rates because of my balances...so don't worry about the high interest rates and consider filing bk.

Good Luck and keep us posted when you speak to other bk attorneys.

[AngelinaCat]

I missed the comment about the 401K--I ditto Liz's comment. DO NOT RAID THE 401K! We did that trying to keep afloat. It is exempt--pretend it doesn't even exist.

I have a TIAA-CREFF account that I got during my first job. The employer matched me $.25 to each $.50 I put in. I only worked for that employer for 3 years, and this TIAA-CREFF wasn't offered until I was there the second year. That was 30 years ago. The little bit that I put in and the employer put in has continued to grow until there is now a very nice little nest egg in it. And the beauty of this little puppy is that the way the original contract with the employer and myself was written--I CAN'T TOUCH IT until retirement age--PERIOD. Thank GOD for that, or we would have raided that too trying to stay afloat.

[Flamingo]

First, welcome, and secondly, as indicated by Liz above, do not touch your 401(k). Do not take that money out for anything. This forum I believe was not around when my hubby and I were investigating filing in early 2002 and we received horrible advice from other posters on another forum who gave wrong advice on purpose just for kicks stating they were knowledgeable in BK and accounting/finances and it was fine for us to take ouit our 401(k) cause the trustee would just take it anyway. Turned out those troll posters were the same person with mental issues - I will drop it at that. So from our error in getting wrong advice and utilizing my hubby's 401(k) prior to filing and having our attorney's jaw drop at our initial meeting as to what we had done, makes me basically stay on this forum to ensure people don't get bad advice to certain things. We could have saved a lot of money - thankfully I did not touch mine.

I am a bit confused...you stated you have talked to (seen?) an attorney....and he did not explain some of your questions to you? You state "we" and then you state "I" talked to an attorney. Usually after viewing all the informatoin you brought to an initial meeting you will at least have some sort of idea, maybe even scribbled on a sheet, as to what you can and cannot do all in conjunction with the information you provided.

If I were you, I would contact another attorney and get another consultation and take with you a complete listing of all your debts, monthly payments, assets, sources of income and most recent tax returns. I believe the added income in May and June is what is hurting you. Your situation is a bit more complicated with the rentals and business aspect of the entire thing - I would definately get another consultation.

Note your hubby's student loans are not dischargeable.

Best of luck to you and believe it or not, you will get this all organized and resolved. Just know you are in for one heck of a lifestyle change and you will need to do whatever you can in the months and years to come to adjust to living on a cash basis and very little, if any credit. Reality is just hitting you and we all go through it and learn from it in various ways...

[AngelinaCatHub]

JustMeJadeD: You can bet you won't go wrong when 'Flamingo' states a case. One of our more intelligent moments was, read closely and slowly when 'Flamingo' posts. Thank you, 'Flamingo'. 'Hub

[liz417]

This forum I believe was not around when my hubby and I were investigating filing in early 2002 and we received horrible advice from other posters on another forum who gave wrong advice on purpose just for kicks stating they were knowledgeable in BK and accounting/finances and it was fine for us to take ouit our 401(k) cause the trustee would just take it anyway. Turned out those troll posters were the same person with mental issues - I will drop it at that. So from our error in getting wrong advice and utilizing my hubby's 401(k) prior to filing and having our attorney's jaw drop at our initial meeting as to what we had done, makes me basically stay on this forum to ensure people don't get bad advice to certain things. We could have saved a lot of money - thankfully I did not touch mine.
..

That is awful!!!! It never even occured to me that this could happen! I guess when you've made the decision and/or thinking about filing BK, you are so scared of the unknown and looking for answers...thank you for being here.

[justplaintired]

As others said, DO NOT TOUCH YOUR 401K! It's not enough to save you and it's basically all you have. It's untouchable in a BK, so keep it safe.

Now I totally agree with other posters, talk to another attorney. Waiting to file is not a problem, we have waited over 6 months now. Not paying cc, not using cc.

I don't believe your student loans can be filed on.

I really think you need to find another attorney who can give you some solid advice. Your like alot of us sinking in debt and I can't imagine a good attorney wouldn't help you set up a time frame on filing. Where did you fall in the median income?

Please don't give up, find a new attorney, one who explains things, and make sure you ask lots of questions. First being, when could we file safely? Did you have cash advances? Did you do balance transfers?

[JustMeJaneD]

I don't mean to confuse anyone. Lord knows I'm confused enough. Often I say "I" when I mean "we". Though my husband and I are in this together, I am the one that works and pays the bills as he has been home and at school for the past 8 years.

The attorney I talked to (for an hour and a half on the phone) took a lot of information then told me that we "may" not pass the means test. He will send me some things to fill out and return and then will have a better idea. He won't charge me unless I qualify and decide to file. I ran the numbers myself and its close but doesn't look promising. We fly under the means test without the tax refunds so worse case we wait out until Dec and file?...but I'm certain we will have lost the house by then.

