Very scared / 1st lawyer consult tomorrow

[blessed]

We have few similarities, I'll tell you what I've done so far. But first, you need to realize that yes this is scary but in the end it should mean a positive and bright financial future. This is a fresh start. Also, knowledge is comforting. Read on this forum and any other place you can, it will help you come to terms with how bk CAN help you instead of feeling so hopeless.

We didn't know we wouldn't lose the house and cars by filing, so honestly had no idea it could be an option until last month. We feel like we'd be fine without having to pay the minimum payments to the CCs every month, our income is under the median though.

My husband has a CC issued from the bank we've used for 10+ years. I had to cancel all of the auto payments from that account, including the mortgage and car, and close it. For the credit cards I went online and deleted the auto payments, AND the banking info. I had to stop his direct deposit and get live paychecks. I opened a new bank and will give NO ONE the account or debit number, minus the house and car payments. I was told the CC companies can access your account 3 times to try to collect if they have the banking info.

I have been told that my new bank won't do anything about the bk as long as I keep the accounts in good standing. IF they ran a credit check to open them, it was just now, before I filed, and our credit is actually good. So you need to create new accounts soon.

If you and your husband are sure you're going to file, stop paying the CCs. And don't use them. We were planning on paying the last $137 of a Best Buy account but the attorney said we'd be wasting that money, we should save it instead. The reason for this is because ALL of your accounts will be closed, probably the ones with a 0 balance too. So don't bother with any payments if you know you're going to file.

I see that you are, but meeting with a few lawyers is the best advice I can give. The first one we met was terrible, the second was amazing.

[blessed]

Ask the attorney about the timing. We received our tax refund and used part of it to pay the attorney fees, and part to pay last month's mortgage payment. You will need to document how you spend it, but the roof, car, utilities, and food are acceptable uses.

Also, if you're really far behind with the utilities sometimes they can be included in the bk. As best I understand you'll have to start over with a new account, and a new deposit, but won't have to pay the past due amounts. Ask your attorney about it.

[andysmom]

Hi,
Thanks for all of your great info Blessed.
We're only a little behind - we run about a month behind on some & would like to get caught up- and we have an overdue sewer bill (about $400) that I'd like to pay. Our roof on part of the kitchen leaks when it rains/snow alot & our porch roof is sagging and rotted in one spot & needs to be repaired. My husband's truck (1998 explorer) needs struts & is leaking antifreeze- these were things we planned on getting done w/the refund before we realized how far in the hole we really were.
I am so embarrassed & ashamed for not waking up sooner & doing something about this. Everything I tried to do to fix it was a little much much too late.
As far as definately filing, I don't see any other options- I've looked into everything- CCCS, equity out of house (only $30,000 equity max and w/the 80% ltv rule and how much we owe out no one will touch us), thought about trying to settle with the cards but we have so many accounts & no where to come up with the money to settle them.
Unfortunately, I don't see any light at the end of the tunnel for us. I think this is the only thing possible for us to do. I wish it weren't so.....

[blessed]

I went through all of those options too. Called our mortgage man to refi, called some non-profit CCCS, thought about a signature loan to see who would settle with me. All of those options end up having monthly payments, with Chapter 7 you don't. Zero payments, done. Again, like you I wished it hadn't come to this. But once I realized how not having payments would be so awesome, I said screw it, I'm filing.

I hope you get to that point too, I'm actually HAPPY about this now.

[lulabelle]

We tried Dave Ramsey's plan, too. We were just one of those people that it didn't work well for. My husband was already taking on extra jobs and wasn't home to stay with our children so that I could pick up extra work. We also have very personal, practical reasons why we couldn't just sell our house and move to something a bit less expensive. The credit card companies took away our ability to refinance - our credit score went in the toilet when they started cutting available credit & raising rates, even though we always paid on time. Then last fall we found out that my husbands' pay was going to be cut significantly and that was the last straw for us.

We filed Chapter 7 just a few weeks ago. Our 341 meeting is coming up near the end of the month. So far the only regrets I continue to have are moral ones. And I hate the stigma attached to filing bankruptcy. Many, many people in my life would not understand. There is no reason for any family members to have to find out unless you tell them. I don't have any immediate plans to tell any of my friends or family.

You may want to wait a month or two to file, if it will help with your 6 month look-back. Many people have not paid on cards for 6 months to a year and still have not been sued or anything like that. Plus it will give you more time to get a new budget in place and on more solid financial footing. It was amazing to me to just be able to go any buy food we needed or new socks for the kids, etc. Those were always things that I had to think carefully if we could afford. I was sad when I realized that I'd been putting my creditors as a higher priority than my family. I just wanted to do the "right" thing.

