topic Re: Considering Filing for Chapter 7 in Bankruptcy

Considering Filing for Chapter 7

hpmoney505 — Thu, 05 Sep 2024 19:06:53 GMT

Hello all! I am just looking for some advice. I am 21 years old and I made some very bad financial decisions during college. When I factor in all of my debt (non student loan) I am negative each month. I have almost 15 credit cards, two personal loans, other lines of credit and a mortgage. I definitely was living out of my means during school but have gotten that under control. My budget is very tight and I stick to it but I just can't overcome any of this debt. I talked with a bankruptcy attorney and I do qualify for Chapter 7. I've talked to some people around me about this possibility of filing for bankruptcy and they've all told me it's an awful idea. I know I'm young and I am not at all proud of the situation I got in but I just want some opinions. Is it worth filing? And how long can I except for my credit to begin rebuilding after discharge? Total Debt is close to 150k without student loans. Student loan payments don't start until Mar 2025.

Re: Considering Filing for Chapter 7

JoeRockhead — Thu, 05 Sep 2024 19:18:53 GMT

When you find yourself barely able to tread water, BK might be the best solution not only for your financial well being, but also your mental state as well. While I've never had a BK, there are many here that have, and will hopefully chime in, sharing that it might have been one of the best decisions they ever made.

Re: Considering Filing for Chapter 7

CreditCuriosity — Thu, 05 Sep 2024 19:23:04 GMT

How could you be 150k in unsecured CC debt/loans at 21 while in school? They were willing to hand that kinda credit out to someone maybe making 20k year with 3 years credit history? Honestly I am curious. Do what is best for you as you are young enough will you will recover quickly enough but credit might not be the best thing for you in your future other than necessities

Re: Considering Filing for Chapter 7

hpmoney505 — Thu, 05 Sep 2024 19:26:09 GMT

I had made almost 50k a year working a full time job from sophomore year on. I had been using the credit to pay for housing costs and school costs because I had no support. I was also unsure how I got approved for so much but almost anytime I applied for anything with my income they would hand me credit. A lot of it has now built up because of unpaid bills and late fees being added.

Re: Considering Filing for Chapter 7

hpmoney505 — Thu, 05 Sep 2024 19:31:09 GMT

And I was also incorrect it is 150k with student loans ~ 100k without. Still very high but I do have a mortgage.

Re: Considering Filing for Chapter 7

pizzadude — Thu, 05 Sep 2024 20:03:30 GMT

Is there any chance that your income will increase at all now that you're out of college ? If so would this give you any realistic chance of improving your situation ?

Also are you current on all of your payments on your CCs and loans ?

Filing BK is a tough decision but for some people it's the right choice. I'd for sure talk with a few other BK attorneys and get a second / third opinion.

Re: Considering Filing for Chapter 7

hpmoney505 — Fri, 06 Sep 2024 12:40:52 GMT

I have applied to some new places that do pay more but I am not in the highest paying area.

I had failed to mention originally but I was relying on two incomes until about 3 months ago. I had purchased a home with my fiance and we are no longer together. We were setting up for most bills to be coming out of my check and hers was for the extra week to week spend. This was making it easier to pay down some of the debt. Then once that was gone it became so much harder to stay on top of it all. I thought bankruptcy may be the best option because I was living on over 100k+ a year and now it's down to roughly 50k. I can afford to pay every bill but it leaves me down to about $20 then to survive for 2 weeks.

Re: Considering Filing for Chapter 7

Zeiram — Sat, 07 Sep 2024 08:01:29 GMT

@hpmoney505 wrote:
I have applied to some new places that do pay more but I am not in the highest paying area.

I had failed to mention originally but I was relying on two incomes until about 3 months ago. I had purchased a home with my fiance and we are no longer together. We were setting up for most bills to be coming out of my check and hers was for the extra week to week spend. This was making it easier to pay down some of the debt. Then once that was gone it became so much harder to stay on top of it all. I thought bankruptcy may be the best option because I was living on over 100k+ a year and now it's down to roughly 50k. I can afford to pay every bill but it leaves me down to about $20 then to survive for 2 weeks.

