Looking a Chapter 7 as a way to eliminate credit card debt, many questions...

[DoctorPC]

2yr.s !! well that is a deal breaker for certain, the brokerage account has a value of around 25K, and once unemployment ends, it's my only lifeline until I finish college and find a new job.
The 401K has a value of about 15K so it sounds like I can't do cha 7 as a result. Sounds like either default or settlement with a long payback period.

But a consult with a few attorneys are needed. I just don't need to rush at this point

[tobee43]

i agree...and we needed the 2 years to answer NO to the questions otherwise we would not have done well...we just had to waited out. it wasn't easy, but we did what we had to.

or you could leave the country for 10 years and everything will just disappear! LOL!!

yes, please see a few atty's and see what they think about your personal situation. only you know what's the right thing for you to do for you and your future.

[ccsjoe]

Hold on....do what you said in your last line. Talk to a few attorneys first. You seem to have a general idea of what would be the tipping point factors on your decision, so articulate those out in questions to the attorneys. Then see what the strategy and options look like.

Check back here, there's always fresh experiences, ideas and knowledge.

[tobee43]

Tobee, I think I disagree here. 1. He is personally liable for the cc's, 2. he is looking at only transferring the 0 balance cc's in order to try and keep them open, 3. because of personal liability they would likely be closed, and 4. his debts are primarily consumer, so he would have to pass the means test. On top of that, even if he were to transfer the debt to S-Corp or other Corp, it would be well within the lookback period and certainly objectable by the trustee.

well...it would depend..did the OP purchase for that business...is it an established business...is it a sole prop..is it a LLC is it a subchapter s....

but of course you are correct if the OP wants to do that now...one cannot and then file bk.

i had an "established" business but used my personal cc for that business, but i had it for over 5 years...i just didn't create it for the sake of the bk...so you're right on joe.

[oregonpilot]

wouldn't the 401K be exempt as long as it didn't have over a mil in it?

[tcreegan]

Hey Doc, good news for you!! Washington allows up to $125,000 equity for your home. So you will have no problem keeping your home.

btw, 'homestead' just means the value of your home you can 'exempt', ie. keep out of the BK

You can keep $2500 worth of vehicles. Pick and choose until you get to $2500 in value. The RV has $5K equity so it is a problem, but look at the valuation, most people overvalue things, forgetting the condition and what they could get for it if they put an ad in the paper.

You have a $2,000 wildcard which means you can choose whatever you want to protect up to 2K (add it to your vehicle amt if needed) You can only protect $200 in cash w/ the wildcard though.

The other WA exemptions are pretty good:
Appliances, furniture, household goods, home & yard equipment to $2,700 total for individual
Clothing, no more than $1,000 in furs, jewelry, ornaments
Food & fuel for comfortable maintenance
Tools & materials used in any other trade to $5,000
and more...

Lots of good personal prop exemptions means more you can do w/ the wildcard

Avoid taking $$ from the 401, it is completely protected (well, over a million dollars anyway)

Don't plan on keeping any cc through the BK, might happen but don't count on it.
(and no large cc charges for at least 90 days prior to filing)

The advice about not filing BK when you have more of an income problem than debt problem is worth considering. Folks file, then have to get into debt again b/c they don't have enough income to live on. A red flag is trying to keep ccs open through the BK. The big question is 'Can I live on a cash basis for the next 8 yrs?' If you can't honestly say yes, a BK might not be your best option.

Hope this helps,

Tom in Colo

[ccsjoe]

but of course you are correct if the OP wants to do that now...one cannot and then file bk.

This is what I got out of his post, not that it was an established corp. Thanks tobee

[DoctorPC]

Does a business have to be making any money? It's been a registered web site for a dozen years, it just isn't generating any revenue. I use the web site to advertise myself and demo software applications I've written over the years. I won't be transferring any assets to the "business". I just thought that I might be able to open a business credit card since the existing personal ones will most certainly get cancelled.
So hiding assets are a big no-no, even though the brokerage account was a personal 401K with out any of the penalties of a typical 401K, meaning you can have a margin account and you can withdraw funds or borrow against funds when needed... So If I file BK and 6 weeks later I'm offered a job I can't cancel the deal? Hmm, I don't know if I like the direction this is going, it sounds like default or a settlement is the only direction to go at this point. But still I need to speak with legal council before taking any direction.