As far as I have heard, you can get your tax return, pay your attorney and spend it in the other ways you have mentioned without any issue. Just keep detailed records of where it went. I would just cancel your automatic payments (you are under no obligation to tell them why - just do it) and then immediately go and open a new bank account that has no association to any of your lines of credit. Most banks will not freeze or close your account when you file. We did not have any problems.

Luxury items are generally purchases over a certain amount - $600? I don't have the figures in front of me.

I just feel bad for you because you sound so much like I did three months ago. It's a very hard realization to come to. Now I just don't let myself go "there" - I don't focus on how horrible I think it is that we're in this situation and instead look ahead to what I can do differently in the future. We have a long road ahead. We are almost guaranteed to be an asset case, which causes me a great deal of worry. I just want things to go smoothly. But by far, the hardest parts were realizing this is what we had to do and working through those emotions to get to where we are now. You'll get there, too - just give it time.

[andysmom]

Hi, Blessed
Is your bankruptcy discharged? Did you lose anything?
I just don't know what to do if we don't qualify for a chapter 7; I think I am so much more nervous about a chapter 13 but if that's the case i don't see how i would have any other option.
Our income is borderline, so I guess it all depends on the timing of it?

I hope I'm able to open a checking account that'll survive this. My husband gets paid by direct deposit; his only other option is to have it mailed to the house.

How did you / do you feel about people finding out about this? I'm scared to death of the comments, looks, etc that'll happen once this does get filed.
I really appreciate your time & talking to me as there is noone here to talk with. I'm a stay at home mom & my husband works alot & we really don't wannt people we know involved in the mechanicisms of this. It's hard enough to deal with everything as it stands. So thank you very much for your kind words & anyadvice/tips/etc that you share.

[blessed]

We haven't filed yet, it will be Chapter 7. Our last meeting with the attorney to finalize the petition is on Monday so it should be filed next week. We were told we won't lose anything and will be a no asset case. We make less than the median and have about 20k in home equity, one car worth $7000 but we're still making payments, one car paid off worth $2900.

Your attorney should be able to tell you in the first consult if you'll qualify for 7 or 13. It seems to me like you'd be a 7, but I'm no expert.

I started the thread about "who did you tell?" and my husband and I are adamant about not telling another soul about this. It's just not necessary to share, and most people wouldn't understand. I feel like a fake though, because we lead on like all is fine. Oh well.

[andysmom]

Lulabelle,
Our stories do sound very very similiar.
I apprecaite your openess. My husband is more level headed than me about this than I am. I am an emotional train wreck 7 just want to de done & over with.
One question,
What do you mean about an "asset case"? I think everything I have is exempt according to the fed. exemptions- we do have the house and our equity is protected. 2 old cars, not worth much at all and a house of old furniture.
We have a few things that have a little value but they are way under the exemptions too.
My main concern is just making sure we can fit under the median income- we are barely boderline now.
I feel the same way about the dave Ramsey plan, I tried but I was toooo far gone. I even called about finanicial coaching but it's just a lost cause at this point. i'm home w/ my son who just turned 3 last month & will start preschool in September but it's only 2 1/2 hrs a day. i left my job to be a SAHM but my company was downsizing- it was very small- and went to the president & only 1 employee so I would have lost my job anyways. As far as another job, there's absoluteley no around here that would even pay me what daycare would cost. Plus he just had minor surgery and docotor visits,etc- In this economy I'd be let go right away for missed time and an extra maybe $40/wk if that would not do any good at this point when your credit card minimums are at about 42600 in hardship plans and your house is close to $800.
What other option can there possibly be?
Thanks & I wish the best for you. I can't wait til the day I can finally sleep at night again....

[momofthree]

As far as the direct deposit, just open a new checking account and have him change the info on his direct deposit form at work.

If you're going to file, stop paying the cards now. You're throwing money out the window. You do need to keep current on your mortgage, car payments, and 401k loan (which cannot be included in the bankruptcy).

As far as income, it doesn't go by the w2 form. It'll go by the actual paycheck stubs from the last 6 months, so gather them up (including overtime pay), add them all up (gross pay) and then multiply by 2 to get your annual salary, and then compare that to the median. This is the way the courts calculate your income.

Keep in mind though, that even if you're over the median--which if your hubby has been working overtime recently, you very well may be--if your expenses leave less than $150 after paying your allowable expenses, you can still qualify for a chapter 7. You just can't include your credit card payments in the calculation.

