What just happened? Were we lied to?

[princessminor]

So my husband and I went to see a lawyer yesterday who took all of 6 mins looking at our debts.  He concluded that we make too much money and said that a chp 13 is better for us.  So the breakdown is the following.  Our total credit card debt is $95,417.66.  Personal loans total: $51,027.00 and Federal Student Loan:  $25,628.93.   Last six months income average is $8,401.82 gross.   Net is more like $5,000.  Monthly minimum credit card payments total $3,190.55, rent is $1,875.00 and Verizon/Directv/Cell phones (2) total $600.00.  Each month we end up using the cards just to pay the difference.  I did a means test online for NY and according to them we are over median by $-21692 for a family of 3, but not sure if I did it correctly.  I'm on long term disability and wondered if I could do a chp 7 would this be an option, if they insist on a chp 13.  I have more credit cards than DH.  He was served with papers back in March and we didn't serve an answer and now it's a waiting game to see when and if they will garnish his paycheck or freeze our accounts.  I plan to see at least two more attorneys for second and third opinions.   What do you guys think?  Let me know if I left out any info.  Thanks in advance!!

[Anonymous]

If you fail the means test, and cannot provide an asset that would otherwise account for the extra  income, or have an explanation how your income will decrease (thereby making you eligible for chapter 7), and you want to proceed with bankruptcy, you must file a Chapter 13 bankruptcy. If you file an individual case, you generally need to include your spouse's income in the calculations.

If you weren't already sued, I would suggest exploring a Debt Management Plan or something similar. Since it sounds like you got a judgement, and are waiting for a garnishment, I would move on bankruptcy sooner rather than later. Alternatively, you could explore settling with the creditor that sued you, and making up some type of plan for the others. 

Ultimately, you may want to:

1) confirm that you are ineligbile for a Chapter 7

2) Determine what your payments would be in a Chapter 13

3) Compare those payments to what other non-bankruptcy option you may have

[Anonymous]

Oh, and yes... meet with at least 2 more attorneys. Chapter 13 cases are usually more expensive than Chapter 7 cases, so you should ensure you hire an attorney that is competent and one that you can trust.

[Anonymous]

I just wanted to add that they also are looking at how much money is left after all the bills are paid.  You will want to sit down and add up all of your expenses including utilities, food, gas, car insurance, medical expenses, haircuts, etc, even Netflix or magazine subscriptions.  When a lawyer sees that Bankruptcy would free up $3,190.55 of your monthly income, to them, that indicates that you will have plenty to pay towards a Chapter 13 restructed debt payment plan for a few years instead of a chapter 7.  So you want to show your income vs all of your monthly expenses. You can also include money alloted towards clothes and things needed for work.  

Hope that helps!

[Anonymous]

You need to talk to another lawyer. The ones quick to throw you in a 13 may be doing so to serve their own interests OR to not deal with a 7 that could be a little more complicated. I was almost pushed into a 13 but talked to a few more lawyers and one finally said, "oh no, we can get you in a 7."  Don't be afraid of paying for a GOOD lawyer. I paid a lot for my 7, but he did what the attorneys 1/3 of his price said couldn't be done.

[princessminor]

Thanks leonel9 for your input.  The problem with a chp 13 is that I worry that we won't have enough to live on.  I understand about cutting corners and I do a budget every month but I still have to pay Geico quarterly, pay Verizon, Directv, Sprint and AT&T monthly.  The lawyer said we would pay no more than $1,700 a month, which would be great, but he just threw that number out and I'm not sure if that's the max anyone could pay or just for us.  We have no roth, no 401K and now wer're trying to play catch up and want to same more and spend less.

[princessminor]

Thanks 720dream for your reply.  I will include all the other living expenses.  We're also paying our parents credit cards.  We had to have my mom-in-law open a carecredit for us when our cat was sick and she was kind enough to do that and we've been paying on that card and my mom has three that we're paying which was suppose to be used only for her, but when things got tight, we ended up using them as well.  No matter what I will not destroy their credit as well. 

[princessminor]

Thanks SteelerNYC.  So looking for two more at least.  Quick question, did you just stop paying the cards to pay for the lawyer?  Did they ask for the money upfront?  I don't mind paying back the cards, but I would like to be able to have at least an emergy fund and something in the bank.  

[Anonymous]

I had stopped paying most of my cards a few months before I even considered filing.  It was when I got back to work and started crafting a plan to get caught up that I realized the problem was bigger than I could handle and decided to find an attorney. 

CH 13 attorneys will put you on payment plans for their fees

Most CH7 attorneys won't, because a BK by nature relieves you of all debt incurred prior to filing. (So technically you could not pay the attorney!) I made payments to mine over 3 months or so and we did all the prep work during that time. When I made my last payment on his $3500 fee, everything was prepped and ready to go and he filed it.  It was definitely the money that I was saving from not paying my CCs that allowed me to scrape that together so fast!

[princessminor]

So since the month just started, I said I wasn't going to pay and got scared and just paid two today.  We have so many that stopping just scares me, I don't know why.  I think when the attorney says to stop paying and we're getting the ball rolling, I will feel much better.  Someone suggest that we try to pay off the smaller cards first which I think are three and then start trying to pay off the rest.  If we had extra that would be great, but having to use the cards just to pay for utilities is hard.  Do you think if I close out some cards and ask for the hardship dept. this would help us not having to file?  One judgement said they would settle for 50% which would be $9,000.  That's great but we don't have that money and adding on another bill would just put us deeper in the whole. What do you think?