Confused and Scared

[pdxwife]

My husband and I are now convinced that we are going to have to file for Chapter 7 but we have some questions. I'm hoping that someone on here can answer some if not all of them for me. We are $31k in debt, half of it is due to medical costs from me and I am unable to work. I am now disabled and waiting for Social Security, which seems to never come (it's been almost a year now). We can't wait anymore. We don't own a home, we rent and can't afford to live here much longer. We'll last a good month or two before we'll have to move. How do we qualify for a new apartment in the middle of a bankruptcy? Our car is leased and that lease is up in January. My husband has to have a car for work. How do we get around both of these problems if we stop paying our debtors now? It's mainly credit cards but if we stop paying them our credit will be shot more than it is now and we won't be able to get a car. Is there a way to keep the car that we have? Can we do that before we file? We are just so scared that this is going to come back to bite us. We are sincerely a family that is really hurting and desperately has to get out of this situation. Any advice is appreciated.

[TEW]

Can you aford the appartment if you are not paying the 31K in bills?
the medical bills, CCs can all be discharged.
how would things be if you were not paying them?

[JRScott]

Probably for a vehicle I"d let the lease run out, you don't mention how much it is. Take the money from not paying the cc and get a local car mag. Then hunt for a car that you can afford, yes it will be an older car but you can find some good deal and probably will save on car insurance over the leased car as well.

While it will case dings on your credit report if you stop paying the credit cards now, it is common not to pay them in the 2-3 months leading up to filing. Many folks use this time to get money to pay the lawyer.

As for the place you live, have you considered looking now for another apartment, are you in a lease situation with the apt, where you signed a rental contract?

[pdxwife]

We are still short $200 a month if we stop paying our credit card bills unfortunately. We are in a month to month situation with our current place which is scary. We're afraid that they are about to raise our rent.
As for the car, thank you for that advice. I figured that was our only solution as two of our credit cards are Chase and Capital One, so no car loans for us. My husband is cashing out a small IRA this week so we have some extra cash to live off of for the next few months and for our lawyer. Maybe also for a car.
Thank you for your advice, I'm feeling better today about things.

[hnhlvr]

My husband is cashing out a small IRA this week so we have some extra cash to live off of for the next few months and for our lawyer.

Do you have to pay taxes if you take money out of your IRA? Be careful. My SIL took $ out of her 401K and paid dearly for doing so.

[WoodSprite]

We are still short $200 a month if we stop paying our credit card bills unfortunately. We are in a month to month situation with our current place which is scary. We're afraid that they are about to raise our rent.
As for the car, thank you for that advice. I figured that was our only solution as two of our credit cards are Chase and Capital One, so no car loans for us. My husband is cashing out a small IRA this week so we have some extra cash to live off of for the next few months and for our lawyer. Maybe also for a car.
Thank you for your advice, I'm feeling better today about things.

Welcome to the forum pdxwife; I'm glad you found us. I'm so sorry to hear you're in such a frightening position. I'm sure 100 other people will chime in with DON'T TOUCH YOUR IRA, and although I would normally be leading that pack, I can certainly understand why you're doing it. Just please please please remember NOT to use a penny of that money to pay down credit cards or any other dischargeable debt, since your IRA is exempt. I poured 100K of retirement money into a black hole before I knew this, and I'm not the only one. And as hnhlover points out, there will be penalties AND the money you withdraw is added to your income for tax purposes. Please be careful: this has GOT to be a last resort.

(It probably seems like SS will never start, but remember SS payments are also exempt.)

Since you're in a month-to-month situation with the rent, you'd probably be wise to find another place before your credit gets any worse. I know, it's the last thing you need - to add more stress and uncertainty to your lives - but it sounds as if you know what's coming, and this could ease things for you considerably.

If you can actually manage a new/old car, then the combined savings from the lower rent and getting the lease payment off your back could actually knock off that $200 deficit. And if you can use this horrible time to figure out how to restructure your financial life to live on cash, then once the bankruptcy's over with, you guys could actually have a shot at a fresh start.

Good luck to you , and keep coming back - there's lots of help and support here.

[pdxwife]

Thank you Woodsprite.
The IRA I know is going to be added to our income. We made that mistake two years ago and are dearly paying for it still with taxes owed. We did it to pay off credit cards, we learned from that mistake.
This is a last resort sort of thing. It's a very small amount ($4100 total before penalties), but we need everything we can get. That's how bad it is.
We've begun looking for a place but it's hard with a child to find a place big enough and cheap for the three of us.
Thanks for all of the advice.

[pdxwife]

I just wanted to thank everyone for their responses and advice. We've found an apartment that's much cheaper and are moving on the 15th. My dad is helping us figure out how to get a car. We're switching banks. Getting all of our ducks in a row. This was all so overwhelming and you all helped me reign in my anxiety about all of the things that I thought needed to be done. Thank you.

[WoodSprite]

I just wanted to thank everyone for their responses and advice. We've found an apartment that's much cheaper and are moving on the 15th. My dad is helping us figure out how to get a car. We're switching banks. Getting all of our ducks in a row. This was all so overwhelming and you all helped me reign in my anxiety about all of the things that I thought needed to be done. Thank you.

Wonderful news! If PDX means you're in Portland, you certainly are to be congratulated on finding more affordable housing - we had to come all the way back east in order to find a few acres in the woods. Don't forget to call the board of elections and make sure your voter registration ducks are tidied up too. Thanks so much for the update.

[pdxwife]

We aren't moving before the election, mind you... I've lived in Portland all of my life. It's a beautiful city but getting very expensive. We're having to move out to the 'burbs which is hard on a city girl. But I gotta do what I gotta do for my family.

[JRScott]

Glad things are falling into place. Keep us informed