Bankruptcy or Debt Negotiation...I'm so confused.

[LostNFound]

My husband and I have been debating the BK issue for over a year. He has NEVER wanted to file and I generally disagree. I need closure and I need to feel that my life is moving in the right direction, but the constant reminder of 110K in credit card debt is always there.

After many discussions, my husband came around to the idea of filing a Chap 7, but he didn't want to consider a Chap 13 because he doesn't like the idea of the trustee being involved in our lives for 3-5 yrs. We own rental property (which we've been trying to sell but it's not happening fast enough).

If we would have gone to a lawyer 6 months ago, we would have more then qualified for a non consumer Chap 7 bankruptcy. However, after giving back a Contract for Deed and selling 2 houses (without profit), we are slightly under the percentage to qualify. We are currently in the process of selling another house. If the deal goes through, we will make 10K. We also have 2 other homes that we may consider contracting which would bring in another $30-40K. Therefore, my husband wants to negotiate the debt rather then file for BK.

I've spoken to a couple of attorneys and we are over the means for a Chap 7. We have another appt on Thursday with a NEW attorney (hoping this one is a little more professional), but his secretaries have already made comments to me about how much money I make. One of them said she should "just quit her job and do daycare if she could make that much money." It makes me nervous to think that we are already going to consider a Chap 13--which my husband is fighting NOT to do.

I've read the posts on here about negotiating debt and it makes me uneasy to think about it. I'm sure I could get a couple of the cards to work with me, based on the odds, but there is also a chance that some will not and then we will really be in trouble. I've avoided paying them for over a year and I'm sure they will be out for blood if I actually communicate with them. The strange thing is that our accountant says we will come out fine if we negotiate, but everything else I've read or heard tells me that we make too much money for a Chap 7. I don't understand how those 2 statements can be right at the same time?

Anyway, I'm very frustrated trying to make sense of all of this. Yes, I know an attorney is the best person to help me decide. My issue is that my husband is NOT interested in hearing about Chap 13 and it's taken me a long time to convince him to even talk to an attorney. Then, the guy was a jerk and I've had to locate another one on my own and do all the paperwork which is difficult because we have 3 self-employed businesses plus my husbands "real job". I'm also going to be off work for the next 2 months due to a medical leave. The doctors say that my injury is due to overuse of working too much--duh!! I'm trying to pay my bills!! But now, I feel like I'm fighting an uphill battle. My only hope is that by not working for 2 months, maybe that will put us under the means test and qualify for a Chap 7. But I'm not sure how all that works either so maybe it doesn't matter.

Has anyone on here considered negotiations as a way out of debt? Is that even worth considering? Or do I work on negotiations with my husband instead and convince him (somehow) that BK is our only way out. Our credit is shot already, we have our home, our jobs and our cars secured for many more years to come. What decision is the right one for us? Will I ever know?

[jwmc1]

I have been negotiating for about 2 years and been doing ok, but the problem is that you need to be able to pay when you settle something. I am not sure if you have the cash available to do this. If you can do a 7, then I think it is a no-brainer. I was not able to do a 7 so I decided to start calling and seeing what I could do about settling the debt. I was able to settle everything that was in my name, but I still have a couple in my wife's name that are problematic, but I suppose I will get it finished at some point. From what you say, I think you need to file for BK...not sure if you would have the ability to settle, like I said you need to come up with the settlement money right away, they do not typically let you make payments for very long.

[maxterr]

I was recently discharged from a BK13; I also had to convince my spouse to do it. Like you, we didn't qualify for a 7 because we had regular income and a home I wanted to keep. When I tried to negotiate with my creditors, they basically laughed. My mortgage lender actually did laugh because I was not yet in default. They told me to come back when I was in default.

Now that I'm on the other side, I can recommend 13 if you are very honest with yourself about what you can afford to pay and how well you can manage the very tight budget you'll be given in a 13 plan.

Most 13s fail, and I can understand why having made it through one. For three years (can be five for some) I made myself track every dollar we made and spent in an Excel spreadsheet budget to make sure I could make the mortgage, the 2nd mortgage, and the trustee payment, plus all the other necessities. It was painfully tight and we had to put things off -- any medical or dental that wasn't critical, fingers crossed every winter that my old furnace held up, no vacations and or entertainment beyond cable TV, no new clothes, etc.. The lawyer said if there was a major issue, we could work something out temporarily w/the trustee, but I never wanted to do that. Just wanted to make my 36 payments and get out.

It was tough, but we kept our home, the car, and I'm debt-free. Even before the discharge, my FICO went from 400s pre-BK, to high 600s. I'm hoping it'll be even higher after my case is closed. Best of all, it was a great lesson on money management so that I can avoid being in this place again. In another 3.5 years, it'll be off my CR.

If you have assets you want to protect, feel reasonably secure about your income (as is possible in this economy!), and trust yourself to live within a strict budget, go for 13. Do find a lawyer you feel good about, because even in a fairly mundane 13, you may need their assistance during the course of it (their pay is part of your monthly payment negotiated in court, and they must assist throughout the BK).

It was tight living, but it sure beat the constant worry and CA hassles.