Please help me with my story

[LSUTiger32]

OK, so here I am. This is the situation I have dreaded for years but I don't see any other way out at this point. We have a consultation with a lawyer on Thursday and I am actually looking forward to it. The stress of the last two years has really added years to my life.

I've made so many terrible decisions that had good intentions at first and now seem not only stupid, but irresponsible. We've managed to keep everything up to date save two items (luckily neither of which report to the bureaus) and our credit score while down 100 points or so is still in the 620-630 range.

Our problem is just way too much debt. The grand total, a shade over $700K with most of it ($600K) on mortgages on four properties. I am one of those idiots that thought he could make money in real estate. Another $30K on credit cards and $57K on auto loans of which $32K, $635 a month, we will be giving up. We would like to keep one car at $389 a month.

Right now we are right at the median income level for our state but we do receive rental income. Of course, none of it is profit by the time I pay everything but I am worried that we will not pass the means test to do CH7. We make around $5,200 a month before rental income but of course we net much less. Basically our bills out number our income and that is before we pay for food, utilites, etc. I've been making due for the last two years by basically robbing myself of anything of value. On top of all of that we were completely wiped out by Katrina in 2005 and lost everything we owned and then damaged badly again (although nothing like Katrina) by Gustav in September of last year. Because of this we want to keep our home so bad because to us it is a trophy that proves we overcame, the other three properties can go bye-bye.

I have so many questions and my lawyer has been wonderful in answering them via e-mail before our consult. Is there anything I should know going in there on Thursday?

I just wanted to introduce myself and ask for help from everyone. The last several years have been filled with pain and loss for us and we are desperate for a fresh start. Hopefully this will be ticket we need to get our lives back on track. We are in our early 30's and I feel 20 years older from the stress and pain.

Thanks in advance for your help!

[falken]

I would ask the lawyer if they can get you in to a 7 by declaring 50%+ of your debt as business related. If the majority of your debt in non-consumer debt you do not have the pass the means test.
Looks like you may qualify based on what you have said.

[LSUTiger32]

I would ask the lawyer if they can get you in to a 7 by declaring 50%+ of your debt as business related. If the majority of your debt in non-consumer debt you do not have the pass the means test.
Looks like you may qualify based on what you have said.

Really? OK, well I never actually had it set up as a business though, they are all in my name personally.

This is a rundown:

$240,000 Primary residence ($1,525 a month before taxes and insurance)
$162,000 Rental #1 ($900 a month income before expenses, $700 note before taxes and insurance, $0 profit after)
$11,000 Rental #1 second mortgage
$69,000 Rental #2 (no income right now, $654 mortgage before taxes)
$40,000 Investment property (not paying monthly, worth less than $10,000)
$37,000 credit cards
$32,000 Car #1 (dumping)
$26,000 Car #2 (keeping)
$24,000 school loans (I know I am keeping those even though I don't want to)
$8,000 Timeshare (this is one thing I have worth more than I owe, the resale value right now is about $12,000)

[LSUTiger32]

Quick questions I just thought of.....I am still using the cards to pay bills and making the payments for as long as I can. Is this considered fraud and should I stop using them all together and also, is there any benefit for me to try to continue to make the minimums as long as I can? Does it help your score any when you get discharged?

[falken]

Really? OK, well I never actually had it set up as a business though, they are all in my name personally.

Looks like you are at $306k of what would be non-consumer debt and $343k consumer. If you can perhaps link your credit card bills to investments (fixing up the rentals, investing the cash, something like that), or a car that was used exclusivly for investment properties?

Example, if you have a credit card with a $30k balance and you can document where you used $16k on investments the entire balance is considered non-consumer.

Its going to be close, but its worth trying to see if you can get the numbers to swing more to investment/business than consumer.

Does not matter if it was just in your name BTW, as long as it was non-consumer debt.

[falken]

Quick questions I just thought of.....I am still using the cards to pay bills and making the payments for as long as I can. Is this considered fraud and should I stop using them all together and also, is there any benefit for me to try to continue to make the minimums as long as I can? Does it help your score any when you get discharged?

If you know you are going to file and continue you charge on the cards, it would be fraud. If you haven't put down a retainer for an attorney yet its hard to prove you knew you were going to file.

To be safe you should stop using them for at least 90 days before you file, otherwise those purchases or perhaps the entire balance could be ruled non-dischargeable.

[LSUTiger32]

I defintely spent a lot of the credit card money on the properties. Some of it though was cash advances ($10,000 worth) and I not sure how I would prove I used the cash on the houses. For instance two of the cards totaling $4,000 is home improvement cards.

[LSUTiger32]

If you know you are going to file and continue you charge on the cards, it would be fraud. If you haven't put down a retainer for an attorney yet its hard to prove you knew you were going to file.

To be safe you should stop using them for at least 90 days before you file, otherwise those purchases or perhaps the entire balance could be ruled non-dischargeable.

OK, well at this point I don't know I am going to do it although I would like to. I guess I'll find that out on Thursday.

[LuciluS]

I defintely spent a lot of the credit card money on the properties. Some of it though was cash advances ($10,000 worth) and I not sure how I would prove I used the cash on the houses. For instance two of the cards totaling $4,000 is home improvement cards.

I would think owning rental property, you would keep receipts for tax reasons. So if the receipts are after the cash advance, but close to the date of cash advance, those receipts would suffice.

You didn't have a separate checking account for your rental property? Not trying to sound mean, but how did you complete Schedule C on your income tax returns right?

Luci

[OhioFiler]

Quick questions I just thought of.....I am still using the cards to pay bills and making the payments for as long as I can. Is this considered fraud and should I stop using them all together and also, is there any benefit for me to try to continue to make the minimums as long as I can? Does it help your score any when you get discharged?

I would not worry too much about your credit score if you plan to file bk.

You should immediately stop using and stop paying your credit cards.

[hereforinfo]

I'm trying to figure out how one gets approved for $522k worth of mortgage loans on a $62k salary?!

[OhioFiler]

I'm trying to figure out how one gets approved for $522k worth of mortgage loans on a $62k salary?!

Rental income.

[LSUTiger32]

Rental income.

Thanks for explaining things to people. It's called down payments and rental income. Of course I also didn't have a lot of the other debt when I was approved for some of those.

I don't want to distract from the point here but have you not seen the people in California who have $700K houses and they make less than I do? There's no question I was wrong for applying for them all and the bank was just as wrong for giving them all to me. For my role in destroying the economy, I apologize!

[LSUTiger32]

I would not worry too much about your credit score if you plan to file bk.

You should immediately stop using and stop paying your credit cards.

I totally agree, I just thought if there was a benefit and since I have come this far I might as well give it a shot and see if I can hang on until the filing date.

[LSUTiger32]

I would think owning rental property, you would keep receipts for tax reasons. So if the receipts are after the cash advance, but close to the date of cash advance, those receipts would suffice.

You didn't have a separate checking account for your rental property? Not trying to sound mean, but how did you complete Schedule C on your income tax returns right?

Luci

Yes, I have the receipts and yes I filed my taxes correctly. No, I did not have a seperate checking account and yes that was a mistake. Like I said I wasn't thinking of it as a business even though it was and I should have. I just didn't know if that was going to work to prove that a personal cash advance off of a personal credit card was used for the rentals.