My wife was laid off from an executive level position in the Spring of '08. I was laid off in October '08. She started working as a consultant in December '08. I am still unemployed. Prior to layoffs, we had reduced our unsecured (not school loans) from $60,000 to just under $40,000. Although we had no savings we were reducing our debt at a rate that would have put us debt free (not school loans) by early 2010. Even with her severance and unemployment compensation, we quickly maxed out our available credit by the time she received her first paycheck in early January '09($87,000). We have been without health insurance since October '08, fortunately we have remained relatively healthy and paid cash/credit for any medical visits, prescriptions and testing. We have maintained on-time minimum monthly payments on all of our bills and debt.
Unfortunately, I made a crucial error in judgement by not withholding ANY tax from my wife's monthly check. With my unemployment and her monthly check we survived 2009. Had we taken out the necessary Self Employment and Federal tax we would not have made it. However, we are now facing a tax liability of nearly $25,000 for both Federal and State. This is an estimate, and we won't know for sure until we complete our return.
Although we WANT to repay our debts, I don't feel that it will be possible once we file our tax return. The IRS will demand repayment, more then likely ahead of the credit card companies. My wife, who filed bankruptcy over 20 years ago when she was just out of college, is very reluctant and emotionally can not look at our situation from a logical POV. So we are at a crossroads just in communication.
In addition, we believe our homes valuation will rebound over the next several years, but at this time we are fairly certain that if we had to sell our house we would be under in our mortgage. To add to this we are in the 5th year of a 5/1 ARM on our primary mortgage with Chase. Without looking closer at our current contract, I can only assume that we will see some increase in our monthly payment starting in September. Obviously with our high debt to income ratio we are not in a favorable position to refinance. In closing this point....we don't want to leave our house. We are extremely thankful for our neighbors and friends in and around our home, and feel a bond to the school system for our children.
Neither of us want to file Bankruptcy. We still feel that if I can find gainful employment we could make it work. But realistically, I don't see how it can work. Assuming things don't change, my unemployment runs out in 6 weeks, we won't have filed our tax return yet, but our net income after current taxes, min. cc payments, mandatory payments, utilities will be negative before we put a scrap of food on the table or drive our vehicle out of our driveway...
I don't know what to do.
In addition, I spoke with a certified debt management company this week. They were very helpful to me in reaffirming my belief that bankruptcy is more then likely our best option at this time. If we stay the course, assuming all were to stay the same(it never does that's why it's life), it would take us a minimum of 71/2 years to pay off just the credit cards not including the tax liability. If we went with the DMP, it would take just over 5 years, but we would have to come up with another $1500/month to pay for it....once again, does not include the tax liability.
I have spoken with a local BK attorney, and he believes that we would qualify for Chapter 7 at this time while I am unemployed.
Please let me know if you have any other ideas or solutions. From a moral standpoint, I feel that more then half of our CC debt is directly attributable to the current economic conditions(our job loss and real estate dropout) that led to our use of the cards, and therefore could live with the BK. My wife, obviously being through this once, blames me for not finding employment and believes we are completely accountable for the debt. HELP!
One last thing, if I were to gain employment that would more then likely eliminate our ability to declare Chapter 7. My question is, what if we file now and a month before we are set to discharge I get hired? Will we be pushed into a Chapter 13, or would we be far enough along in the process? Any history out there?
Thank you to all of you. I have learned many things from all the posts.