You may find you have quite a bit of money left over when you're not paying any credit cards. If that is the case, buying a new car (with a payment at or less than $489) may be a good idea before filing.

[andysmom]

Hi, momofthree.
Thanks for the advice.
I saw on your signature that you filed a chapter 13 with 0% payback to unsecured creditors. How does that work?
The reason we're close to the median is because he got 2 quarterly gain sharing checks that boosted the income.
Some of his ot is mandatory, some was just him trying to work as much as humanly possibly to keep us afloat - but it's of no avail at this point. We're drowning quickly; so wheter it's a 7 or 13 it has to; i guess it's all about timing and waiting and see game.
I'm really hoping for a 7 because reading the 13 threads they seem way more complicated and alot harder to go through.
Thanks so much & any insight is welcomed!
Good luck with your 341 meeting. I know I will be a total mess the day our's does come.

[LALADY]

When you have a "significant" 401k loan outsatnding like you have (and I have) and you are at or near median income, if the UST gets involved it is a TOTAL nightmare. Trust me. I'm going through it. Start working with your attorney and employer. It will be a requirement of the UST for Chapter 7 that it is MANDATORY you pay your employer back in full out of payroll deductions as previously scheduled or you will be canned. If it's converted over to Chapter 13, you will only be able to pay a PORTION back to your employer THROUGH THE TRUSTEE NOT PAYROLL DEDUCTION, and that portion will be equal to that that you are paying your unsecured creditors AND the trustee gets to collect its fee on top of that, and of course if your employer doesn't agree to partial payments you are screwed. After paying NUMEROUS attorneys a whole lot of $$$$$, trust me when I say you MUST hire an attorney that is versed in SIGNIFICANT 401k loans. Small time 401k loans are NOT the same. Don't mean to scare you, but you don't want to be going through what I am going through.

[andysmom]

We are currently paying the 401k back out of my husband's check weekly through payroll deductions. Will this change?
Why does having a 401k loan complicate matters so much?
The only reason the loan was taken out was to try & catch up on bills & stay afloat to prevent this, but it just didn't work. Too little way too late.
How far under the median do you think you'd have to be not to have this extra scrutiny?
Just wondering, I'm all new to this & am definately hiring an atty.
I have 2 lawyer consults- one tomorrow afternoon & one on 3/18.
Any info you can provide is greatly apprecaited.

[momofthree]

Hi, momofthree.
Thanks for the advice.
I saw on your signature that you filed a chapter 13 with 0% payback to unsecured creditors. How does that work?

We are about $20k below our state median income and could qualify for a chapter 7, but chose to go the chapter 13 route to strip our 2nd mortgage. Our budget is such that we literally have NO money left over after paying our expenses. In fact, when we were trying to figure out our chapter 13 payment, the attorney was having to reduce our grocery budget (down to $450 a month for a family of 5!) and transportation budget and get rid of home maintenance expense, etc. just to find the money for the chapter 13 payment.

There is simply NO wiggle room in our budget, so we don't have to pay anything except our car payment + trustee fees + attorney fees.

So, to make a long story short, we could have filed chapter 7 but chose the 13 and that's pretty much how we ended up with such a low payback figure.

[LALADY]

We are currently paying the 401k back out of my husband's check weekly through payroll deductions. Will this change?

In Chapter 13, court pays. In Chapter 7, with significant loans, you'll be required to provide proof that 401k loan payments are mandatory, as set up through the note, as payments set up by the employer, that they must come through payroll deductions AND if you don't, you're canned. Letter and Declaration will be required. Reason is: UST believes the 401 payments will be enough to pay your creditors off in full or in part. It's backed up by case law/precednet.

Why does having a 401k loan complicate matters so much?

Got me. They are there to protect the creditors, not you.

The only reason the loan was taken out was to try & catch up on bills & stay afloat to prevent this, but it just didn't work. Too little way too late.

Sorry, doesn't matter. I did the same and PROVED it to the UST.

How far under the median do you think you'd have to be not to have this extra scrutiny?

Don't know. They examined every part of my life for the past 3 years. And I wasn't even technically under audit.

Just wondering, I'm all new to this & am definately hiring an atty.

Hire one that is versed in significant 401k loans. Don't waste your time if they're not. You'll be throwing any money you have after bad money.

[momofthree]

I believe I remember someone saying at one point (take this with a grain of salt, didn't verify it because it doesn't apply to us) that the reason 401k loans cause a problem is because you basically borrowed money from yourself and are choosing to pay yourself back rather than pay your unsecured creditors.