Finally decided to file, a few general questions

[Runnin on empty]

Well, enough is enough. I've been denying it long enough, I kept telling myself that we'd find a way, that there was some bank out there that would help us consolidate. I've kept working 2 jobs that I hate, all the while my physical/mental health is suffering and my family becoming more and more distanced.

My wife, who has been adamantly against filing for quite some time, came to me the other day and said that we have to stop robbing Peter to pay Paul. We've been paying all of our bills, but then needing to turn around and use more credit to purchase things like groceries and gas. We decided that we should finally call a lawyer. So we did, and are in the process of getting the necessary paperwork together now. Our plan is to file as soon as we can, but we're in a bit of a jam so to speak.

Since we know we are going to file, we plan to stop paying our bills and use that money to pay the secureds (house/car/utilities/food). We would need to wait the 90 days before we can file as we're still using the cards because we've cut it that close to the bone. My biggest concern is that a previous consolidation loan that was given us by a local credit union is paid through payroll deduction to a savings account. Each paycheck, a certain amount is taken out, and at the end of the month, they withdrawal our monthly payment (I get paid bi-weekly). I can stop the payroll department from depositing that money into the savings account, but seeing as we need to wait the 90 days, I am not sure if this will cause them to sue us before we are actually able to file.

The other problem is that we have a 2nd mortgage with Chase. We also have a CC through them that has a little over $1,500 balance on it. We did want to pay if off, but were afraid of getting slapped with a preferential payment claim by the trustee. We do plan on re-affirming the 1st and 2nd mortgages, and even the Chase CC if necessary, our biggest thing is that we do not want to lose the house.

So I guess my questions are this (all of this is based on the assumption of us being able to file chapter 7):

1) How imperative is it for people to wait that 90-day minimum before filing?

2) We do have a line of credit (not tied to the house) that has quite a bit available still in it ($16K). If we took some/all of it and paid off some bills ($10K-$14K) and leaving ourselves enough money to pay for necessities over that 90-day period while still paying our bills until we can file, will the trustee look unfavorable upon that?

3) My wife is driving a car that is almost 9 years old and is starting to fall apart. My car is 6 years old and is having some decent mechanical issues. We have thought about it, and due to the limited number of miles we both drive a year, we want to lease some vehicles. If we trade in both of our vehicles and lease new ones (econo-boxes, not Cadillacs), does the trustee look unfavorable upon that?

4) If we decide not to use our line of credit and stop paying our monthly unsecureds, what is the action most likely that the local credit union is going to pursue? Is it something that can damage us before we file? As I said, as soon as we reach the 90-days we will officially file.

Last question:

5) If we stop paying on our unsecureds, including the Chase CC, can they come back and do anything with our home since they also have the 2nd mortgage, even if we continue to pay the 2nd mortgage faithfully?

Thanks in advance, and thanks for all the info. I only wish it hadn't taken me this long to realize that we just needed to make a clean break and start fresh. I was never taught how to manage money, and I do not want the same for my children. We start a new leaf and teach them the right way.

[keepmine]

First of all, don't use that LOC or any other credit.Over a $10K hit, expect the creditor to scream loud and long and very likely file an adverserial appeal to prevent that debt being discharged.
The big problem with the CU is, once you default if you have a savings account with them, they'll execrise an offset. Just take the money from existing accounts. Were I you, I'd open a new bank account and empty out any checking or savings account with the CU. It'll likely take longer than 90 days to sue and even if they did, the judgment would be discharged in bk.
Ask your lawyer about the auto lease idea. In general, a lease is a very expensive way to own a car.
Forget about Chase. They can't change the terms of the mortgage if you default on the CC. I would not reaffirm unsecured debt.

[SinkingFast]

A lot of the answers to your questions here depend on if you're gonna file Ch 7 or Ch 13. How you need to prepare for Ch 7 is different than how you'd prepare to file a Ch 13.

One thing you do need to do, either way, is change over to a cash and carry lifestyle. Quit paying CC's and charging food and gasoline. Pay for all your normal monthly necessities expenses with cash and don't charge anything.

You're gonna need to go cash and carry so you can effectively prepare a budget for any attny you hire. Things like insurance premiums, mortgage payments, and such are easy because you get bills for those expenses. But groceries, clothing, gasoline, car repairs, even school/work lunches are expenses you don't really think about. If you're like the rest of us, most likely you pay and go on without knowing how much all that stuff costs you each month.

What State do you live in?? How much is your annual income?? How many people in your family?? With more info we can help you better.

[Runnin on empty]

A lot of the answers to your questions here depend on if you're gonna file Ch 7 or Ch 13. How you need to prepare for Ch 7 is different than how you'd prepare to file a Ch 13.

