Another "should I file" thread. (LONG)

[Grumpy2]

I'm just looking for some opinions from those who have gone through bk. I have weighed my options and just let the months go by, we are current on all debts. Here's my scenario. What would you do? Is there anything I haven't considered?

$28,000 in unsecured debt. Have not added to this total in probably 120 days.
$28,000 in secured vehicle debt (held by an unrelated institution to the unsecured debt)
$36,000 in student loans
$79,500 in gross income, which is under the median for a family of 5 where I live. We have the cheapest rent in town, but it's really expensive to live here. We can't afford to relocate either.

I have $265 a month left to cover miscellaneous expenses. ($165 in the summer when the electric bill goes up). My kids only get new clothes when grandparents buy them or I get a tax return.

For cost cutting, I have 85 a month for communications (prepaid cell phones) that could be cut and 88 for cable/internet/netflix/offsite data storage. With the kids around, it really isn't feasible to cut off the internet and tv, as we are using the cheapest plan (unadvertised even). The 18 for netflix and data storage is nominal, but could be cut. I don't feel safe going without prepaid phones either. Everything else goes to rent, utilities, food, vehicle maintenance/insurance, and monthly medical expenses. There is nothing else to cut without forcing the kids to eat top ramen 3x a day.

We only have one car and it is $385 a month (minivan). I totalled my car 4 months ago and can't afford to replace it. We spent the small amount I got from insurance on a modest new mattress ($800) and cheap $200 Ikea bed that we have desperately needed for a long time (our mattress was on the floor and had big divots) and a surprise funeral.

Our standard of living isn't bad, my kids just can't do extra curricular things and we can't save anything either. Credit card debt builds up every time something goes bad. Like if someone needs a crown or have to replace a tire or something. We just can't get ahead of it.

My wife never finished school and can't make more than 8.50 an hour or so, which won't cover daycare or really get us anywhere. We can't afford to have her go back because FAFSA thinks I make a lot of money . I have health issues but have looked for a 2nd job anyway. No such luck for me after a year or two of looking.

If I file for CH7, we will free up the minimum payment amount on unsecured debt of $700. The extra $700 a month would certainly help us prepare for unexpected expenses, but it isn't a guarantee. CH 13 doesn't help the situation much at all and just guarantees that we will be subject to the debt cycle if anything goes wrong.

I have consulted with several attorneys and they are usually cheering me on to file, as I would expect. For those who have gone before, is it worth it just to free up 700 a month? Is it better to just take a minimum wage job and work another 30hrs a week to get by until the minimum payments pay it off (6 years!).

Finally, the wrench in the works. I mentioned that car accident. I was at fault. I rear-ended a large SUV at under 20mph, but the other party got whiplash. My car was totalled because their tow hitch went through my grill and bent my frame rail, otherwise it would have been repaired. I have the typical 100/300/100 coverage, but I am concerned that they may want to recover more than the 100k because 4 months have gone by and they are still in treatment. If I file before that happens, I could just get that $700 a month I saved taken away from me again. I truly feel bad they are hurt and I have been in their shoes, but I just don't have anything else to give.

Any ideas?

[Grumpy2]

I forgot to add, since I work in a rather unique position, I WILL be let go if I allow myself to default on my debts and it comes back to them (e.g. garnishments). I can declare bankruptcy as long as I have a good explanation, but judgments and the like are a quick ticket out the door. It is totally legal for them to do so, unlike most employers...I researched it and I have the case history to prove it. I have a narrow window to file and not be punished for it because recent events outside my control give me a temporary "get out of jail free" card. Ch. 7 is highly frowned upon vs Ch. 13, but if I can argue my case that it made more sense I am ok.

[bcohen]

Without knowing the amounts you are paying on each of your bills--including rent and utilities, as well as the type of student loans you have and what kind of payment plans they offer, it would be difficult for anyone to advise you. If your necessary living costs (such as housing, food, and utilities) gobble up a large enough percentage of your take-home pay, it may be possible to discharge some or all of the student loans.

Also, I fail to see how it is your employer's business if you file for bankruptcy, or that you need "permission" to file a Chapter 7. There are laws in place to prevent discrimination for exercising your legal right to bankruptcy protection. Other than certain government or military positions, employers CANNOT legally terminate a person because of bankruptcy.

[Grumpy2]

That is correct that an employer cannot terminate for declaring bankruptcy. However, they CAN terminate when a condition of employment is maintaining a professional license or security clearance that gets revoked because bankruptcy is a sign of financial risk.

Student loans are 100% federal. I am on the IBR program with my student loans. The payment can't get any lower without a consolidation and extending the term out another 20 years.

So basically, of my take home income. (approx $4,800 a month)
$1550 is housing
$270 Utilities
~$600 to feed the family (we don't eat out...ever) All groceries that the kids devour.
~$700 unsecured debt min. payments
$461 student loans
$380 Vehicle
$140 Insurance
$200 gas and pro-rated maintenance (oil and filters)
$85 prepaid cells
$80 cable+internet+netflix+storage
$193 Medical (Prescriptions, equipment, and appts. Recurring and very accurate)
_____
That leaves me with $162 to cover anything else. (summer and winter). The only space to cut is groceries and cable, which isn't significant enough.

