Trying to avoid bankruptcy. Will this work?

[Anonymous]

To make a long story short. My wife and I are both laid off from the same place (due to plant closing), and our unemployment is about to run out. We had a child a few months before the place announced it's closing, we had also bought a new car. Yeah, bad luck, I know ;0(. To top it off, we live in a rural area, where there are no jobs. We have been looking, but unfortunaly the best job so far is $9/hr, full time with no benefits and 50 miles away! My unemployment is a lot more than that, and $9 aint gona pay the bills. There are a few places around here that pay decent but they just are not hiring. My last job was $50k/year, without a college education, so you can see where I am coming from. Also, a daycare will run $100+/week, so I would be working for basically almost zero income after gas and childcare...

With all that being said, here is the situation:

1 mortgage $500/month

1 car pymnt $540/month

7 credit cards $690/month min

plus everyday bills, garbage, water n sewer, electric, groceries, etc about $900/month

we already cut our house phone. tv and internet (using the library cpu right now)

our unemployment just barely covers the rest, but it does, so we are greatful for the unemployment, but it does not last forever!

At any rate, I am being forced to make this possible decision, and am wondering how it would work:

1) letting the car go back. it is only 1 year old, and we have 2 other older cars that we can use for work

2) continue paying 2 of the smaller CC bills. we have one for $50 and one for $65. i am hoping to save face with them

3) stop paying the other 5 CC's. with this extra money we will be able to get ahead a few months on the mortgage

I am thinking if I do this, I may be able to get a local job for minimum wage, and my wife get a p/t job for the same amount. The way I figure, we will be able to survive on this amount since we would have eliminated about $1200 per month. I am not proud of this and hate to do it, but I not about to give up my home and live in a car. I know the bill collectors will come calling, and they have the right. I have not been late yet so it will be awhile. I am thinking that sacrificing those 5 CC's, but staying current with the mortgage and 2 other CCs, that it will hopefully help somewhat over not paying anything and going to bankruptcy.

Thoughts?

Also, forgot to mention something that really makes me angry. I have a sears card that was originally opened on 18% interest. I have a $5k balance on it for a year now, and have never been late. Most times actually usually pay at least 10% more than the min due. My reward, they just upped their terms and the interest is now 25.25% with a default rate of 29.99% interest!!! I really do think sometimes these guys bring this stuff on themselves. When bad situatuations arise, who in the world is going to continue to pay 30% interest over making a mortgage payment or buying groceries?

Message Edited by LifeAfterBankruptcy on 10-30-2009 11:21 AM

[Anonymous]

Im very sorry for your situation.  I would do all you can to avod bk unless your house is in foreclosure process.  I would attempt to call your cc's and see if they have a plan to help stay face if you had lost your job or cannt stay a float.  I know my cap one has a plan in case that happens.  Could you sell your new car just to get it out of your hair and settle the balance with the bank?  Or attempt to sell the older cars to pay a few months in mortgage payments.  You probably thought of these already but just thought I would help. 

To help with you employement, have you thought of maybe serving tables at night, its cash every day and you thier are resturants that you could make like a hundred dollars in one night.  If its not too much have your wife babysit a child or two, a little extra while your on unemployment.  I hope this helps.

[QueenBean]

I think I would agree with turning your 3rd car back into the bank - but you may have a voluntary repossession show up on your credit.

Also, if you quit making payments on those 5 credit cards it may eventually impact the two CC that you are paying on time.  I have found that if a CC company notices any derogatory reporting on your credit, they tend to panic and respond by cutting your credit line, or jacking your rate.

You may want to contact the CC companies and see if you can negociate a low interest rate in exchange for closing the accounts ..... just to allow you to pay off the debt and try to avoid filing bankruptcy.  In the end, they are in the business of making money, and if you file BK, they don't get anything......appeal to their business sense & if you get someone in India reading from a script, ask to speak to their supervisor - be persistant.

I agree that your priority should be keeping your mortgage current.  You may also want to file a homestead (if that is available in your state) on your property - it protects it from confiscation to pay debts.

Good Luck & Best Wishes

[Anonymous]

thanks queenbean. you think the same way i do. i figured as well that the other 2 cc companies will catch wind of this, but i think i can handle them. the 2 balances are around 2k, so i should be able to swing that.

with this being said. i am intrigued in the 'homestead' thing. i am wondering if it is something i already have? when i first bought my home, i got a letter from the state saying i could submit for something with a homestead or farmstead. i applied and got accepted. i never really understood it other than it gave me tax break on the property. is this what you are talking about? if so, then i already have this!

[Anonymous]

how can i verify if i have a homestead for sure? i am in pa.

[QueenBean]

In my area, legally recorded documents are available online through the county recorders office, you may check and see if your area has similar access, or just call the county where your deed of trust is recorded and you may be able to simply ask them.

Where I live, a Declaration of Homestead protects up to $500k of equity in my property from judgements (except for loans secured by the property).  Filing this was one of the first things I did when I began investigating BK and other debt settlement options.

Message Edited by QueenBean on 10-31-2009 01:20 PM

[Anonymous]

I am sorry to hear what you are going through. I understand  that you want to avoid bankruptcy but your situation is the reason why the laws were created. Instead of avoiding bankruptcy I think you should contact a bankruptcy attorney and file as soon as possible. It sounds like you would qualify for Chapter 7 instead of Chapter 13 and be able to eliminate all the debt you don't want (like the car and ALL the credit cards) while keeping your house and  your 2 lien free vehicles. The benefit of Chapter 7 over 13 is you eliminate all the debt without having to report to someone(Trustee) for the next 3 to 5 years. If you file while you are unemployed the means test will be a lot easier to get through and then when a job does come around you will have the new beginning that you want.

You are not the only one getting screwed by the credit card companies jacking up their rates to the USURY level. I don't think you should concern yourself with paying them back. Take care of yourself and your family. Keep your home. Keep your cars. Call a good attorney in your area and look into a chapter 7 filing.

[XAVIERSMAMA]

If you do those three things, how much time will it buy you?  I ask because sometimes people can make their situation worse by postponing the inevitable.  I'd hate for you to spend the money trying to juggle the remaining debt obligations, only to find out 6-9 months later that you need to file for BK anyway.  Do you have the equity in your house to sell and then downsize?  You are in a situation right now where there are no really great options, but maybe declaring BK and downsizing for a year or two will leave you in a better position than you are now.

[credit99]

I would recommend that you give the car back and stop paying all credit cards.  You are now in survival mode and must feed your family.  Change your home phone and get an unlisted number to stop the annoying calls as they will drive you crazy and make you miserable.  Wait for a while to see if you are doing OK or if things get worse.  You may want to save that bankruptcy option in case things get worse.  Unless you have lots of equity in your house "and" your creditors try and sue you there is really no reason to do anything rash.  You may, once you get your job back, be able to settle with all your creditors for 10-20% and all the charge offfs will fall from your credit in 7 years or sooner if you negotiate a pay for delete.  I hope this info is helpful to you.  Good luck to you!