One thing you do need to do, either way, is change over to a cash and carry lifestyle. Quit paying CC's and charging food and gasoline. Pay for all your normal monthly necessities expenses with cash and don't charge anything.

You're gonna need to go cash and carry so you can effectively prepare a budget for any attny you hire. Things like insurance premiums, mortgage payments, and such are easy because you get bills for those expenses. But groceries, clothing, gasoline, car repairs, even school/work lunches are expenses you don't really think about. If you're like the rest of us, most likely you pay and go on without knowing how much all that stuff costs you each month.

What State do you live in?? How much is your annual income?? How many people in your family?? With more info we can help you better.

We're definitely aiming for a Ch 7. We will file Ch 13 if the Trustee demands it, but we're preparing for Ch 7. We have a 4-person household in NY. Based on USDOJ Trustee website, we are currently about $5K under the median income for a 4-person household, and that is with 3 incomes (my 2, wife's 1). When I am able to quit the 2nd job after we are discharged, we will be about $20K under the median.

I agree. I think our biggest problem is that we have been living on/with plastic so long that it is almost as if the money isn't real. Even when we used our debit cards, you don't equate spending $100 the same as handing over a $100 bill. I'm actually looking forward to scrutinizing each purchase we make on a weekly/monthly basis. I'm sure there are many corners that can be cut, and money that can be set aside for home repairs, the kid's college or our retirement.

How soon after we stop making payments to our unsecured creditors should we expect the phone calls to start? Also, should we be forthright and tell them right off the bat that we are planning on filing BK, or should we just not answer the phone if we see it is them on the caller ID? We're not about to hide this from our family, but by the same token, we'd hate to have our parents or our jobs called over this.

*Edit - How will we know if the Trustee is going to scruitinize our finances? Is it that if you fit under the median income, you should be able to file Ch 7, or will he/she automatically want to delve deeper?

[rrockinggramma]

My advice is to find another credit union asap and get all of your payroll direct deposits set up with that new place before filing. The credit union will probably close your account unless you reaffirm with them on that 1500. However my experience has been that even if you reaffirm, they won't work with you in the future. So, cut it loose, set up new accounts and start using that new bank as a fresh start. And like everyone else has said, no more plastic. Good luck!

[SinkingFast]

You should be fine on the Means Test. An attny should file B22A, get to Lines 13 and 14, compare your income to the Median, and check "Presumption of Abuse does not Arise" on Line 15. You'll be done with the Means Test at that point.

From there, the Court is gonna look to Schedule I compared to Schedule J. I is your actual earned income. J is your real living expenses.

Personally, I'd start saving receipts from every purchase anyone in your family makes. Once a week or so, go thru the receipts and break out the categories. Food, clothes, gas, car repairs, etc. Receipts help you know where your money is going AND document your real life expenses if you were to happen to spend more in a category than the Court is used to seeing. Say someone in the family has a medical condition and you spend more for medicals than the Court is used to seeing. That type of thing.

DO NOT take any money against your house. You do not want to convert an Exempt asset to pay Unsecured Debt you can Discharge in BK.

If you're gonna get to file a Ch 7, personally I wouldn't do anything about Leasing or buying a car until after your BK is over and done with. Chances are your Credit isn't great right now anyway. The interest rates will probably be similar, post BK, to what you'd pay now, pre BK. You may have to wait a while to file. So you may be looking at having to make due for a year to 18 months. It sounds painful, and it might be. But you never know how long your old beaters will carry you before you absolutely HAVE to replace 1 or both.

Just a side note here,........... About the cars,.......... I'm speaking from experience. One 10 years old. One 15 years old. One 18 years old. All 3 150K+ on miles and we managed to make it. We started the BK odessy in Jan '06, filed Sept '06, Discharged Dec '06, Closed April '07. We just did buy a car after the 15 year old, family car, was recently totaled.

The 90 day minimum is almost etched in stone for people filing Ch 7. The longer you can wait the better. If you can put 6 months+ between filing and your last charges, that much better. The more time passes, the less chance you have for an Objection from a Creditor.

The Chase CC/Mortgage thing is a question for an attny. The CC may be totally Dischargeable with no effect on your mortgage. Or, Chase may have some Cross Collateralization statement in the CC agreement that might allow them to add the $1500 back to your mortgage. Definitely a question for an attny.

[Runnin on empty]

Thanks Sinkingfast.

