A Leased Vehicle and Chapter 13 or Bankruptcy

[6ftladycop]

I have really gotten myself into a jam with all of these loans and credit cards. Believe it or not my credit is great as of this moment, but recently I had a reduction in my salary and now each month I have 987.00 dollars more due than my paycheck. Creditors are not concerned about why your job downsized or why you did not get a raise, but paying the creditors is of great concern to me. I have tried to avoid bankruptcy and chapter 13 for at least a year now when i saw the problem comming. I immediately found a debt consolidation company and they have helped me pay off 7000.00 worth of 16,000.00 dollar debt, however at this time I can not even afford to pay them.

All the credit cards that were under this debt consolidation company are threatening to drop me. I have no idea what to do. I have a leased vehicle which will not end until 2yrs from now and have no idea what they will do once a bankruptcy is filed. I have called every place that I owe money and the only person who tried to work with me was the loans I took out against my retirement. They simply said that even though my loans will go into default, the monies that I borrowed will go on my W2 for tax filing for 2006 as income and reported to IRS. Other than that, nobody wants to work with me. What should I do?

[lrprn]

(6flc, I moved your post here to its own thread so you will get better responses.)

Welcome to BK Forum - glad you found us, but sorry to hear about all your problems. You certainly have done whatever you could to repay your debts. Unfortunately as you have discovered, our creditors have very little incentive to work with us. Your journey to realizing that bankruptcy is your only option left has been repeated here many times by many members, including yours truly.

Sharing a little more information about your situation will help us help you better. What state are you in? Do you have assets (house, cars, other?) that you want to keep? Are you married or in a relationship where you live together with another adult? Do you have children or other adults that are listed as your dependents when you file your income taxes? If you add up all the income you have earned since January 1, 2007, how much is that? When did you last use your credit cards? Have you done any payday loans or credit card transfers, and if you have, when and for how much? Have any of your creditors gotten judgments in court against you? Have you met with any bankruptcy lawyers in your area yet?

All of these questions will help us sort out which chapter of bankruptcy you qualify for and where some issues with filing might be for you.

You will owe taxes on the money you removed from your retirement account (never a good idea to liquidate a protected asset, so please don't do this again if you are serious about filing). However, if you end up filing Ch 13, you can calculate what you will owe and place that amount in your bankruptcy to be paid off through your trustee payments.

You're beginning a stressful journey, but there really are better times ahead. Hang in there with us, ask questions, and we'll help any way we can.

[6ftladycop]

FW: Sharing with the Moderator/6ftladycop

I am a single mom/grandmother
I am 53yrs old
I live in Illinois
I do not own anything I am sorry to say
I leased a GM vehicle 2yrs ago when I thought I would make it.
I need my vehicle for my two special needs grandchildren and transportation to my job that is far far away.
I live with my daughter who is unemployed because of her child who has autism(one of the special needs children) and needs 24hrs care. I worry that filing will cause me to be without a vehicle and if I can not get to work, I can not pay anybody.
We can not afford a baby sitter so we all play around with time and pitch in. Living together is better financially than having two apartments.
I claim my daughter, her twin girls and myself on my income tax as dependents after IRS helped me clear up tax debt believe it or not.
My income since 1-1-07 was 17,232.00
I used my credit card last amount for training pants yesterday for the special needs child that is not potty trained.
I have just started using payday loans because if I had not, I would not have been able to pay my rent this month.
I got some offers in the mail for credit card transfers, but did not do them.
No judgements or wage assignments or anything like that because I have not gotten behind yet but the devil is knocking fast...lol
Have not met with any lawyers in Illinois because in reality if I do not have enough money to pay bills, I sure do not have enough to pay a lawyer. I am trying Legal Aide.
I definitely will not borrow anymore money from my retirement although I actually thought about quitting my job and taking all the money I had in retirement, any IRA's or Valic or anything just to get out of debt. I would have found another job because someone is always asking to hire me in law enforcement, but I changed my mind on that subject....could not do it and was not sure if it would have carried me for a year anyway but glad to hear that I can calculate the amount I owe them every month in payments if I file a chapter 13.
note: It is very stressful having two special needs children at home along with their adult parent. Father ran off and left them. Everybody moved in with me and the autism diagnosis we received has cost us dearly but in my position, anybody would do whatever they could for a child...at least my heart is right...methods wrong, but for a good reason. Thanks for being here. I had no idea there was a forum like this. I am always on autism forums talking to mothers with special needs children, but this is a help for grandma right now.

[leftyf]

Do you have one of those sweet cop pensions? If so, you may want to consider using the IRA to pay debt. I have thrown around the idea of trying to find a job with a pension and liquidate my 401K to pay off my debt...but for now, no job with pension, so I will probably be doing a 13, or hopefully a 7.

