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Looks like I have to take the plunge, scared to death, I’ve got tons of questions…

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simicalif
Member

Looks like I have to take the plunge, scared to death, I’ve got tons of questions…

Unfortunately I am in the early stages of divorce and fighting for custody of my child. We have been struggling to keep up with our bills for the last few years, but we also made too much money to file chapter 7 together, and she refused to file chapter 13... after doing the math on my income, my attorney/legal fees for my impending divorce and custody battle, and costs to reset my life and living situation, I have way too much debt to keep up with... here's where I'm at...

 

My income is $68k, but with overtime last year it hit $70k. We currently live in a rental home. This pushes me passed the income limits for Chapter 7. From what I understand, the cap increases for my child as a dependent, but what about if I have 50/50 custody with my ex-wife? She's in the medical field and works graveyard. I am in public works and work day shift with weekends off, except for emergency calls for work, which has slowed down considerably, my divorce attorney says this will surely net me 50/50 legal and physical custody, barring something crazy happening, and what I've read, that means my income cap should increase a good $9k, thus qualifying me, from what I understand. Can anyone confirm?

 

Whenever the court allows me to move out without jeopardizing my custody rights, I will be moving in with my dad and will have a stable roof over my head. He offered me the room rent free to get back on my feet (as my grandfather did for him when he and my mother split), but I've read that this effects the bankruptcy, as not paying rent means more of my income is available to pay other bills. But even without the $600 rent every month I still don't have the means to keep up with my debts. I have been trying to knock out the smaller store cards to simply payments, and the discover card just to make sure I don't burn them, but I often push my luck darn close to a late payment hitting my CR (So far none, 100% payment history, trying to keep it that way).

 

I currently have a truck payment every month ($450/month). Nada guide shows the value to be roughly $20k, I owe $15k, and since we don't own a house, from what I've read this SHOULD be exempt equity under the California 703 Motor Vehicle Exemption ($6,375 max), but I'm concerned they will tell me to sell it due to my higher payment... is that how it works? Would I be better off refinancing prior to filing? Or would I potentially lose that truck in the bankruptcy?

 

I have numerous near-maxed out high balance credit cards, as well as two personal loans (1 for debt consolidation that's joint with my wife which will be split during the divorce, and 1 for a large repair on my truck last year). From what I've read these should all qualify, but am curious if there is a scenario where they wouldn't qualify?

 

When I applied for my various credit apps, I included my and my wife's rounded combined incomes, as I was always told if it's available to me, to include it, but I've read that the creditors could still dispute my filing by claiming I lied about my income when I applied for the credit lines to begin with. Is that a common occurrence or is that only in cases where actual fraud occurred? I'm just trying to get all the info I can so I can be sure I and confident and ready when I file (obviously it will probably be a good year+ before I do since I just barely now filed for divorce and have lots to work out first).

 

I also have another truck I own outright, but it's an old pile of junk I've been trying to sell for the last 8 months but no real offers so far... i was considering just letting it get taken in the bankruptcy, but I am curious what happens if I do, will it effect me negatively? Or should I lower the price and hope someone takes it off my hands during my divorce? 

 

Also, all of my accounts are in my name only, with the exception of the debt consolidation loan. Beyond that, my wife and I's finances are separate. We transfer money back and forth as needed to keep things above water. My wife's car is solely in her name and my trucks are solely in mine.

 

After rough calculations, and assuming my discover card and small balance cards are paid off prior to filing, my minimums every month are at $1300 for my debts, plus factor in my average fuel costs ($150/week), insurance ($215), food, toiletries, other essentials, and my child care ($300 a week), and my bi-weekly take home of around $1600, I'm in pretty deep... I'm honestly scared how to move forward and don't see any other way out, so naturally I'm even more scared about what happens if they find some BS technicality to dismiss over... 

 

I haven’t been using my credit cards, but due to my high amount of minimums, I’ve used them once in a while to fill in gaps between pay days but this obviously isn’t sustainable, so I’m now shifting my focus. I have read that I shouldn’t use the cards for a minimum of 3 months prior to filing but I won’t be filing until my divorce is finalized so I’ve got time. I have since removed my credit cards from my wallet and they are now stored in a safe at my fathers office. I have about $600 in store cards to pay down and about $2k on my discover card.

 

I also plan to open a checking account with a local credit union I don’t owe money to, per advice I’ve read on the forum previously. Do I wait for after I file to do that? Or does it not matter when?

 

I have read that most bankruptcy attorneys will tell me to stop making payments, but I don’t want to tarnish by 100% payment history. I’m sure it will be a matter of just a few points, but it’s my belief that when I begin my rebuilding, potential lenders will appreciate that I paid everything on time up until I had to file. I feel that it’s worth throwing away that money for that cause.

 

Lastly; I fully intend to pay one of my lenders off after my bankruptcy discharges so that I can borrow with them again in the future. Obviously it will take a long time but with no minimums I can pay them off at my leisure, and surely once they’re paid off, along with rebuilding, i am hopeful that they will be generous. Also, it is my understanding that if I do pay one of the lenders off, it will not reaffirm the debt as collections/delinquent on my credit report. Is that accurate?

 

If you’ve made it this far, I appreciate your consideration and any advice or experience you’re willing to share with me will be extremely helpful and I would would be extremely grateful.

 

 

Regards!

