When can I file bankruptcy?

[Anonymous]

Question: Do I need to be behind on my bills in order to file bankruptcy? I have scrimped and scrapped money in order to pay my bills each month, however, when it comes to emergencies (i.e. fixing my car), buying groceries and other necessities, I end up having to pay on my credit card. And I have NO savings. I know that an attorney will be able to tell me which step to take, but I just wanted to know whether anyone has had experience filing bankruptcy though staying afloat (if only barely). I don't want to waste my time.

[Anonymous]

If you are managing to get by, even barely, then I don't believe Bankruptcy is your best option.  BK should be the option of last resort.

I suggest a combination of the following, where possible:

1.  Create a written budget.  Determine all income sources and where your money is currently going.

2.  Cut ALL non-essential spending and impulse buying.

3.  Sell stuff to pay the current debt off.  A garage sale, ebay and craigslist sale for the stuff you don't use, don't need, is a luxury you can do without, don't remember that is stored in closets, the attic, under the bed, in boxes, in the garage and WORST in paid storage.  Use this to pay down debt.

4.  Get a second or third part time job.  You don't have to make a huge amount of extra income to go a long way toward paying down debt when your current income is getting by, but not paying down.

5.  Once debt is paid down, continue with the budget and implement savings and emergency funds.

6.  Don't run up debts after paid down.

7.  Contact your credit card companies and negotiate a lower interest rate.  Explain your desire to avoid bankruptcy but need assistance in this area.

8.  In your case, I suggest tuning in to Dave Ramsey and his no debt program.

Most people can avoid bankruptcy with just a small increase in income and/or decrease in expenses.  And when you can combine and do both, it is really amazing where you can get in 1, 2 and 3 years without reneging on debts and suffereing 10 years of BK residual effects.

Good luck!

[Anonymous]

Well, let me give you the flip-side alternative argument. Like you, I was current on all my bills and debt -- and with hardly a penny of discretionary income -- when I filed Chapter 13 in April 2005. My unsecured debts (all accounts had been closed for a year or so) were paid via a debt management plan with a credit-counseling service, and my year-old car loan was paid up-to-date.

However, with no opportunity to save anything because ALL of my income was accounted for, and already working a second job, I could see the headlight of the delinquency train coming toward me full speed. As a schoolteacher, I have no regular income in the summer (and, as I've said, I had no savings). Plus, the Fall '05 bankruptcy law change was already in the works, so I figured if this was something that was going to come eventually anyway, I might as well get it over with. Thus, I filed with a couple of months before summer in order to divert my erstwhile DMP payments to savings, and was approved for a 42-month plan which paid back 80% of unsecured debt.

Since I was current on closed accounts -- some of which were paid-in-full and not IIB -- when I filed, those accounts still report today, and show no lates. Yes, the bankruptcy is on my record for a few more years (Chapter 13 usually drops off 7 years after filing, not discharge), but the 42 months of timely payments to my plan are evidence of ability to pay. I left bankruptcy earlier this year with a FICO mid-score in the 640s, and received an FHA mortgage less than two months later (I'd been saving about 1/3 of my income through much of the BK -- I actually had a 'looser' budget during bankruptcy than I'd had in my no-wiggle-room prior budget). I opened an unsecured credit-card account with a nominal credit line shortly after becoming a homeowner, in order to line up a down-the-road FICO boost.

I'm told the absence of lates on those still-reporting, older credit accounts, as well as paid current monthly expenses (such as rent and utilities) were helpful in offsetting the knock from the Chapter 13. Thus, if you wait till you really are stressed financially, you may lose the benefit of having stoically paid them to date, should they later become delinquent.

I'm all for avoiding bankruptcy, if that's possible -- but, if you think you're just putting off the inevitable, sooner is better.

Message Edited by oldhack62 on 05-04-2009 12:26 PM

[krielly]

Oldhack 62, I could not agree with you more!

Sorry, but someone who is having to put groceries on a cc everymonth, is not "getting by"........... they are "getting deeper".

BK is a business decision. Your "business", not anyone elses. Ideally, yes, it would be good if you didn't have to file, but it may be that filing is something inevitable, and that you are just prolonging things.

We filed our Chap 13 in 2005 as well. We are in a 60 mos plan. I was NEVER late on a payment before the date we filed. That has helped I believe with our credit scores (680's or so).

The best thing you can do at this point is to schedule 2 or 3 free consults with a BK attorney in your area. You will learn a lot from this. Also, I'll PM you a link to an excellent BK forum that I belong to.

Good luck! Keep us posted on how things turn out for you.

K

[Anonymous]

i filed bankruptcy 97 i left home when i was just a teenager and dunno anything better and this lawyer convnced me to file ( i think he's just starting out cuz he's still sharing office w/ a different company) and at the time was the cheapest. Well Im filing again, i dont really want to but i cosigned with my uncle and bro and they ruined my credit, their car got repossessed. I was doin well rebuilding my credit now itz ruined again. Is there any chance of rebuilding my credit again? I'm really losing hope here. I'm already a cast out among my asian family coz i got mad at my uncle and bro.