Meeting the lawyer today

[Anonymous]

I probably should have explored the possibility of bankruptcy years ago, but I am finally doing that today as I don't see a feasible way out of about $50k in unsecured debt.  At some point about 2 years ago, the payments on my credit accounts exceeded my disposable income and I began to charge living expenses on credit...I'm sure everyone here is familiar with that cycle.  It only took a few unexpected financial circumstances (death of a family member, and a my rental property to go vacant for a few months) and unfortunately I am approaching a place of being unable to meet minimum payments.

I have read through this forum quite a bit and appreciate all the info everyone here has shared, I have been able to use much of it in researching what I should expect if I chose to move forward with bankruptcy.  I am meeting with a lawyer today to discuss my situation and I will ask him the same questions, but I am curious if anyone wants to weigh in on a few questions I have.

1.  Is there any advantage to doing whatever I can to maintain making minimum payments on my credit cards until the day I file for bankruptcy?  Other than my utilization (about 90%) I currently have no bad marks on my credit report.  If I were to maintain good payment history while simultaneously not using credit for 90 days before filing that would mean I'd have to sell things which likely would be considered non-exempt assets.

2.  2 Years ago, I borrowed against my 401k (on a 5 year repayment) to consolidate some debt.  I know this is a dumb move, and had I expected bankruptcy in the future I never would have done it.  Having learned how dumb this was (strongest stock market we have seen in years) I will never do that again.  The quesion is, if I do default on minimum payments on my cards, would it be inappropriate to transfer that money towards paying off that loan?  I feel like getting out from under the $440 a month in repayment as soon as possible is critical to coming out of this bankruptcy in a position where I don't need credit for everyday expenses.

3.  My wife has some outstanding medical bills around $3k and an old school bill for $4k-not a student loan (which we have written documentation from the school that she does not owe, yet they continue to bill us).  I am debating if she should file bankruptcy as well to get those debts washed and to double our wildcard exemption.  The flip side is, those debts may be manageable after my bankruptcy, and I am not sure if having her CR clean of bankruptcy will be advantageous should we be looking for a new place to rent in the future.

Thanks for reading and any input anyone has to share.  This is not the most pleasant of times, but at least I am feeling slightly hopeful that we will come out the other side of this thing in ok shape.

[Shooting-For-800]

If you know you are going to BK, quit paying everything except car and house if you are going to keep them.

You will need CASH for lawyer and other expenses.

Save CASH.  

Is you wife's credit ruined or not? 

How much debt does SHE have?

Does your state recognizes a form of property ownership known as "tenancy by the entirety,"

Feeling down about BK?  Read this entire thread...

http://ficoforums.myfico.com/t5/Bankruptcy/Life-is-Good-After-Bankruptcy-7-Keep-the-Course-Keep-the-...

[Anonymous]

Thanks for the reply, I read it as I waited for the lawyer so it gave me a few more questions to ask.

After my meeting, it looks pretty clear that I will be filing for Chapter 7.  Oddly enough, the extra job I am working to pay towards the mounting debt will actually hurt my chances in qualifying for the disposable income test, not to mention its already killing my family time and hurting my performance at my main job, so that will likely go.

My wife's credit is not "ruined" but those collections are sitting there (about $7k).  The attorney said we would be asking for trouble if we didn't joint file and that debt accrued while married can get assigned to a spouse who doesn't file for bankruptcy protection.

The good news is, it seems as though I have a "no assets" case, and may be able to walk away from the second job.  The bad news is that I need to go 90 days without using my credit cards and that means using my cash for living expenses and not minimum payments.  After what I am sure will be an extraordinarily painful 3 months of collection calls then I will be able to file.  I am dreading that.  Now I am working on switching my direct deposit and checking account to a CU in which I don't have any credit so that my current CU doesn't freeze my account when I don't pay next month.

The biggest question I have left is regarding my rental property.  I am thinking that I should keep the mortgage current and continue collecting rent for the next 90 days.  I feel as though it would be in bad faith to stop paying on the house while tenants were paying rent.  I could then stop paying the mortgage the day I file (and serve notice to the tenant) as I am not looking to reaffirm the house as it is underwater still 10 years after buying it.  Does that seem reasonable?

BTW, thanks for the link.  Good read and it did make me feel a little better.  It's appreciated.

[Shooting-For-800]

Send me a direct message so we can talk a little in private.

[Anonymous]

Welcome to the forums! I know it is nervousmaking. You sound like you are asking good questions, and getting pointed in a good path. 