The biggest thing that scares me is the Schedule I - Schedule J comparison. Right now, we have about $20-$30 a week left over after bills are paid, but once that unsecured debt is gone, we'll have quite a bit in expendable income left over every month. Of course this won't be the case once I quit the 2nd job, but the Trustee will go on our last 6 months worth of salary, which will include both jobs. I don't think we can string along creditors (with no payments to them) for 6 months waiting for our salaries to drop even more. Truth be told, I'd love to quit the day job and go back to college to work on my degrees.

Too late on taking money from the house, that's where the 2nd mortgage went to, back when I was still dumb enough to think we could actually somehow pay it all off.

I guess push comes to shove, we might be forced into a 13, and then have the 13 reassessed after I quit one of the jobs, or have it converted into a 7 after I quit one of the jobs. Either way, I'm quitting one of the jobs, my health/family is suffering too much.

As far as the cars go, I guess it can't hurt to wait. I'm just really nervous, I don't want my wife driving herself or the kids in anything that might be unsafe.

I figured as much about the 90 days. 6 months might be a little tough, I'm worried about a judgement/garnishment going against us before we're able to file.

I'll ask the attny about Chase.

[jal1129]

I don't know if this is how all cases are handled but in my case my attorney only used the income from the previous 14 days to filing to fill out I v. J.

They used the 6 month income for the means test only.

There was a significant difference in our income on the means test and I v J as my DH had been in an accident and was'nt working at the time we filed.

[Runnin on empty]

I don't know if this is how all cases are handled but in my case my attorney only used the income from the previous 14 days to filing to fill out I v. J.

They used the 6 month income for the means test only.

There was a significant difference in our income on the means test and I v J as my DH had been in an accident and was'nt working at the time we filed.

I'll have to check with the lawyer on that one, because if that is the case, I can take a few weeks off until we get this straightened out...

[SinkingFast]

Once you start living on cash only,.......... No CC charges for anything,........ You might be surprised at how much money you really have left. Right now, you're thinking like you currently live. Charge some necessary, like groceries or gasoline, then turn around and pay your minimum on your CC accts.

Remember,............ You've got to budget every month for auto insurance, car repairs/maintenance, etc........... Those once in a while expenses you may not be thinking about right now. School lunches for the kids. Day care possibly.

Here's a link for you to help remind of some expenses you may not be thinking of:

http://www.ca-bankruptcy-attorneys.c...alculator.html

And whether you actually spend it or not,........... Many Courts allow for Entertainment. Generally, that's up to $100/mo in our area. Attnys in your area will know what your Court is used to seeing.

[JollyGG]

The biggest thing that scares me is the Schedule I - Schedule J comparison. Right now, we have about $20-$30 a week left over after bills are paid, but once that unsecured debt is gone, we'll have quite a bit in expendable income left over every month.

You have also probably been going without some necessary items such as new clothes, entertainment, some routine maintance to cars and home, annual dr. visits, ect. Once you actually start adding some of those things in you will probably find you have much less left at the end of the month than you thought.
Also don't forget those semi annual things that should be a part of each months budget so the money is there when it comes due, such as christmas and birthday gifts, car insurance, property taxes, ......

[Runnin on empty]

You have also probably been going without some necessary items such as new clothes, entertainment, some routine maintance to cars and home, annual dr. visits, ect. Once you actually start adding some of those things in you will probably find you have much less left at the end of the month than you thought.
Also don't forget those semi annual things that should be a part of each months budget so the money is there when it comes due, such as christmas and birthday gifts, car insurance, property taxes, ......

Thanks JollyGG. Too bad there wasn't a list somewhere of things like that you could take off, so that everyone would have one location to look at deductions...

Hmm...that might be a good idea for a thread. It could be made into a sticky too...

[JollyGG]

Thanks JollyGG. Too bad there wasn't a list somewhere of things like that you could take off, so that everyone would have one location to look at deductions...

Hmm...that might be a good idea for a thread. It could be made into a sticky too...

Check out the link SinkingFast directed you to. That link is also listed in a sticky under General Bankruptcy "Links for members"

Also when we did our credit counseling we had to do a budget that factored alot of that stuff in.

[Runnin on empty]

Check out the link SinkingFast directed you to. That link is also listed in a sticky under General Bankruptcy "Links for members"

Also when we did our credit counseling we had to do a budget that factored alot of that stuff in.

Oops, I did check it out, I just forgot about it.

[Runnin on empty]

Here's a link for you to help remind of some expenses you may not be thinking of:

http://www.ca-bankruptcy-attorneys.c...alculator.html

And whether you actually spend it or not,........... Many Courts allow for Entertainment. Generally, that's up to $100/mo in our area. Attnys in your area will know what your Court is used to seeing.

SF, is there anywhere I can look that will tell me how much the average Court (or even each county court) will allow for each of those expenses? I know we fall well below the range on entertainment, clothing, ect.