New, stressed, and need some advice

[lillymarlene]

About 20 years ago, I had credit card debt of $12,000. I carried balances on 1/2 dozen cards from month to month, sometimes only paying the minimums. A bank offered a consolidation loan to me, but I didn't go for it. At that time I could not imagine a life without credit cards and/or what would happen if I couldn't make that minimum payment to the bank.

So I did nothing and just kept on dutifully making at least the minimum payments...and of course the debt just blossomed.

$19,000 is a lot of debt if you're having trouble meeting those basic food, clothing and shelter obligations. So far filing is one of the best things I've done. I only wish I had done this years ago.

[Fallen2011]

I again appreciate all of the knowledge around here. I am extremely relieved to have come across this board.

With my income being the only income in the household there isnt anything left. This check, I'll pay rent ($690), utilities (water/cable $127 combined), and my cell phone ($105) that is also late I have like $60. Great. BTW, this is why that inheritance really didn't go too far...but I was certain we would find a workable job for my g/f by now.

A bank offered a consolidation loan to me, but I didn't go for it. At that time I could not imagine a life without credit cards and/or what would happen if I couldn't make that minimum payment to the bank.

I tried this one like a year ago and was denied by my credit union because of my high debt/income ration at that time (before my balances were maxed). I would jump on that in a heartbeat if it was offered...at a good rate...for less then my cc payments...? Nevermind

Wow, I'm surprised by some of the responses. Don't file because having over $19,000 in dischargeable debt is too low??? Even with all of his other living expenses thrown in? That boggles my mind. I filed with only approx. $11,000-$12,000 in dischargeable debt. I think the individual situation should dictate whether one should file or not. If a person can't pay basic living expenses, AND all of the debt, then something has to give. Little to no income, mounting bills and late/overlimit fees, day to day and month to month living expenses, etc. Those should be the factors in the decision, as it was in my case. What might seem low to some people, could be insurmountable to others. Like myself. I could not continue on the road we were on. Filing was my only hope left to me. I did the negotiations with creditors, I tried making payments, I was getting harassed 200 times a day with phone calls and letters.

This is where we are at in a nutshell. I have about $200 due from 3 creditors with $60 to my name for 2 weeks. Med bills too (though I am delinquent). I haven't even heard about a schedule for this weekend from my new pizza delivery job I am currently still TRAINING for. Hope we find something for the g/f soon!

I did get a google voice number...hope I got it set up right. I changed it to my contact information for everything really. I guess it'll come in handy. I just don't want to be harrased at work so I don't know how much good this will end up doing?

As time goes on these balances will like double or something right? Will that 12k end up to be like 24k in 6 months or so before it is considered a chargeoff?

[TBA]

It was so emotional for me to make the decision to file. I had never been late on a bill in my life, and being told to stop paying credit cards was just the worst thing i could imagine at that time. Believe it or not, even worse than being in debt way over my eyeballs.

I did it. It was amazing how much better i felt and how much more functional i became. I was part of my family again. I wasnt hiding myself anymore. Granted, i did quit answering my phone.

You do have to make some tough decisions, and you will have a tough road ahead of you. However, only you can make the decision for yourself and your family. You and your family are the ones that have to live with the decision you make.

I do commend you for gathering as much info as possible on the subject - this is the place to do it.

Sit down, make a budget. Ask yourself some of the tough questions that have already been posed here. look for areas to cut - start couponing, do anything to start saving.

Remember to pay yourself first. Take care of yourself, and even if at first you can only afford 10 a week, save that 10 in a jar. It will get better. There is a life after debt, bk or not.

[BKAttyMI]

Well, when I see situations like this, I always ask who is supporting who. Is brother making contributions to the household? Why hasn't girlfriend sought food assistance for the child? Why is this all on your shoulders? What is GF's job outlook once this internship is completed (really, be realistic, not optimistic)? If it is bleak, she may need to put it on hold for awhile and bring in some income.

I usually cut off filings at around 10k, 10k can be a crippling debt load if you only make $23,000 a year. I agree, the motorcycle needs to go, let them repossess it, especially if it isn't even running.

[keepsmiling]

There are many kinds of assistance available out there. There are programs to help with health insurance- do you have any, btw? that's a biggie, especially when considering BK.
And there are programs to help with food, utilities etc. Somebody needs to get on the computer or phone and start asking questions. Don't know if you'd qualify for more if you were married or living elsewhere, but it's certainly worth looking into.