[lrprn]

You are a family of 4 making $17,232 in the last six months (assuming your daughter isn't receiving child support and the children do not receive disability payments which would have to be added in). In Illinois the median income for a family of 4 is $74,705 so I'm guessing that no matter what extra income might be added to yours (if any), qualifying for Ch 7 will not be a problem. No wonder you are teetering on the financial edge!

Since you want to keep your car and its lease, you just need to sign an affirmation agreement agreeing to continue to pay the lease after you file.

Before you file, you need to stop using your credit cards and not make balance transfers or get payday loans for at least 90 days. If you don't pay your credit cards or unsecured loans for three or more months, does that free up enough cash to pay a lawyer to file your Ch 7 and catch up on the other things your family of 4 is doing without?

If you are certain you are going to file, it's fine to stop paying all your unsecured creditors - it's called bankruptcy pre-planning and is in your advantage to do, especially since you have no judgments and are on time with all your payments now.

You have a straightforward, no asset case so you could try filing without a lawyer (called filing pro se). However, to do that and have a good chance to file without problems that drag your case out or worse, get your case dismissed by the trustee, you will need to do your homework and learn as much as you can about Ch 7, the Means Test, your allowed exemptions, and how to complete the forms.

If filiing without a lawyer is too overwhelming for you (you sound stretched very thin dealing with what is going on in your family's life right now), let us know and we can share some strategies to save up enough to pay a lawyer to help you file your Ch 7.

Hang in there, 6flc - we've all been where you are right now. Ask questions, search the forum, spend time with us. We understand the stress, the shame, the frustration, the anxiety....all the emotions that overwhelm when we realize that we've done everything we possibly can and we still are swirling down the financial drain. We're here to help you any way we can. There are sunnier days ahead, I promise.

[lrprn]

Do you have one of those sweet cop pensions? If so, you may want to consider using the IRA to pay debt. I have thrown around the idea of trying to find a job with a pension and liquidate my 401K to pay off my debt...but for now, no job with pension, so I will probably be doing a 13, or hopefully a 7.

Bad idea, Leftyf. By law all retirement accounts are protected in bankruptcy - the trustee and your creditors can't touch it.

Turning a protected asset like an IRA or other retirement account into a non-protected asset (cash) is NEVER a good idea. If you are considering that, then things have probably already passed the point of no return. Also there are huge tax penalties for early withdrawal from retirement accounts - you are setting up the perfect situation to jump from the financial frying pan right into the fire.

Save your retirement money. File bankruptcy (7 or 13) instead.

[leftyf]

Agreed lrprn. Do not touch the retirement if at all possible. I just thought it might be worth it based on the $9K (is that right?) of debt on a $34K annualized income I liquidated a few IRA's to pay a realtor to sell my last house...definitely a dumb tax move, but I planned on paying off my debts at the time. Of course I am at 110% of income in debt, not 25% like the 6 foot lady cop. Maybe a pension, if available, is sufficient to cover retirement plans? If you're committed to not racking up debt again, bankruptcy is the best option, as lrprn stated.

[6ftladycop]

RE: IRPRN/Moderator Reply To

From 6ftladycop

Thank you for all the information you gave to me. It made me feel good to know that I am not alone. After reading your post with information for me, I started doing some checking around with my finances. I was trying to see as you said wether or not I had enough to pay a lawyer, but alas....there is not enough even with my daughters SSI checks she receives from the government. I added it all up and the debt is just overwhelming. I do not think I even knew how bad it was until I sat down today, did an asset and liability sheet where I listed every debt and the amounts owed, listed any money in savings which was not much and listed what we have to pay out each month. Tomorrow will be the first 288.00 dollar personal loan payment to Chase that I have ever missed. I feel so ashame. I can not explain it, but missing my first payment(besides the retirement payments)is kind of devastating.

The next payments due on 7-22-07 will be for all the credit cards. This payment is made in one lump sum to a Debt Consolidation company. I have no idea what will happen, but that will be the second missed payment of 439.00 which they distribute to my credit card companies. I am still trying to figure out should I call them all, ignore them all or write or e-mail them all. This is all so new to me that I just do not know what to do. I got General Motors to defer my payment for June, but July-13-07 is my next car not payment due. Since its payday, I am going to pay it but I sure would appreciate some information on how to do the affirmation that you guys talk about when it comes to the car payment and will I have to wait to do this until I file.

I know all you guys are experts at least more than I am. I also wanted to say that my log in name of 6ftladycop is not because I am a police officer so there is no officer pension, rather I am the telecommunications officer at the police station. I dispatch, fire, ambulance and customer service....sorry if I misled anybody....that was not my intention. I still need you guys help and I appreciate all of it.
Thanks