You could use the bankruptcy to walk away from this mortgage too if you can't recover even without the credit card debt, but geez, dude. People were hardly letting me rent a car at that age. :/

I doubt you're too far in on the house payments. Might just want to go back to renting unless you got the deal of a lifetime, and I'm guessing if you signed in the last couple years you didn't.

You'll probably plunge the ex into bankruptcy unless they want to take the house back if her name's on it too. But that's her problem.

I wouldn't sign anything with a person that was not my spouse.

Re: Considering Filing for Chapter 7

FicoMike0 — Sat, 07 Sep 2024 15:58:12 GMT

The ex on the mortgage is a wild card. Is there much equity? Does she want the house?

Re: Considering Filing for Chapter 7

Zeiram — Sat, 07 Sep 2024 20:19:19 GMT

@FicoMike0 wrote:
The ex on the mortgage is a wild card. Is there much equity? Does she want the house?

I'd guess that there's no equity given that OP says he's 21 years old. The mortgage couldn't be more than 1-2 years old tops and with a 30 year fixed at the rates they were at last year, you wouldn't have any equity for a long, long time. Probably until he was close to 30 years old himself, if he finds a way to pay for this.

If he can't quickly figure out a way to pay for just the mortgage and get her to quitclaim deed the house over to him (because who wants to own a house in 30 years when you're 50 with an ex from when you were 20 who may or may not even be alive by then) then I'd probably consult a bankruptcy attorney and see if I could go into Chapter 7 and strip everything, but not just yet.

If OP could handle the mortgage without the credit card debt in play, I would get into contact with the ex and go "Here's how this works. If you can quit claim this, then maybe, just maybe I can continue paying it after I file bankruptcy. If you don't, I'll eventually file bankruptcy, then the house will be discharged on my end, but not on yours, and you'll be responsible for this house loan at this point."

This will create a "Take my deal, or I leave you with them." ultimatum, but don't present it as a threat, merely a statement of the facts.

"I’m trying to work out a solution that benefits both of us. If you’re willing to quitclaim the house, I can potentially keep up with the mortgage payments after filing for bankruptcy. If not, the mortgage might end up being your responsibility alone once I file for bankruptcy, since my liability would be discharged."

The credit cards probably won't start charging off for 6 months after he stops paying them. The banks almost never start foreclosure for a while. I'd consult, then stop paying, then only file bankruptcy when someone actually took action. Eventually something will give but until then there's no reason to play hardball with them. That would freeze everything in place while the courts sorted out the mess, and probably buy him some more time in that house before it had to go back. If he's lucky he might be living in that house another year or two depending on what the docket looks like in the local foreclosure court and not paying them anything to live there.

Some free months with a place to live while he figure out how he's going to go back to renting is probably the "best" outcome from where this is now unless he can strip the credit card debt, save the mortgage, and get a quit claim deed. This is a real mess.

This is why people need to get married and accumulate wealth before signing a mortgage. Sure, there's some banker out there who will give one to an unmarried couple and stretch their budget with it, but being legal to do that doesn't mean it's a financially wise decision to sign on it.

Divorce raises the bar to break up with someone because of "the new shiny" and since there was never a marriage in place, a divorce judge cannot order her to do something to help you wind down the mortgage.

Had this been a marriage with a divorce decree and the judge ordered her to help wind this down, you could file a contempt motion if she didn't.

Re: Considering Filing for Chapter 7

hpmoney505 — Sat, 07 Sep 2024 22:07:07 GMT

The house is only in my name so all of that issue is eliminated. The loan and deed are all in my name luckily.

Re: Considering Filing for Chapter 7

hpmoney505 — Sat, 07 Sep 2024 22:07:27 GMT

The mortgage is only in my name as well as the deed.

Re: Considering Filing for Chapter 7

Zeiram — Sun, 08 Sep 2024 00:43:40 GMT

@hpmoney505 wrote:
The mortgage is only in my name as well as the deed.

