Should I file? Now or Wait?

[TCARPENTER92]

I am considering filing bankruptcy. I have about $25,000-$30,000 in debt from a $12,000 deficiency balance on a car repo, about 3-5 thousand in collections/charge offs, and only a $400 limit credit card open with Discover. I have a broken lease that I'm still being charge for until the lease is up or someone occupy's the unit, so a possible balance from that can be about $10,000. I have a tax debt of $1400 and unemployment over payment of $3800. I also have about $16,000 in student loan. I do know the last few things I listed may not be able to be discharged. I have spoken with at least 3 bankruptcy lawyers so far, I do qualify for CH 7

If bankruptcy is the answer, I did have a few questions. I have been doing tons of research due to me planning to file pro se. I've been getting a payday loan through an mobile app for the past month and half to get by, my last payment is this Friday coming up, should I wait 60-90 days to file due to this payday loan? I also had a 2001 car that kept breaking down so I sold it to a junk yard for $150, would this interfere with anything? I am wanting to file before October if it is the best option. I make about $31000 a year if that helps also. And no assets. Living with mother and brother right now.

[justbroke]

I don't personally believe that your recent "payday" loan or your sale of a car for $150 is going to cause any issues. If the Trustee is interested in the car, they would need to personally seek leave from the bankruptcy court to try to recover the car. The Trustee's rate, as a practicing attorney, is probably $250/hour and just doing the paperwork wouldn't be worth trying to recover a junked car.

I don't see anything wrong with the payday loan. When I filed I had an active $1,000 loan from one of the major providers of payday loans, that I had just opened about 4 weeks before filing. (It was a "long term" loan for 12 months.) They never even filed a claim. That debt was discharged and haven't heard a peep from them.

I'm sure you asked all these questions of the attorneys and they said the same thing.

[bcohen]

From what you have written, it does appear that Chapter 7 bankruptcy is your best option at this time. For a single man, an income of $31,000 is adequate to live on, and you should even be able to set aside a few thousand a year in savings--but not if you're stuck paying on over $27,000 of debt for things you don't even have anymore! (The student loan obviously is not factored into the above figure, since you won't be able to discharge it given your circumstances.)

Once you have made the decision to file, you should quit paying on all unsecured debts--except for your student loan. Hopefully, you are not currently being garnished for the two judgments, and keep minimal funds in the bank to avoid the risk of a bank levy. Also, you should read up on your state's exemptions and try to spend down any non-exempt funds on things which are exempt (such as food, medicine, clothing, tools necessary for your work) or on any medical/dental procedures you have been needing, or any car repairs/maintenance which you need done. The goal is to be a "no asset" case if possible.

Speaking as someone who successfully filed pro-se and discharged over $40,000 of debt--including one which had gone to judgment--I typically suggest saving the cost of an attorney on a straightforward case. However, since you have certain debts which might require additional effort to discharge (the taxes and unemployment overpayment) as well as two judgments, it may be worth paying for an attorney to ensure that these debts are discharged and all attempts to collect on the judgments are ceased.

Also, do not worry about the trustee questioning the sale of a non-functional car to a junkyard, or the possibility of a payday loan company attempting to object to having its debt discharged. These things simply won't happen. Trustees understand that most people filing for Chapter 7 bankruptcy are in very poor financial shape, and it is very common for people to sell household items or vehicles prior to filing in order to pay for living expenses or filing costs. As long as the items were sold for a reasonable price, and not to an "insider" i.e. a friend or family member, there isn't anything the trustee can do.

Likewise, bankruptcy judges (as well as payday lenders themselves) know that many people will take out these type of loans in order to pay essential bills such as rent or a car loan, and end up having to file for bankruptcy soon after. By definition, one who seeks these type of loans is already in a precarious financial situation, and has already exhausted all other options for coming up with the money! For these reasons, payday lenders would have a difficult time mounting a successful objection to discharging their debt, and I have never heard of one even trying.