New here~ So many questions!

[dustijane]

Just stumbled across this forum, and there is so much info! Here is my situation...hopefully there are some words of wisdom =)

We live in California. Family of 5. Hubby makes about 50,000 a year, I usually make about 8,000. We have never made over 60,000 yet. I am currently working a temporary but full-time job but will be laid off any day now. Anyway, we own (or are buying) our home, we owe 155,000 but house is worth maybe 110,000. Hubby does NOT want to move and the price for rentals is so ridiculous! Our mortgage payment now is 1,000 but is adjustable so who knows. I would say after taxes, child support, and health insurance premiums are deducted hubby takes home 2400/month. With me losing my job I will be able to bring in about 500-800 a month for my part time job.

We owe about 40,000 in CC debt just trying to get by the last several years (and obviously living beyond our means). I also owe 8k in student loans, and he pays 500 /month for child support (no arrears just current).

We are current on all of our minimum payments, BUT that is only because hubby has been paying for some household expenses with CC's. Not smart, but we are afraid not to pay. We just started talking about bankruptcy...but not sure if we can or not.

We also have two cars (paid off they are not worth more than 5k each). We have one travel trailer (maybe worth 4K), one street bike (maybe 4k) and a few quads (little value, all used and old). One of the things I am concerned about is the fact that we have sold and traded a few items in the last year, even months. We had a boat, but hubby needed a reliable, working truck so he traded it. SO, that is my biggest concern.

I know this month we will start not being able to make minimum payments. I am just so nervous but there is no way we can pay them, not all of them. I know that they can sue and garnish wages, which would hurt us terribly. Also, I am afraid of losing our house and cars.

I am at the point where I just want to quit paying them...it is so overwhelming we will not be able to catch up, but I am worried about the consequences of not paying. Any advice???

[kartoons19]

Welcome to the forum. There is a wealth of information here. In your case, I would first check your states' exemptions to see what you can exempt. Your state may also allow you the option of using federal exemptions which may be more beneficial. I don't have an answer about trading vehicles, but I'm sure someone else will chime in.

I will tell you that I stopped paying my CCs five months before I filed and I was never sued. According to what I've read on this forum, some have gone a year or more without ever getting sued while others are sued within six months. So know that while it may be difficult to stop making the payments, you do have a some time before you need to be concerned about wages being garnished. Hope this helps. Good luck to you.

[tcreegan]

Calif BK

Hi dustijane,

California uses two state lists for exempted property. They are called 'system 1' and 'system 2' Go online and look them up. They will tell you how much vehicle value is exempted, is the streetbike or travel trailer exempted, how much, etc.

Go online and find a "means test calculator" and try it out. My guess is your income is way below state median income for CA. You should have no problem qualifying for a Ch 7 BK

FYI, student loans and child support do not go away in a BK You are stuck w/ those. See your student loan servicer about an income based repayment or hardship deferment.

It will be hard to keep the house. In a BK you can 'reaffirm' a debt, but it has to be approved by your attorney or the BK judge. Approval not likely if you owe more on the house than it is worth. Having the low payment will help get an approval. Having an ARM loan will not.

You also need to see how much equity you have in the house, and compare that to how much equity you can exempt under CA exemptions. If you have more equity than the exemption, keeping the house gets less likely.

You should speak with your lender and ask about staying current on the payments through the BK and afterward. This is called a 'ride through' or 'retain and pay' Some lenders are OK with this, some aren't. The lender does not like this b/c you are no longer legally liable for the debt. You can walk away in the future. BUT, with the housing market in its current condition, many lenders will want to keep you in the house.

If your lender does not do "ride throughs", you can take a long shot and get a loan modification. Sign a new contract with the lender either during the BK as a reaffirmation or after the BK as a new contract. Either way, you remain legally liable for the debt, and if things get worse later and you default, the property forecloses, sale at auction, you get sued for the difference between auction price and amount owed.

But....maybe you can negotiate better terms w/ the lender? Lower fixed rate, move loan term out to 40 yrs, something to make sure it is affordable if things get worse in the future.


Well, I hope this is somewhat helpful,

Tom in Colo

[Maine]

The worst part of stopping paying the cards was the phone calls, we would have 10+ calls a day, and after trying to talk to them and tell them our situation but getting nowhere we just started hanging up on them. Other than that we went 9 months of not paying before we started getting letters from lawyers demanding payment, and we just got served with a court date for October.

If you can stop paying and stop using the cards and wait 6 months to file the property transfers will not look so bad.

Plus that 6 months will give you time to figure out all the paperwork, get the money together for a lawyer if you want to use one, and figure out what your real expenses are after all the cc's are not in the budget.

Good luck! We have all been there!

[LadyInTheRed]

Since your house is underwater, as long as you stay current on your payments the lender is not likely to foreclose.

The current California exemptions are hard to find because they were updated in April to match the consumer price index, but the increases are not reflected in the actual law. I have links to the current exemptions in my blog. I'll make sure they still work since the Judicial Counsel seems to move the files now and then. System 2 has a pretty generous wildcard. It sounds like you'll be able to exempt all of the assets you listed.

Selling or trading assets should not be a problem as long as the sales/trades were at fair market value.

[momofthree]

I don't know about other areas, but here in CA, the trustee will not object to you keeping your house just because you're underwater. They actually want people to keep their homes, at least that's what our trustee said.

Since you're not using the homestead exemption, you should be able to keep most, if not all of your belongings because CA has a wildcard exemption of over $20k + auto exemption of around $3300.

Like the others have mentioned, you have no reason to rush into filing. Garnishment will take at least 6 months of non-payment.