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Been Unemployed and Money Ran Out - BK?

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Anonymous
Not applicable

Been Unemployed and Money Ran Out - BK?

Hey all..

Been lurking on myFICO for quite some time but until the last 6 or so months it was for other reasons.

 

My job was taking a toll on my health, not just stress but physical toll as well, I was at a point where I really had quit my job to get away from it.  For the last year I had been trying to get other work, but, well.. It's crappy out there.  Leaving my job was one of the hardest things I've done, a lot of people would look down upon it, but my SO had been pressuring me to do it for awhile as she was the one who pointed out what it was doing to me - us.  Doctor agreed with the move on a medical basis, said he couldn't comment on the financial part Smiley Wink

 

Health wise, in the end it was a good move.  So, I'm not whining, just explaining the reasons behind the move, as stupid as it appears.  So now I'm 6-months unemployed.

 

Financially.. we knew it would be tight but I didn't realize how hard it'd be to get any job.  Understandably, no one wants you for a position if you're over qualified which is what I'm running into.  Still sending out resumes/attending job fairs..etc.

 

OK, so that's the back story.

 

Right now, I've ran out of money.  I'm selling some hobby gear to get through, hopefully, the next couple of months.  I have a potential job in September lined up, never a guarantee but it's a trusted, reliable source.. not that I'm waiting around for it but at least if all else fails there's a light at the end of the tunnel.  The downside being it'll be about 60% of what I was making before, but it's a paycheck.  I also have all my paperwork in for financial aid to go back to college at the local CC in the fall, but I highly doubt there's a living expense sheet that goes along with that. Smiley Wink

 

I'm questioning if I should be looking at filing for BK, specifcially chapter 7.

 

Right now I have:

 

Vehicle loan @ 0.9% interest w/ a balance of about $37k ($8k upside down).  Payments $650 /month

A variety of credit cards, approximately $18k all together ranging from 10% - 20'%.  Payments roughly $700 /month

Small student loan balance left of about $1500.  Payments about $50 /month.

Icing on the cake, IRS backtaxes owed of about $5,000 - still waiting to hear back from them about a payment plan..but, no income.. don't know what I'll do about that.

 

I can't think of any substantial property other than my car.  (No jewelry, bonds, CD's, stock..etc..)

 

With my savings I made it alright until about now.. Nothing late yet or past 30-days.  I guess I'm looking for opinions on if I should just blaze through and try to carry on - let creditors know that there's no income and do what I can, or should I start looking at how to get a BK filed?  (Which other than finding a pro-bono would likely be filed by myself).

 

My SO and I aren't married yet and we have no joint debt, so she's good.  Her income supports her bills and our joint insurance/cell phone bills but that's it.

 

Thanks all, please be gentle.. I've never been anywhere close to this sort of situation and it's..humbling to say the least.  Makes you look real closely on how you operate your finances..

 

Thanks all

Message 1 of 15
14 REPLIES 14
beezer32
Regular Contributor

Re: Been Unemployed and Money Ran Out - BK?

First, welcome to the forums! Second, you've sure got a huge decision to make. I can understand why you're contemplating BK. My view is that since you have no way to forecast future income (post bk), BK would only be a temporary solution for you. It would relieve you from immediate debt responsibility but if you get yourself back into the same situation after discharge, your going to be in awful shape. Worse than now. My opinion is to exhaust all means of finding additional income, sell as much stuff as you can and find someone to assume your vehicle loan. Also, BK will not relieve you from student loan debt or recent IRS debt (in most.situations) . Hope this helps. Keep us updated.
Message 2 of 15
CH-7-Mission-Accomplished
Valued Contributor

Re: Been Unemployed and Money Ran Out - BK?

What was your old income level, what is your expected new income level and what is your share of monthly housing expense?

 

You don't seem like you are bad off enough to file a BK 7.  

 

Do you need a car?  Can your SO sign to get you a cheap one?

 

The reason I ask is that if I were you, I would keep up on the cards and if you simply can't make it, let the car go.  That's half your monthly debt payments.  And you don't need a luxury car if you are flat broke.

 

If they repo the car it will likely go to collections for the deficiency (probably 10K if you think it's 8K when they add on costs, interest fees).  You can then string that along for some time and later try to settle it for 20% (2K).  If you get sued and they get a judgment, well you can still settle the judgment for pennies on the dollar if you can set aside some money in the future.

 

It is MUCH better to have burned just one credtor on your credit report than many.  And if you burn some credit cards, they will never let you back in.  Also bad credit is cumulative, so having many bad accounts is worse than one bad account.

 

If I knew what would happen with my BK, I would have put all my debt on just one or two cards.  It was stupid to have a bunch of petty little 1K or $500 balances on multiple little cards thus banning me from those creditors.  I could have put the 80K on a couple of cards.

 

Do try to keep up.  Your credit score is likely pretty good right now, but once you get even a 30 day late you can expect a 100 pont drop.  If you file BK7 you can expect scores of around 525.

Message 3 of 15
Anonymous
Not applicable

Re: Been Unemployed and Money Ran Out - BK?

I knew 'bout the IRS debt and student loan exemption, not too worried about that especially since I'm planning on enrolling in the fall, ~2 months from now, and they told me that I can suspend payments while attending.

 

As for the IRS.  We'll see how that goes.

 

What did you mean by getting into the same situation after discharge? Just having debt with no income again?

 

Thanks for the response, much appreciated.

 

Message 4 of 15
Anonymous
Not applicable

Re: Been Unemployed and Money Ran Out - BK?

