To file BK or not file OR WHEN TO FILE???

[JackFrostMI]

Here's my summary:
I'm in Michigan - unemployed since May 09'
Only income for me is unemployment ($362 gross/wkly)

Stopped paying all of my CC except joint ones with husband and my Best Buy card as I had purchased gifts on it prior to losing my job & don't want them coming after what I already gave away as gifts months ago. Bal owed BB is $900

I've been sued by Chase - have a judgment against me as of last month but nothing for them to attach except my unemployment - which I just switched to a Debit Card so hopefully they can't get at it.

All bank accounts with my name on it have -0- balances. Husband closed our mortgage account & opened a new one in just his name. We opened new accounts at different bank for the kids money & put their Dad on the account instead of me. So no bank accounts for them to freeze or attach.

I'm expecting Discover & another Chase account to sue me soon. They've stopped calling but I haven't heard anything from them in the past couple of months - so I figure it will be soon.

Now I'm wondering what I should do next. I have no job prospects coming up and only have unemployment until the end of November 2010. We are behind on our property taxes $5,000 and if not paid by Oct. 2010 county will foreclose on house & we lose it through an auction. We want keep the house - especially because it's in my husband's name too (primary) and he is NOT filing BK.

I have a 401K that is the only access to money we have to pay the property taxes. If I withdraw that money (yes I know I'll lose 30% off the top) to pay the taxes & Best Buy off - how long would I have to wait to file BK to be outside the "look back period"?? I know the 401K money would count as income and I'll probably be sued by all the creditors by then, but if I'm going to file BK anyway - does it really matter?? My credit is already ruined by not paying all these bills over the last year.

Any advice is SO APPRECIATED!!

[starr4law]

First, don't give Best Buy a dime. As discussed on other threads, they might threaten to take stuff but very, very rarely do.

Second, once you add in your husbands income, do you still pass the means test?

Third, if you do pay off the property taxes, it is unlikely that the Trustee would go back and get it. They are a priority creditor and considered secured in most districts - if the Trustee took it from them, he/she would simply have to give it back. The look back is 90 days.

Fourth, it is usually never wise to touch otherwise exempt assets - especially to save a home. I have seen so many situations where people cash out all kinds of stuff to try to save their home only to lose it anyways. It is a personal call on your part, but very often leads to a very bad ending. Are you SURE that they would really foreclose on the home for unpaid property taxes? I'm sure the letters they are sending you say that, but will they really?

[keepmine]

And, what is the house worth?
If you have a lot of negative equity, I'd think long and hard about raiding an asset that is exempt to pay taxes on a house that's underwater.

[JackFrostMI]

We are not upside down on the house - we have about $10K equity in it. Refinanced JUST before I was laid off so we were lucky to get a really affordable monthly payment.

The county WILL foreclose for unpaid taxes - they are doing it all over the place. I know people who were in our exact same position and they lost their house right on the date the letter said. It was sold out from under them PLUS they still owe the bank the difference that the sale was short.

We want to keep our house - but I just don't understand what would happen if I took the 401K money out now to pay it - how long would I have to wait to file BK?? Do I have to report to the trustee what I used the 401K money for if I'm outside the "look back period"??

I guess I don't understand what the look back period time frame really is for a situation like this. Guess I'd like to take enough money out for the delinquent taxes & whatever it will cost to file BK when the time comes so that I know I have the money. I'm on extended unemployment benefits so even that is up in the air right now & could end at any time.

I do NOT want to use any of my 401K to pay creditors - just the necessary taxes & a lawyer. I only have about $10K available in the account.

[starr4law]

The means test look back is 6 months not including the month we are currently in. If your income is low enough (and your husband's since his will be included), you might still pass the means test.

You can pay your lawyer no problem (there is even a special form for that), and I don't think that the Trustee would go after the money given to the property taxes but technically the look back is 90 days. HOWEVER, if it were me, I would list it under SOFA #10 - Other even if it is past the 90 days. No sense in leaving the Trustee out of the loop. Plus, you have to list it on SOFA #2 - unearned income, so you might as well just show him where it went. Saves you from doing an accounting of funds spent after the 341 hearing.

Please consider speaking to a good attorney in your district before taking out the 401k. He/she may have some other ideas based on your paperwork that we haven't thought of. Usually the initial is low cost (or even free).