5 REPLIES 5
FireMedic1
Community Leader
Mega Contributor

Re: Looks like I have to take the plunge, scared to death, I’ve got tons of questions…

Best advice is sit down with a lawyer and explain the situation. All BK lawyers have free consults to figure what would be best in your situation. Lots of legal angles in your case. More than what this forum can provide. Then come back and tell us what they came up with. Yes the sub-forum is BK. More towards BK and Credit.


Message 2 of 6
Lurker22
Frequent Contributor

Re: Looks like I have to take the plunge, scared to death, I’ve got tons of questions…


@FireMedic1 wrote:

Best advice is sit down with a lawyer and explain the situation. All BK lawyers have free consults to figure what would be best in your situation. Lots of legal angles in your case. More than what this forum can provide. Then come back and tell us what they came up with. Yes the sub-forum is BK. More towards BK and Credit.


Completely agree - you're looking for a lot of legal advice and we're not lawyers, however many of us have been in very similar situations and can provide advice once you've taken care of the legal issues

 

I will add, be sure you discuss the entire situation with BOTH attorneys (divorce and BK) - you don't want to keep either of them in the dark about the full situation

Message 3 of 6
TRC_WA
Senior Contributor

Re: Looks like I have to take the plunge, scared to death, I’ve got tons of questions…


@simicalif wrote:

 

I have read that most bankruptcy attorneys will tell me to stop making payments, but I don’t want to tarnish by 100% payment history. I’m sure it will be a matter of just a few points, but it’s my belief that when I begin my rebuilding, potential lenders will appreciate that I paid everything on time up until I had to file. I feel that it’s worth throwing away that money for that cause.

 


... and you'd be wrong.

 

You should stop paying immediately because you will be throwing money away.  The public record that comes with filing is going to tank your scores to the point that a pristine payment history won't matter.

 

I know that from experience.

FICO8 current as of : 4-17-24 EQ: 724 TU: 707 EX: 706
Hard INQs last 12 months: EQ: 5 | TU: 8 | EX: 9
Verizon Visa $8500 Amex Delta Reserve $10,000 Care Credit $18,000
NFCU CashRewards $7500 Apple Card $7000 Best Buy $8000 Amazon $5000
NFCU auto loan (2022 Ford Bronco Sport Badlands - Cactus Gray) 6.95%
NFCU motorcycle loan (2024 Harley Davidson Road Glide - Alpine Green & Chrome) 9.45%
Total CL: $64,000 --- Total CC UTI: 27% --- AAoA: 5.5 years --- Income: $200k
Last app: 4-6-24
Message 4 of 6
WildestDreams
Regular Contributor

Re: Looks like I have to take the plunge, scared to death, I’ve got tons of questions…


@TRC_WA wrote:

@simicalif wrote:

 

I have read that most bankruptcy attorneys will tell me to stop making payments, but I don’t want to tarnish by 100% payment history. I’m sure it will be a matter of just a few points, but it’s my belief that when I begin my rebuilding, potential lenders will appreciate that I paid everything on time up until I had to file. I feel that it’s worth throwing away that money for that cause.

 


... and you'd be wrong.

 

You should stop paying immediately because you will be throwing money away.  The public record that comes with filing is going to tank your scores to the point that a pristine payment history won't matter.

 

I know that from experience.


I had no late payments when I filed, all of my accounts that were in 'good' standing before of course all report as derogatory now. Not sure how true it is however both my lawyer and a lender (bank underwriter to be exact) said the bankruptcy derogatory basically overulles the good payment history on the accounts included. 

 

Its hard but try not to worry about your score now, they will tank and it will be unplesant to look at and think about HOWEVER, rebuilding is possible! and this site has SO MUCH fantastic info on what and how to do it after. 

 

 



BKCH7 - Discharged Dec 2022
Message 5 of 6
Catzalcoatl
New Member

Re: Looks like I have to take the plunge, scared to death, I’ve got tons of questions…

as others have said, consult with a BK attorney as you've got a lot of moving parts to consider. The attorney can provide solid advice on what to do to prepare, but if you're going to file, no use paying the bills that you plan to include in the BK. Put that money towards your legal/BK fees and living expenses. If you cannot manage the debt now, living hand to mouth to maintain debt/lines of credit doesn't make sense. Divorce is a solid rationale for needing to file BK.

 

However, it may help to know that the day you file is the snapshot in time that will be used in your case. As my attorney told me, BK looks backward, not forward. So whatever debts, assets, and current income you have on that day is what will be used. I had to provide 3 months of paystubs when I filed to calculate my income. Also had to provide the attorney/trustee with my prior year's tax return, but that was not computed in the income estimation for the BK.

 

I also opened a checking account with a CU that I was not going to burn in my BK before I filed. I would say the longer you have a relationship with a CU, the more likely they are to extend products to you. Wish now I had looked for one that offered a credit rebuilder loan.

 

My BK is now discharged, and some of my old, PIF (before the pandemic) accounts are boosting my score into the mid-600s despite the derogatory info from the BK, but you'll have the ability to open lines of credit again eventually. Not having to pay rent while you live with your father will allow you to save cash and apply for a secured CC that can eventually be graduated into unsecured.

 

BK isn't the end of the world, though a lot of us felt that despair when we realized we were so underwater it felt like drowning every day. I lost my job and incurred major medical debt from COVID, after already going $13k into debt while being my mother's caregiver and having to use CCs to pay my bills, so I am hella grateful I had BK as an option and only have my student loans to worry about now.

Message 6 of 6
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