And yes he answered a lot of questions, but I had so many more after I hung up. He said it looked like we had too much unsecurred debt (we have to count the student loans even though its not dischargable) to file 13 and that the alternative CH 11 could cost us 20k which we obviously don't have.

I guess i could talk to another attorney, but it took me 10 days just to get a phone interview with this guy and he came highly recomended. I had talked breifly to someone else prior to talking to him and she was so bad we didn't even make the apt. I get sick just thinking about having to go through this again and again for months and months...

[getouttadebt]

I am in CA and we did not include our 2007 Tax Refund in the Means Test calculation because our attorney said it is just that -- a refund from 2007 which is a time period outside the 6 months income to calculate your Current Monthly Income. Not sure if this is just something for my district or not, but we sailed through the 341, Trustee filed Report of No Distribution, and now we're past the 10-Day Statement of Presumed Abuse period. My attorney says we are done with the UST and the countdown to 9/9/08 has begun. I am really hoping it's smooth sailing from here.

My point in telling you this story is that I was worrried that a large tax refund was going to screw up our Means Test, but we did not have to include it. Again, I would double check that for your district.

Good luck,
getouttadebt

[JRScott]

First off don't raid the 401k, 401ks are exempt assets and thus it would be bad to take it out and make it non exempt.

Next get a second opinion. It is best to talk to 3-4 lawyers before deciding on one.

Stop paying the credit cards immediately. Pay everything else first, if nothing is left over don't worry about the cards. If some is left over after everything else you can buy yourself some more time.

1. If you can make the minimum payments for all cards and still have a little left over, take the leftover and apply it to the smallest card balance. Do this til you pay it off, then move up.

2. If there is not enough to make even minimum payments you can divide what is left after all other expenses equally between all cards. Send a copy of the balance and division you are making to show you are trying to pay something . You can string them along for a while this way. When they call and ask for more just say I'm sorry I'm giving you the same amount I give everyone else.

3. The other option is to not pay any credit cards at all. Take the money and save it towards a lawyer. Care needs to be taken that you do not build up to much non exempt assets this way prior to filing.

[JustMeJaneD]

Thanks everyone for all the suggestions and encouragement. I guess we will try to talk to another lawyer sometime in the next two weeks. And we WON'T touch my 401k.

Angelinacat (and HUB)- Thanks...will order the book from nolopress.com -I've looked for books at B&N and Borders and they didn't have much. (I should have tried the library....) :-)

Liz-...I'll work on breathing and not sucumbing to hysteria. This is the first time I've talked to anyone about this at all and I guess it makes it a lot more real. No one knows we are having so much trouble...not even my family. And I don't feel like I have any friends that I can talk about this kind of thing with.

Flamingo -thanks for the heads up and sharing your experience. That must have been so hard. I've heard all kinds of crazythings online -I can't believe people can be so awful sometimes.

Justplaintired- yeah...we know we have those student loans for life, but somehow they count them in the calculations? dunno...Our median income..INCLUDING the 20K in federal tax refunds, 5k in state...and oh yes our 2k stimulous check which is also income?...is about 110k a year (MD w/ a family of 5 I think the limit is 103ish...) I work on 100% commision and my production is declining rather than improving due to the real estate market so those number will look very different in Dec.

JRScott - that is helpful too. there is no way we will amass any assets anytime soon. Even after the discharge we will be strapped as we've robbed peter to pay paul for so long. But its helps to have a game plan for dealing with the deficit and your suggestions are very helpful. Thanks!

Getouttadebt - That is interesting about not having to count your tax refund. I am saddled with refunds for 2006 and 2007. Personally I think its rediculous that they would consider it income... but I was told that here in MD it is. I will most definately get a 2nd and 3rd opinion.

What about selling things...do I have to count that as income? Ebay and consignment stores and pawn shops? Do they count and do I disclose them? The attorney asked us if any one item we own could be sold for $1000 or more? I threw out a few things, but he assured me that no one really wanted my laptop that much...lol.. So the answer was no, but we have a lot of little stuff... do they take your stuff at consignment stores into account and ebay stuff?

[AngelinaCatHub]

Angelinacat (and HUB)- Thanks...will order the book from nolopress.com -I've looked for books at B&N and Borders and they didn't have much. (I should have tried the library....) :-)

No, don't depend on the library. What they have will be very out of date. It can be as much as 6-9 months between the start of the purchasing process, going through acquisition processing, cataloging, etc. before a 'new' book hits the shelf.

I'm a librarian; I can say this...

Thanks for not touching the 401K.

[AngelinaCat]

Actually, the above post is mine. I was sitting at 'Hub's computer.....

[liz417]

Thanks everyone for all the suggestions and encouragement.
Liz-...I'll work on breathing and not sucumbing to hysteria. This is the first time I've talked to anyone about this at all and I guess it makes it a lot more real. No one knows we are having so much trouble...not even my family. And I don't feel like I have any friends that I can talk about this kind of thing with.

Hi there again,
I know exactly how you feel...I haven't disclosed this to anyone, not even close family members. It's really easy to come here and talk, we all may be miles apart but we are all in the same boat....

Good Luck to you!