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Considering chapter 7 for SO. What do you think?

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MACFRME
Frequent Contributor

Considering chapter 7 for SO. What do you think?

Hello all: I am looking for some advice about filing for chapter 7. My husband and I are in quite a bit of debt, and I am not sure we will ever get out of the hole we are in right now. We are considering filing for chapter 7 in his name. Here is a rundown of our finances.

 

Income: $89,000 per year.

 

His debts: $56,000 in credit cards, $26,000 in federal student loans, $7,500 for his car. (I'm thinking the credit cards alone will be dischargeable)

 

My debts: $33,000 in credit cards, $29,000 in student loans, and $26,000 for my car.

 

Currently, we are able to make all of the payments on everything, but I feel like we are getting nowehere with paying off these debts. I think if we were going to file, t would need to be him because he has more debt, and we could continue to pay mine off and maintain my credit rating, so at least one of us would keep good credit. The financed cars are the only assets we have, so we probably wouldn't have to relinquish any property. One issue we have is that my car is a joint loan. I am considering refinancing the loan to another bank under my name alone before we file, so I don't suffer any repercussions. This is such a mess.... 

 

Any advice would be greatly appreciated. We live in Texas.

Cards I Carry
$7.5K $23K $5k $300(SEC) $500 $300 $1,500 $800 $800
Total Available Credit: $39.7k | FICOS: EX 659 | EQ 661 | TU 673
Message 1 of 10
9 REPLIES 9
StartingOver10
Moderator Emerita

Re: Considering chapter 7 for SO. What do you think?

Are you in a community property state?

Message 2 of 10
MACFRME
Frequent Contributor

Re: Considering chapter 7 for SO. What do you think?

I'm not sure, but I do know that Texas does not recognize our marriage because we are a same-sex couple.
Cards I Carry
$7.5K $23K $5k $300(SEC) $500 $300 $1,500 $800 $800
Total Available Credit: $39.7k | FICOS: EX 659 | EQ 661 | TU 673
Message 3 of 10
barbaralee
Established Contributor

Re: Considering chapter 7 for SO. What do you think?

Is the 86k income his, yours, or combined? Are your finances combined? My concern is even if he files for BK and you all keep your debt you are still looking at 88k worth of debt... which is feasible to pay off, but it would take aggressive budgeting. I imagine his credit card line up is similar to yours, so BK'ing them would also mean being blacklisted among the big boys, as well.

 

Is he unable to make payments on his debts?

Message 4 of 10
MACFRME
Frequent Contributor

Re: Considering chapter 7 for SO. What do you think?

Our finances are combined, but the income is his. The only joint account is the car that I drive, but I think I might be able to get it refinanced solely in my name. Here's where we are. We pay about $200-$300 a month to each card and seem to be getting nowhere. We can still pay all of the bills each month, but we are not saving any money.
Cards I Carry
$7.5K $23K $5k $300(SEC) $500 $300 $1,500 $800 $800
Total Available Credit: $39.7k | FICOS: EX 659 | EQ 661 | TU 673
Message 5 of 10
StartingOver10
Moderator Emerita

Re: Considering chapter 7 for SO. What do you think?

I see an issue here with the refi - it will be difficult for you to refi into your name without an income (if I understood correctly that the actual income comes from your husband). You won't be able to use his income and leave him off the loan as far as I know.

 

As for the Bk, have you considered the 'snowball method' of paying off the debt rather than filing BK?

Go to daveramsey.com to read up on this and other ways to aggressively pay down your debt without a BK.  That site has some excellent budgeting tips too.

 

BTW, Texas is a community property state. You might have an advantage because Texas doesn't recognize your marriage, but for others it would be more difficult for one to file BK and the other not to file as the debt would just go from both being responsible to one being responsible Smiley Frustrated

 

 

Message 6 of 10
barbaralee
Established Contributor

Re: Considering chapter 7 for SO. What do you think?

Yeah, unless you have something local willing to work with you I am not sure how you will get refinanced. And I know it sucks, but savings is not a priority right now, paying off the debt or gathering up the fund for BK is. I second the snowball method if you decide to keep your debt, but it would take aggressive budgeting to chomp away at that amount. 

 

I don't want to say yay or nay on the BK, but if my husband and I were in your situation I would consider BK for both of us, rather than just one. In the long run your credit will recover.

Message 7 of 10
MACFRME
Frequent Contributor

Re: Considering chapter 7 for SO. What do you think?

I think I will try the snowball method for 6 months and see how it goes. Ramsay's site says to ignore interest rates. I think I will do the snowball method, but pay attention to interest rates and see how it goes. Thanks for all of the advice.
Cards I Carry
$7.5K $23K $5k $300(SEC) $500 $300 $1,500 $800 $800
Total Available Credit: $39.7k | FICOS: EX 659 | EQ 661 | TU 673
Message 8 of 10
EW800
Valued Contributor

Re: Considering chapter 7 for SO. What do you think?

I believe you are smart to do all you can to pay down the debt, before filing for BK.  

 

I will just share what my wife and I went through.  About two years ago we went through some real ugly times.  We had an absurd amount of credit card debt.   Regretfully, we did have to "settle" with one one credit card company, but from that point we committed to paying off all the others.  We tightened our belts big time and really committed to sending every dime we could to the credit card companies.  It was not easy and it was painful, but looking back now, VERY worth it.  We now have literally no credit card debt, other than a showing a few dollars on one account each month for optimum credit scores.  It feels amazing to no longer be owned by the credit card companies.  

 

We all know that every profile/situation is different, but just wanted to share this in case you think it might work for you guys.  I suggest doing all you can to increase income, even if just a small amount each month.  Tighten your belts and send everything you can to the CCC's.  Before you know it, you will see the balances fall.  

 

Best wishes!

 

Year 2012: All Scores in the 520 range, during a foreclosure, CC Settlement and high UTIL. Very ugly days...
April 2023: EX8: 840; EQ8: 832; TU8: 842 -- Middle Mortgage Score: 822
In My Wallet: Discover $73.7K; Cap1 Venture $48.7K; Amex ED $38K; Amex Optima $2.5K; Amex Delta Gold $18K; Citi Costco $22.5K; Cap1 Plat $8.4K; Barclay $7K; Chase Amazon $6K; BoA Plat $21.6K; Citi TY Pref $21K; US Bank $4K; Dell $5K; Care Credit $6.5K. Total Revolving CL: $296K
My UTIL: Less than 1% - Only allow about $10 a month to report, on one account. .
Message 9 of 10
barbaralee
Established Contributor

Re: Considering chapter 7 for SO. What do you think?

You can do the snowball method one of two ways: smallest balance or highest interest. With the smallest balance you see more of a success, because you are seeing credit cards being paid off. Highest interest means you are saving more money in the long run, paying off the one with the highest interest. I think it is a personal decision, myself. But as I just advised the other poster, if you know your husband is going to be filing then DO NOT pay his debts, except for the student loans. You will be wasting money paying on cards that you are including in a charge off.

Message 10 of 10
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