Wow! No idea what to do...

[lostoutwest]

Hello All,

I am a first time poster and just found this site. I have reviewed many posts but don't feel like I have any idea what I should do (aside from talking to an attorney at a later point). My situation is that nmy wife and I have been rpetty high incomve earners but have run up quite a bit of debt (well, she has on the credit cards anyhow, I just let it happen). We are going to separate and may end up divorced. If so, I will need to consider Ch 13.

Right now I earn approx $100k/year with net monthly income of $4700/mo. If we split, I will end up with 1/2 of the cc debt which stands at $45k ($22.5k) to me and 1/2 of the $55k HELOC which is recourse debt ($27.5k to me). I will also have my car loan at $14k with no equity and student loan debt of $75k. So, the debt I would walk with is as follows:

1) $22.5k cc debt (can transfer 1/2 balance to card in my name and she do the same);
2) $27.5k HELOC (although in both of our names, so that adds a wrinkle);
3) $75k student loans (all government loans, no private);
4) $14k auto loan that I want to keep.

I would also likely have child support in the range of $800-$1500 per month depending on custody and school tuition.

We also owe my father $24k we borrowed when we needed $ as part of a down since our first house hadnt yet sold (actually borrowed $50k from him, but when our first house sold, it had gone down $35k and we didn't realize enough gain to pay him back from the sale as we intended.

I guess my question is, how would Ch 13 help me (if at all)? Im feeling pretty lost on all of this and we would also need to clear up the issues re: joint accounts by putting things into our own names. I would also be willing to try and negotiate with lenders, but am viewing this as a business decision and am able to separate emotion from it.

Hope this all makes sense. Thanks for all of your advice.

Lostoutwest.

[momofthree]

With an income of $100k a year, how are you only bringing home $4700 a month? Is part of your income a large bonus that is only paid out once/twice a year. If so, you may be able to qualify for a chapter 7 if you carefully plan your bk timing. In the case of a divorce, it may be easiest for you 2 just to file ch.7 before filing for divorce. It could be difficult to get each of the debts into your individual names and you could potentially end up being held liable for all the debt.

Are either of you planning on keeping the house?

How old is the car--did you buy it more than 2.5 years ago? If yes, how upside down on it are you?

If you file, your debt to your father will have to be included.

[lostoutwest]

With an income of $100k a year, how are you only bringing home $4700 a month? Is part of your income a large bonus that is only paid out once/twice a year. If so, you may be able to qualify for a chapter 7 if you carefully plan your bk timing. In the case of a divorce, it may be easiest for you 2 just to file ch.7 before filing for divorce. It could be difficult to get each of the debts into your individual names and you could potentially end up being held liable for all the debt.

Are either of you planning on keeping the house?

How old is the car--did you buy it more than 2.5 years ago? If yes, how upside down on it are you?

If you file, your debt to your father will have to be included.

We live in OR. With taxes, 401k, parking and insurance that comes out of my paycheck, $4,700 is my net (that # includes approx $9,000 annual bonus as salary is $91k).

As for my wife filing, I don't think that would happen. Part of the problem is her parents have always bailed her out of her $ problems before we got married (and even some since when she ran up $10k behind my back). Im sure they would wait for the divorce and then pay off her share (like I said, she could transfer a balance to one of the cards in her name that has a $50k limit).

Neither of us would keep the house. Payment on first is $2100/mo with $390k balance. House is likely worth $400k or so. Taxes are $450/mo. Neither of us would want that payment on our own (she also couldnt afford it with her $48k salary).

I bought my 2004 vehicle last September. I don't think I am upside down. Just owe what it is worth.

[momofthree]

$2833/mo seems like a lot of money for taxes, 401k, and insurance. Do you normally get a tax refund? How much are you contributing to 401k?

Without a house payment, you may very well end up in a 100% payback plan if you file chapter 13.

[lostoutwest]

$2833/mo seems like a lot of money for taxes, 401k, and insurance. Do you normally get a tax refund? How much are you contributing to 401k?

Without a house payment, you may very well end up in a 100% payback plan if you file chapter 13.

I pay $1,109 every 2 weeks to taxes (state, fed, ss and fica). $240 every 2 weeks for insurance and 401k. So, after everything is said and done, my paycheck deductions are around $2800/mo. I do get a refund because I have the fed withhold at the higher single rate so we don't end up owing (wife has a family S-Corp that we sometimes get unanticipated payouts from).

So, if a 100% plan, what is the point (aside from reducing interest to 0%) if Im not being harassed by creditors (Im up to date)? If the trustee were to make me pay $1300/mo (or thereabouts) then I could just do that on my own (albeit with interest rates that average 10$ or the cards and prime on the HELOC).

[SMinGA]

Things to consider...

Before you could really plan a bankruptcy, it would be good to actually resolve the divorce or at least a legal separation. At that point you could deal with moving out, setting up your own rent/utilities and alimony/child support. You can't predict what your DMI (net income less expenses) will be when you don't know your expenses. When calculating your net income - count it on an average month. If you're paid every 2 weeks, take the net x 26 divided by 12...

The vehicle loan should not be an issue, assuming its nothing extravagant.

Next, you will also need to adjust your withholding to an accurate level based on your filing status. Once single, you won't need to worry about your wife's tax liability, but if you're having extra withheld and getting a refund that will be a problem for bankruptcy.

One other thought, I'm not sure that it would be wise to transfer balances before filing bankruptcy. Unless you would be able to maintain payments for a while after doing so at least. The creditor that you transfer funds to could cry fraud. If you're paying back 100%, that would not be an issue.

A 100% plan pays back in full to unsecured creditors. But with no interest or penalties. Debts to family are treated the same as debts to creditor cards, but student loans are normally deferred while in a payment plan.

[lostoutwest]

Things to consider...

Before you could really plan a bankruptcy, it would be good to actually resolve the divorce or at least a legal separation. At that point you could deal with moving out, setting up your own rent/utilities and alimony/child support. You can't predict what your DMI (net income less expenses) will be when you don't know your expenses. When calculating your net income - count it on an average month. If you're paid every 2 weeks, take the net x 26 divided by 12...

The vehicle loan should not be an issue, assuming its nothing extravagant.

Next, you will also need to adjust your withholding to an accurate level based on your filing status. Once single, you won't need to worry about your wife's tax liability, but if you're having extra withheld and getting a refund that will be a problem for bankruptcy.

One other thought, I'm not sure that it would be wise to transfer balances before filing bankruptcy. Unless you would be able to maintain payments for a while after doing so at least. The creditor that you transfer funds to could cry fraud. If you're paying back 100%, that would not be an issue.

A 100% plan pays back in full to unsecured creditors. But with no interest or penalties. Debts to family are treated the same as debts to creditor cards, but student loans are normally deferred while in a payment plan.

Good advice, SM. Thanks.

I wouldn't move any joint debt into my own name. Since she has a card with a $10k balance and $50k limit, she could take almost all of the credit card debt and I could take the HELOC (in joint names) subject to some balancing since that wouldn't be an even 50/50 split. The point would be to get the debt split up, but get as much of her 50% into her name as possible and then I work on the joint debt (also, I am more reliable to make payments on a joint account).

A student loan deferment would certainly help ($500/mo savings).