[lotsahats]

Wow, I'm surprised by some of the responses. Don't file because having over $19,000 in dischargeable debt is too low??? Even with all of his other living expenses thrown in? That boggles my mind. I filed with only approx. $11,000-$12,000 in dischargeable debt. I think the individual situation should dictate whether one should file or not. If a person can't pay basic living expenses, AND all of the debt, then something has to give. Little to no income, mounting bills and late/overlimit fees, day to day and month to month living expenses, etc. Those should be the factors in the decision, as it was in my case. What might seem low to some people, could be insurmountable to others. Like myself. I could not continue on the road we were on. Filing was my only hope left to me. I did the negotiations with creditors, I tried making payments, I was getting harassed 200 times a day with phone calls and letters. My life was (and still is. my husband just lost his job) on a downward spiral. It was a hard, painful choice, but I'm so glad I decided to file. I still do feel like a failure, in a small way, but the relief is well worth the angst.

I have to agree here. I am planning to file as soon as I can afford an attorney, and I only owe $14K. I know that, in the grand scheme of things, that isn't much, but, in my case, there is no other way. After all of my other necessary expenses are paid, I don't have enough to make the minimum payments.

Don't let how "little" your debt is be a factor in whether or not you file.

[Fallen2011]

Important question!! Can I take out a 401k loan now and use that money for neccessities (car repairs, food, rent) between now and whenever I file (date undetermined)? How does that work in a BK?

Well, when I see situations like this, I always ask who is supporting who. Is brother making contributions to the household? Why hasn't girlfriend sought food assistance for the child? Why is this all on your shoulders? What is GF's job outlook once this internship is completed (really, be realistic, not optimistic)? If it is bleak, she may need to put it on hold for awhile and bring in some income.

I have been sharing the means of the support around here for a while. This is a hard subject for me because there really isn't anyone helping me and g/f's mom. We share the bills and rent. There are major issues in this aspect for me as my brother killed my father 10 years ago which started over arguments about moving put and all the supporting yourself stuff that comes with it. He was also Schizophrenic so that had a hand too. Anyhow, forcing someone to either pay or leave is difficult...especially w/said persons mom holding down the fort. Wow...this is sounding like a therapy session. Let's just say I can't be the person to force change in that realm. I also don't want the angst in the house with my daughter around. BUT, I am going to be much tougher on what I contribute to. Loosing something important could help.

I have the bike still because I was attempting to start a rebuild (I love it, its my first bike) but I haven't had the extra time/money with the new baby and finances. It isn't in its original condition currently and I don't want to give it up over the remaining $600 loan!

[Fallen2011]

I tend to say too much; howeverI figured my past tells a lot about where I am now. I am concerned about taking a 401k loan. How would this be treated if I file in say 3 months? Is it correct that it would not be considered in my filing? I dont WANT it to, but I dont want to raise more questions but I do need the money...

[JackBondLove]

13 years before I took the BK plunge, I was starting out in a new business (quit my 9-5 gig, took some classes to help me get into the business.) I was in decent shape since I had a home equity loan I could bleed (remember those days of tapping the home ATM?), and I was getting really good at the game of balance transfer musical banks. Got cancer along the way, but since I had COBRA insurance, that was not a concern. My business was taking a while to get going, and I gave some thought about doing a BK, but the amount I would have had come out ahead was so small that it would not have been worth it. I figured that if I were going to do a BK, I should make it mean something ...

Fast forward a few years. My business started doing well and because I had such a great record of having big balances and always paying them off, the banks were pushing their CC's at me relentlessly. I started getting into the habit of just spending money without paying it off, since I was getting 0% loans (via the CC's.) Then came the bug hurricane that wiped me out, and with an expected loan from the gov, I went about and bought stuff for my eventual replacement home. The only problem was that my business was not doing so well. I had plenty of cash still, but started bleeding that to live on. Well eventually I totaled up my unsecured debt and realized that I had $140K outstanding! I was quite a bit underwater, and started reading up on BK. As I could shield a good amount of that by buying and furnishing a home, I came to the business decision that BK would be an excellent move, so I paid $6.5K (lawyer fee and post-BK buyback of my stuff and equity in excess of the exemption in my home) to wipe out $141K.

Banks now will probably never let customers like me get so upside down so easily, but the point is that if you're going to do a BK, you really should use it for a big amount. Your amount (not counting the the student loan, which BK would not discharge) is quite low, and seems to only add an extra $200 or so per month to your costs (if that.) Try juggling $4K/mo in debt service with NO INCOME like I did. Now with that said, if the choice is between necessities and debt payments, go with the necessities. You can always try to negotiate a settlement with the threat of BK. You seem to be judgement proof with no assets, with only a possible wage garnishment (which probably would not be all that much since you are not much over poverty level.)

