How do you know when it's time?

[Anonymous]

My husband and I have been struggling financially for the past year or so, since he got laid off.  Somehow, we've made it through so far,but it's come at a cost...our CC debt has grown substantially due to having to use it to make ends meet.  So far, we haven't been late on any bills, but yet again this month, we're looking at having to use the CC to cover expenses.  Right now, we're up to about $45,000 in CC debt overall.  We should've never started down that slippery slope of CC use to begin with but we just kept things would get better soon if we just held out a little longer.  How much longer should we hold out?  I hate the idea of bankruptcy, but I don't want to keep digging the hole any deeper either.  Then again, it does look like things are starting to look up with my husband's job situation, so maybe we should keep trying to hang on and see what happens.

In 2008 we made $131,000.  I don't know for sure because we haven't gotten our W2's yet, but my guess for 2009 is somewhere around $75,000 - a huge drop from what we're used to.  We have 2 houses (one's a rental), 2 cars - a piece of crap that's 11 years old and a 3 year old truck that we still have a sizeable loan on and that's pretty much it.  Other than one other small loan, all of our other debt is CC and monthly living expenses.  We have mortgages on both homes and our primary residence is exempt from any sort of bankruptcy filing.

If we were to file, should we file chapter 13 or chapter 7?  Could we keep both homes?  With the housing market the way it is, I'm sure we're underwater on the rental and have little to no equity in our primary residence.

[bigman023]

I would try to hang in there.  You're still able to make on time payments now. IMO, thats a sign you could probably hang in there a while. 6 months or so in your current situation is far worse than the 7-10 years after a BK.  Yes, you can recover after a BK.  But I would do it only as a last resort.  If things are looking up, I would hold off on filing. Good Luck..

[Jazzzy]

Hi...and welcome.

Are you underwater on the truck? Is it worth selling the truck to get out from under the payment? Something has to give in lifestyle...but you have already learned that. Anything you can sell? Any expenses you can cut? Second jobs a possibility?

I know this seems simplistic, but it helps to put it all down on paper, look at it objectively, and start making choices. Start slashing...cut out cable, cut down on cell phone plans, etc. Do you have kids at home yet?

If you can make it through this, you will be better for it. My kids talk about when we were "broke." If they only knew...  But, now one of my daughters, who is in her late 20's, still calls me (years out from our financial difficulties) to tell me about a great deal she just got on a pair of jeans she bought at JCPenney's. All of my kids are conservative and are bargain hunters. They know how to save a dollar. My husband and I are both better off as well. It helps get priorities straight, and it gives a new meaning to the word "no." Instead of donating dollars to charity, we started volunteering, and that is a lifestyle that has stayed with us.

Does anyone remember the huge glass Coke bottles we used to get? You could get a 20 cent deposit back on each one when you returned it. I remember one day returning big Coke bottles to buy boxes of macaroni and cheese to feed our kids. But...we made it. We worked hard, sometimes a couple of jobs each. Our kids worked. We have rental property as well, and that gets tough when times are lean. My oldest son, who is 38 now, still talks about how he "fell for" us telling him that mowing all those lawns when he was in high school would send him to college some day. Then, he ended up going to MIT. He only had to borrow $6k to get through. We were still so broke at that time, but we made it happen for him.

I don't mean to make it sound rosy. It wasn't. It was miserable...and it can be tough on a relationship. But there's no better feeling than working your way through it and coming out on the other side. I'm sorry to blather on for so long...but your story stirred up memories. Hang in there if you can.

[Anonymous]

My wife & I are completing year 3 of a 4 year Ch13.  We waited too long, made many mis-steps; but did get an excellent BK attny (found a loophole that got us a 4yr rather than 5). Our situation was different than yours.  I didn't know about this resource as we were spiralling down and threw a lot of "good money after bad" including wiping out a lot of assets that we could have kept thru the BK.

This isn't official legal advice, but just some thoughts -

Looks like the deciding factor is your husband's employment - if he can get a decent job soon, then maybe you can hang in there. It looks like the economy is starting to improve, but some areas will lag. 

Regardless of which way you go - you'll need to do some serious belt tightening if you haven't already.

I suggest you contact a free counselling agency and/or an attny who represents debtors. You might see about negotiating better interest on your cc's.  If your 2nd home is not producing adequate income then you should sell it; depending upon your equity in it and the local conditions selling might be a better option regardless.

Good luck!

[XAVIERSMAMA]

I agree with a lot that the previous poster's stated.  It seems like you have some assets and some downsizing that you could do before you filed as a last resort.  If your goal is to avoid BK, downsize as much as you possible can, but if after that you still can't stop digging, and you're putting in a lot of $ and effort and still not getting any closer to getting out of the hole, unfortunately BK may be your only option.  The thing about BK is the sooner you file, the sooner you can begin the repair.  In my experience I wasted a good year and a half trying to catch up and dig myself out, hoping it would get better and instead it only got worse.  I'm two years out now and am rebuilding my credit and hopefully will close on my first house in the next few months.  My only regret about the BK was that I didn't just accept my circumstances and file sooner, so that I could be further into my rebuilding, but only you can make the decision on when to say when.  Good luck to you.