Well, that greatly uncomplicates things. If you don't have much/any equity in the house yet it all comes down to...

Do you think you can go on paying for just the house?

Bankruptcy courts understand that you've got to have a place to live. If you can afford to keep the mortgage then they may just let you strip the credit card debt if you decide to go into Chapter 7. The question is can you afford just the house? If you decide to reaffirm the mortgage then you should be absolutely committed to this thing for the long term because you can only get a bankruptcy discharge once every 8 years, so if you can commit to the mortgage given that, it's something to consider.

If you have to let it all go, you can do that. The good news is you're young and you'll recover from this eventually. Try to use it as a learning experience.

Re: Considering Filing for Chapter 7

hpmoney505 — Mon, 09 Sep 2024 06:07:54 GMT

I did talk to my attorney about the house and I do not think I am going to reaffirm it. I do not know how long I will be in this area at this point and having that on me would just make things so much more difficult.

I am going to use this all as a lesson of what not to do for the future. I made lots of bad credit mistakes and hope that I can just rebuild from here. I was so concerned with my credit going up quick and I thought taking out lots of cards would do that but it ended up just snowballing and it got to a point where I could no longer handle it.

Re: Considering Filing for Chapter 7

compassion101 — Mon, 09 Sep 2024 15:08:23 GMT

So 50k student loans (federal or private?) Is it 100k debt mostly credit cards? Then a mortgage on top of that?

Re: Considering Filing for Chapter 7

hpmoney505 — Mon, 09 Sep 2024 18:47:30 GMT

So 35k of the student loans is private and then 15k is federal.

The mortgage is 60k and all loans and cards are around 40k.

Re: Considering Filing for Chapter 7

FicoMike0 — Sun, 15 Sep 2024 00:35:32 GMT

If the mortgage is $60k, what's the house worth? What are the payments, $500? Where can you live for less than that? If give that another think.

Re: Considering Filing for Chapter 7

hpmoney505 — Sun, 15 Sep 2024 01:46:50 GMT

Mortgage is only 6 months old house is worth what I paid. Mortgage is $529 a month. I did end up filing for bankruptcy and I know the house is going to be discharged but I am continuing to make the payments for now. I cannot live anywhere else for that cheap.

Re: Considering Filing for Chapter 7

Zeiram — Sun, 15 Sep 2024 02:04:23 GMT

@hpmoney505 wrote:
Mortgage is only 6 months old house is worth what I paid. Mortgage is $529 a month. I did end up filing for bankruptcy and I know the house is going to be discharged but I am continuing to make the payments for now. I cannot live anywhere else for that cheap.

Why wouldn't you just reaffirm the mortgage if it's that cheap. The only place cheaper in this economy is a cardboard box under the L.

Our landlord just raised this broken down hovel to $1150 a month. It's steep. They're robbing us in broad daylight. if you told me where to get a $529 mortgage I'd ask who I had to kill to get that deal.

Re: Considering Filing for Chapter 7

compassion101 — Mon, 16 Sep 2024 00:39:10 GMT

@hpmoney505 wrote:
Mortgage is only 6 months old house is worth what I paid. Mortgage is $529 a month. I did end up filing for bankruptcy and I know the house is going to be discharged but I am continuing to make the payments for now. I cannot live anywhere else for that cheap.

So you filed BK for the 40k? I mean thats reasonable if it is a burden to you. But doubt they'll consider the 60k in student loans, that's a tough barrier to cross, you basically have to convince them that you will never be able to pay it back in your lifetime (usually through having a disability, etc.)

Reaffrim the house mortgage seems to be the best idea. You're going to need to live somewhere after the BK is discharged. And if instead you are 100% not going to be living there after, then no need to pay it in the meantime, just save that money if you can be allowed a cash exemption. They can't kick you out for non-payment during th BK process. What did your lawyer advise on this? Did you hire a lwyer or at least go for a free consultation?