I've been behind on my credit card payments since 2007 when I was first laid off. Then in December of 2008 I gave birth to my first child. In January I tried to go back to work but my previous employer wasn't able to rehire me and I've been unemployed since then. Needless to say, I have not been able to repay any of the accumulated debt, plus interest fees and late charges. My total unsecured debt is $42,000. With my car loan $15,000 balance and student loan $24,000, that equals to $81,000.
Keep in mind two important facts. One is that I have two judgments against me already and one of the debt collectors froze my bank account (even though I am on unemployment!) and put a lien on my car (which they cannot take because it's financed and there is no equity in it).
The other important fact is that my boyfriend, whom I live with and raise our son together, is also in huge debt $65,000 in unsecured and $95,000 total with car and student loans. We rent our apartment, don't have any property, assets or valuable belongings.
We went to see three bankruptcy lawyers yesterday and they all suggested we file for bankruptcy. My mom and a friend are suggesting to not file and read Dave Ramsey's books on how to get out of debt. We have researched the bankruptcy and its consequences thoroughly and we are still torn to what's best for us. We keep going back and forth.
My two questions are:
1). Given that my unsecured debt is $42,000 and his $65,000, do you believe there is an alternative to bankruptcy? My last job salary was $35,000 and his $42,000. That should give you an idea of the income we were bringing.
2). Could we file for bankruptcy ourselves or should we invest in a lawyer? The fee for his services will be $1,500 each. We don't have that saved up. Has anyone done it themselves?
Thank you in advance for all your help!
I would never try to take this on yourself without a lawyer. As much as we dont want to hire them. This is one you definatly would want to. When we filed our chapter 13 4 years ago, we only had to put down like $100 and they roled the rest of their fee's into our bankruptcy. As far as your debt to income ratio, I would not know if you qualify for chapter 7 or if they would require you to go into chapter 13. Your lawyer should have told you that.
The best course of action is to always stay out of bankruptcy if at all possible. It will drag your scores down for 7 to 10 years. If you and your creditors can work it out, go that route. Bankruptcy should only be used as a last resort.
To see if you qualify for Ch.7 Bankruptcy go to legalconsumer.com/bankruptcy and look for the means test calculator. This will tell you if you qualify for Ch. 7 or would need to file Ch. 13. As the other poster stated the attorneys you talked to should have told you which you qualify for.
Ch. 7 would wipe the slate clean and give you a fresh start. Ch. 13 allows you to repay some or all of your debt over time. The amount you have to repay is dependant on income.
Since you are unemployed you should qualify for Ch. 7 and this would probably be your best option since you have no job. For your boyfriend you would have to run the calculator. You and your boyfriend would be filing seperately and could file under seperate bankruptcy chapters.
Also, most attorneys will start representing you after partial payment of their fee. Although if you file Ch.7 you will need to pay the full fee before they will actually file your case. Otherwise their fee would be discharged along with the debts you owe to your other creditors.