While it is great you have no bad marks on your credit report - that will help you; your scores will not be as far down in the pits as some of us - don't fret too much about keeping things perfect. The point of a BK is to give you a clean slate. Not to keep a clean slate the whole way there. In fact, you practically can't, unless you don't need it in the first place.

1) Ask your attorney before you go selling items that are of value. If we're talking pairs of pants at a yard sale, nbd. If we're talking vehicles/furniture/original artwork or ANYTHING to family members and associates, talk to your lawyer. You will likely have to report this in your petition if you do this.

I don't like advising people what to do on payments. Personally, I stopped paying out of sheer necessity and went on a cash diet about 6+mo beforehand. My credit score went down the tubes, as you can imagine. But it was a good lesson for how I would have to learn to live anyway. I'd definitely advise you to stop using the cards immediately regardless of whether you continue to pay them. It will be good for you, though difficult - trust me, we all know here.

2) Again, talk to your lawyer before you do this. You have to report practically every dollar you spend or transfer or even give away in the run-up before you file (again, anything of more significance than a pair of pants) and the trustee will be looking for any sign of fraud. You do NOT want your case thrown out because the trustee whiffed fraud, even if you didn't intend it. 

3) You may have difficulty finding a place to rent whether or not you have your wife's "clean" record to help you out. It really depends on your geographical region, based on what I've seen posted in these parts. Some people had no issues, others used a realtor to get around the bias of some major apartment buildings, and others had major difficulties. You may want to hold tight for a couple years until your rebuild is on solid ground (and stick around here for the advice on that!) if at all possible. I'd personally advise to look at whether she needs to file BK or not on the merit. I think most people around here would advise for $7k one person-not to file - but to file jointly may be a different scenario.

Regarding your last question about paying mortgage on rental property, talk to your lawyer before you do this or don't do this. There are rules about favoring creditors in the run-up to a BK and it can send up flags for a trustee. 

Best of luck!

[StartingOver10]

All great advice by others above. 

One comment:  please interview several Bk attorney's. They are all different - different skill sets, different ideas, different charges - different experiences. 

Are you in a community property state? it sounds like it from his comment to  you and that may affect your decision to file jointly or not. 

Another very good resource to help you is: https://www.nolo.com/legal-encyclopedia/chapter-7-bankruptcy

About the house you own:  are you absolutely sure it is underwater now?  Do you have a recent market analysis done by Realtor and not a zestimate (these are not accurate). 

I ask because it would be awful to file Bk if in fact your home has equity that you didn't know about. Naturally, you would have to discuss with your attorney before you sell it if you do file Bk.  

[Anonymous]

I wanted to thank the previous posters for their helpful advice.  I haven't been on the site recently (kind of pretending credit scores don't exist) but still moving towards filing chapter 7.  The first lawyer I met was obsessed with the means test.  It was really frustrating because I clearly fall well below the median income for my state.  I told him I was about $20k below the limit gave all my income documents and he still acted like it was going to be close.....not confidence inspiring.

The second lawyer was ok, kind of a bankruptcy mill but I think my case is simple enough that I don't require too much special attention.  Unfortunately when I met him the first time, he told me to stop paying all debts that I would be discharging and stop accumulating new debt for 90 days.  I asked specifically about paying condo fees on the rental that I will NOT be reaffirming and he told me stop paying it.  On the second appointment he told me to stay current on the condo fees....after I was 90 days deliquent at $305/mo.  His exact words were "if I told you to stop paying the condo fees then I screwed up".  Annoying at the least, if I had not already paid him I would have probably found a 3rd lawyer.

So 90 days have come and gone, while averaging about 35-40 collections calls a day.  My credit score has gone from EQ 715 in November 2017 to EQ 476 in February 2018....crazy.  I meet the lawyer tomorrow to go over the schedules and will then file my chapter 7 next week.  All said and done I should be able to discharge about $190k in debt (granted much of that is my condo).

The lawyer advised that my wife should also file as we have lived in multiple states while accumulating debt, so it is feasible that without bankruptcy protection, one of those state laws may allow a creditor to go after her for debts.

and to answer your last question StartingOver10, the condo is most certainly underwater.  On a good day I could sell it for about a $25k loss....its crazy that it still has negative equity after 11 years of ownership.  I am basing this off of recent sales of condos in the complex and my property manager's assessment of its value.

Anyways, I love this site and the neverending supply of constructive caring comments.  I look foward to reading more about other similar journeys and I will update on mine.

-R

[Shooting-For-800]

BK is hard emotionally.

A year from now you will wake up each morning and feel completely different.

Hang in there and good luck!