Finally, whatever you do, ABSOLUTELY, POSITIVELY, DO NOT TAKE A DISTRIBUTION FROM YOUR RETIREMENT ACCOUNT TO PAY OFF NON-STUDENT LOAN DEBT! A retirement account is exempt in BK, and cannot be confiscated by judgement! Only take such money if even after you have stopped paying ALL debts, that you still need cash to live on. And as for the student loan debt, it may be wise to do take such a distribution, but only think about this after you have resolved the other debt situation.

[JackBondLove]

With my income being the only income in the household there isnt anything left. This check, I'll pay rent ($690), utilities (water/cable $127 combined), and my cell phone ($105) that is also late I have like $60. Great. BTW, this is why that inheritance really didn't go too far...but I was certain we would find a workable job for my g/f by now.

OK, I'll play the part of Dave Ramsey without the evangelizing. $105 for a cell phone bill? I'll presume that the cable includes the internet. Get yourself a MagicJack box, or use Skype, so that you can call using the internet. Then get a TracFone which charges by the minute, and only use it for important calls and as a way for you to tell the caller to call you later at home using your internet phone. TracFone costs about $10/mo or $0.12.minute (whichever is greater for a month.) Drop down the cable to minimum, and you'll have an extra $100/mo or more. I'll presume that you have a 2 or 3 BR appt, so the $690/mo is not too bad for Denver (although you may want to look at the Lamar Village Apartments in Arvada, which might be a bit cheaper.)

[JackBondLove]

I tend to say too much; howeverI figured my past tells a lot about where I am now. I am concerned about taking a 401k loan. How would this be treated if I file in say 3 months? Is it correct that it would not be considered in my filing? I dont WANT it to, but I dont want to raise more questions but I do need the money...

Upon filing BK, it would not matter that you have a 401K loan. If there is cash lying around, the trustee will confiscate it. (Whatever you do, don't take the loan out and have cash lying around at the time of the filing!) The BK would not affect the 401K loan at all, and you would be free to pay it back at any time up until the BK filing, or after (Chapter 13 would be different for the after, but you would be doing a Chapter 7.) You would need to list it, but the trustee wouldn't do anything about it. It certainly would not be a creditor that the trustee would have a fiduciary duty to pay back!

My overall opinion is that if you are at the point at which you need a 401K loan, then you should absolutely be at the point at which you are not paying any of your unsecured creditors. Don't take a loan to continue to pay your unsecured creditors! Stop paying them before considering doing a loan. File BK before doing a loan as well.

[BKAttyMI]

Would taking out a 401k loan fix the problem? No? Don't do it. You're stuck with those payments afterwards. If you're talking about just cashing out a 401k, make sure you're aware of the tax consequences. Again, if this won't fix the main problem, I'd leave it be.

As for the motorcycle, I don't know laws where you are, but it would be a shame if you finished paying off the motorcycle only to have it seized the next month for unsecured debt payments.

Again, read over what I said. I understand about the family issues, but it sounds like everyone needs to sit down and talk about the real situation.

[Fallen2011]

Thank you for your story JackBond. Anymore this is about how I see it. If I have nothing to give/take then I need to focus on living within my means...seriously. I need a bump of income to make it a few months so I took the 401k loan. The payments are at about my contribution amount and I can live with them for a year.

I have to look at trimming everything...phone and all. It is almost a nessicity anymore...maybe I can give something up. That will be what I focus on next.

[keepmine]

First thing you need to understand is, post bk you still have to support yourself.
I'd try and plan this out some. First thing you do is move out and leave the brother and mother to their own devices. Then, see if you can get gf some work, You need to try and find a better job or, a pt job. For sure, you need some health insurance before you file.
Just take it a step at a time. You really don't have anything that a credtor can take. File when it'll do you the most good.

[ValleYum]

A thought: If you are going to stop paying on the reserve line - if it is like an overdraft line of credit on your checking account- make sure your paycheck goes to a different bank. Otherwise they may take your money you deposited for paying bills in order to pay themselves back.

Go get an account where you have NO other business like credit cards, motorcycle loan, etc.

Tough love time here: The motorcycle is a money pit. You do not need to be making a payment on the bike unless you are 100% certain to always have enough money for shelter, gas and to buy diapers for your daughter.

Hang in there. You are at a good place for good information!!