[bcohen]

Without increasing income, or significantly reducing expenses, I am not sure that bankruptcy will help. Even worse, if you get into a financial bind again--such as unexpected medical/dental bills, unexpected car repairs, etc.--then you will be without access to credit and forced to come up with the money all at once, which it sounds like you won't be able to do. Also, I fail to see where you've budgeted for clothing, haircuts, personal care items, toys for your kids, etc. These things can easily cost $200 a month or more. Is that where the unsecured debt came from?

Since you live in a high cost-of-living area, and have a large family, it will not be feasible to lower your housing costs or utilities. It probably wouldn't be feasible to cut your grocery budget either, because for a family of only 2, we are paying $300+ a month for food, and that's taking advantage of sales and using coupons. Food costs have really skyrocketed in the past few years. Perhaps if you cook creatively, using lower-cost ingredients, buy in bulk, and have the willingness and ability to store and serve leftovers, you might squeeze $50 to $80 out of your food budget. This is not a very big amount of money, and trying to achieve these savings might be more of a hassle than it's worth.

What you can and should cut, however is your car payment, Netflix service, and cellphones for the kids. If you are prepared to surrender the van, and buy a low-cost used vehicle outright, then bankruptcy could very well help you. If you quit paying the car loan and unsecured debts for 3 months, you should be able to save up over $3000, which should be sufficient to buy a reliable older-model car or van. Your creditors will not sue before 3 months--and I have never heard of anyone being sued before 6 months--so you would still have plenty of time to file for bankruptcy protection before any lawsuit or judgment. Once you file, if the van has not been repo'd yet, the automatic stay would prevent the creditor from repossessing it for the duration of the case, so you could continue to drive it payment-free for 3-4 months.

If you are NOT prepared to cut the costly car payment, then bankruptcy will likely not help you, and you will likely end up in debt again, and without the relief of bankruptcy being available. Bankruptcy is only useful when a person's income is more than sufficient to meet current and future expenses. Without losing the car payment, that isn't the case for you.

[Grumpy2]

Whew...ditching the car would be rough. Here I was thinking I was awesome for reducing my monthly vehicle payment from 800 to 380. I appreciate the input. I hadn't considered that the 700 increase in income couldn't be saved fast enough to create a cushion. To be honest, my cards are maxed out and I am in that position anyway.

Adding a part time job seems like the only feasible solution.

[LadyInTheRed]

I think BK may help. $700 more a month is a lot. With those payments gone, do you think you can meet all of your living expenses and build an emergency savings without relying on credit cards? I don't think that is a question any of us can answer for you.

To bring in a little more income, has your wife considered providing child care to another child or 2? Might be a good option if your children aren't so young that they require constant attention.

If I file before that happens, I could just get that $700 a month I saved taken away from me again.

Not true. Their claim for damages existed on the date of the accident. As long as you weren't intoxicated at the time of the accident and you list their claim on your petition, the debt will be discharged, even if you don't know the amount of their claim and they have not yet sued you.

[LadyInTheRed]

I forgot to ask: How much is your vehicle worth and how long ago did you buy it?

[keepmine]

I think your best bet is to file and be done with it.
Don't worry about what the other party in the accident may or 380/mont payment isn't too bad since you need a large vechicle if, the van is reliable.
If you're upsidedown by a lot, ask your lawyer about 722 redemption financing.
If you decide to file, stop paying those cc's asap.

You do need to raise your income post bk. What about your wife trying to find something overnight or on weekends when you can stay with the kids.

[Drazil65]

Hi, I agree that the vehicle payment needs to be cut even further and wife could babysit for money or as previous poster suggested get night position so no daycare. Look, you know how you got here and you know deep down how to get out, chp 7 may be right for you but you will have to free up more money AND increase your household income.

On $700 extra a month that does not even cover an emergency in most cases so sit down with wife and take another look at things. You could use the internet at the local library and only use Netflex instead of cable as well as reduce down to one phone maybe. It sucks but aside from you getting another job making more money you both do what you need to do. Good Luck!

[Grumpy2]

I just barely refinanced the van a couple weeks ago as a strategic move. I was getting it out from under a cross-collateralization issue with my credit union and got a lower interest rate while I was at it. I set it up with a 3 month delay until payments start but had the direct deposit start immediately. I figured that way I could have 3 months of car payments in reserve. Realistically, I could sell the van for 2-3k less than I owe to a private party or 5-6k less to a dealer, but its retail value is more than the loan amount (The used car market is nothing short of absurd these days). As part of my strategy, I got approved for a 2nd car loan at another credit union at the same time I refinanced the van. I was looking at cheaper cars that could fit the whole family and have a 90 day window to make up my mind. I was thinking I could pick up something cheap if necessary at the last second if I have to file bk and just reaffirm it in ch 7 since it wouldn't be dischargeable anyway right? I strategically positioned myself the best I could if bk becomes the only solution. I recognize the transfer between institutions pushes my filing window out further.

[keepmine]

This is secured debt you're talking about so it should not affect the filing debt since, you are going the vechicle.

Not sure what happened in my previous post in this thread but, don't concern yourself with what may or may not happen with the accident victum suing for amounts in excess of your policy. Let your lawyer know about the wreck and they'll list the individual and there insurance company as creditors with the amount unknown. No deal breaker there.