We have some similarities in our stories. I too left a job that actually landed me in the hospital in early 2013. I managed to hang on until Summer 2014 when I was more or less out of money. I stopped paying my credit cards and started aggressively looking for a job. The thought of bankruptcy had crossed my mind, but I figured I'd see what kind of job I landed and evaluate the situation then.

 

I got a job making 30% less than my previous salary. Now that I was no longer using credit cards (basically for the first time in my adult life) I drafted a budget and realized just how out of control my debt was and how there was basically no getting out of it and that BK was the right choice for me.

 

However, I'd personally hate to see you file with so little debt. Those back taxes and student loan aren't going anywhere, the car will either need to be kept or replaced, and it's really only the $18k of credit cards this would take off your plate. I had roughly $75k when I filed.

Message 5 of 15
Anonymous
Not applicable

Re: Been Unemployed and Money Ran Out - BK?

I was making just over $60k, new job will likely be around $35-40k, depending on specific openings at the time.  So if I can make it until then, that'll cover everything I think.

 

I unfortunately do need a car.. technically, a single father and need to get her around and where we live it's not feasible to rely on public transportation - I actually almost financed another, cheap car before losing my income and was going to voluntarily turn in the current car..but I didn't.  Hindsight, but I also didn't think it'd get to this point.

 

My SO is tapped right now, she makes very little really (school teacher), she's supporting mortgage, utilities, HOA, groceries..etc.  So technically, just go survive month to month I need to generate very little as far as actual living expenses... But that's living and just getting by.

 

Next week, if nothing changes, I'l likely call the lender (Hyundai).. see if they'll work with me on anything before I'm actually late.  Hoping if it gets to the point of a repossesion, being up front and voluntary about it will save me some expense and grant me some leniency.

Message 6 of 15
Anonymous
Not applicable

Re: Been Unemployed and Money Ran Out - BK?


@Anonymous wrote:

We have some similarities in our stories. I too left a job that actually landed me in the hospital in early 2013. I managed to hang on until Summer 2014 when I was more or less out of money. I stopped paying my credit cards and started aggressively looking for a job. The thought of bankruptcy had crossed my mind, but I figured I'd see what kind of job I landed and evaluate the situation then.

 

I got a job making 30% less than my previous salary. Now that I was no longer using credit cards (basically for the first time in my adult life) I drafted a budget and realized just how out of control my debt was and how there was basically no getting out of it and that BK was the right choice for me.

 

However, I'd personally hate to see you file with so little debt. Those back taxes and student loan aren't going anywhere, the car will either need to be kept or replaced, and it's really only the $18k of credit cards this would take off your plate. I had roughly $75k when I filed.


 

Guess I should start using the quote function so things make sense... Sorry about the other replies I made Smiley Wink

 

What's odd is that $18k in debt to me seems MASSIVE... Not used to having it, but I understand the reasoning in your statement and in the big picture you're right.  May be worthwhile taking, possibly, a few late payments to avoid a BK.

Message 7 of 15
DaveInAZ
Senior Contributor

Re: Been Unemployed and Money Ran Out - BK?


@Anonymous wrote:

 

What's odd is that $18k in debt to me seems MASSIVE... Not used to having it, but I understand the reasoning in your statement and in the big picture you're right.  May be worthwhile taking, possibly, a few late payments to avoid a BK.


Well, I was over $80k in debt when I filed BK in 2010. I like Ch7 Rebuilding's suggestion of avoiding BK, stay current on the CCs and just take the hit on the car loan, stop paying and let them repo. Can your SO do a car loan for you? In Feb I bought a 2013 Mazda2 hatchback from Hertz car sales for only $10k, payments are only $165/mo for 5 year loan. That would get you around for payments 1/4th of the Hyundai. Sorry, but gotta say I had no idea Hyundai made cars that expensive, I also have a 2003 Kia Sorento SUV I bought new and it was only $18k.

Message 8 of 15
Anonymous
Not applicable

Re: Been Unemployed and Money Ran Out - BK?


Well, I was over $80k in debt when I filed BK in 2010. I like Ch7 Rebuilding's suggestion of avoiding BK, stay current on the CCs and just take the hit on the car loan, stop paying and let them repo. Can your SO do a car loan for you? In Feb I bought a 2013 Mazda2 hatchback from Hertz car sales for only $10k, payments are only $165/mo for 5 year loan. That would get you around for payments 1/4th of the Hyundai. Sorry, but gotta say I had no idea Hyundai made cars that expensive, I also have a 2003 Kia Sorento SUV I bought new and it was only $18k.

 Unfortunately her DTI is going to not add up for a loan.  Hyundai makes cars higher priced than that. I have no defense with the car, I was making good money, never had a nice brand new car before, co-workers driving high end BMW's and Audi's.. Yeah, I admit, I got caught up in it.  Just wasn't thinking two-years down the road nor would I ever consider that stress can impact a person to the point of making a decision like I did... Always thought that was a cop-out excuse from people, little did my narrow mind know.

 

Appreciate your input.. I think the general message is to continue my path (and/or ditch the car if possible) and stave off a BK until all possibilities have exhausted themselves.  I'm only considering now as I don't want to make yet another mistake.

 

Message 9 of 15
CH-7-Mission-Accomplished
Valued Contributor

Re: Been Unemployed and Money Ran Out - BK?

As a rule of thumb, I think people are good candidates for a BK 7 when they owe in the neighborhood of one year's gross salary in unsecured debt.  This is how I eyeball it when people ask.   That is just my own personal metric.

Message 10 of 15
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