Obviously the general public doesn't get a bailout like the big banks and auto makers.

[ccsjoe]

the brokerage account has a value of around 25K

Doc, quick question. Your brokerage account, is it qualified? Must be right? Traditional maybe? If so it may be exempt as a retirement account.

Never mind, you answered. As long as it's registered as a 401K, then there's no need to worry about those assets provided it's under 1 MM.

As far as your more specific strategy using a "dormant" business, I'd go with advice of local counsel. They know the trustees and what will fly or not.

Yes, once you file CH7 there's no exit button.

[tobee43]

doc...no a business does not have to show a profit...actually not for 5 years...one can claim it as a loss on their taxes...

now that brings us to that question...you can't arbitrarily formulate the business as previously mentioned...but if you have been claiming it as a loss on your taxes then you can use it in your bk...in not. no.

looks as though your located in one of the more debtor "friendly" states. so that 401 is in good shape...as joe pointed out what's in the other acct...is it for retirement?? if so, i do believe it may also be protected.

[DoctorPC]

Hey Doc, good news for you!! Washington allows up to $125,000 equity for your home. So you will have no problem keeping your home.

btw, 'homestead' just means the value of your home you can 'exempt', ie. keep out of the BK

You can keep $2500 worth of vehicles. Pick and choose until you get to $2500 in value. The RV has $5K equity so it is a problem, but look at the valuation, most people overvalue things, forgetting the condition and what they could get for it if they put an ad in the paper.

You have a $2,000 wildcard which means you can choose whatever you want to protect up to 2K (add it to your vehicle amt if needed) You can only protect $200 in cash w/ the wildcard though.

The other WA exemptions are pretty good:
Appliances, furniture, household goods, home & yard equipment to $2,700 total for individual
Clothing, no more than $1,000 in furs, jewelry, ornaments
Food & fuel for comfortable maintenance
Tools & materials used in any other trade to $5,000
and more...

Lots of good personal prop exemptions means more you can do w/ the wildcard

Avoid taking $$ from the 401, it is completely protected (well, over a million dollars anyway)

Don't plan on keeping any cc through the BK, might happen but don't count on it.
(and no large cc charges for at least 90 days prior to filing)

The advice about not filing BK when you have more of an income problem than debt problem is worth considering. Folks file, then have to get into debt again b/c they don't have enough income to live on. A red flag is trying to keep ccs open through the BK. The big question is 'Can I live on a cash basis for the next 8 yrs?' If you can't honestly say yes, a BK might not be your best option.

Hope this helps,

Tom in Colo

Well sort of but it appears that I stand to loose a lot if I do file. The brokerage account is my only last remaining safety net for when unemployment ends and I still haven't found work.
Realistically, the biggest reason for wanting to eliminate the credit card debt is it a 1000 a month payment I can barely afford to make. Ever since 2000, the industry I'm in has seen a net drop in yearly salaries
I was able to command 50/hr in 2001, in 2009 I barely made $30 /hr and thats no medical, no holiday or vacations.. Make me wonder why bother with college only to get a job that doesn't pay all that well.
So if I can't increase my income, I need to drop my debt load and if a cha 7 will drop the 3 big monthly bills, then I'm game, but I don't want to turn my life upside down trying to make it work.

The 401K will never be touched unless hell freezes over, I made that mistake years ago and still haven't recovered the $ lost.
Again, I need to speak with a atty to get their opinions.

[tobee43]

Well sort of but it appears that I stand to loose a lot if I do file. The brokerage account is my only last remaining safety net for when unemployment ends and I still haven't found work.
Realistically, the biggest reason for wanting to eliminate the credit card debt is it a 1000 a month payment I can barely afford to make. Ever since 2000, the industry I'm in has seen a net drop in yearly salaries
I was able to command 50/hr in 2001, in 2009 I barely made $30 /hr and thats no medical, no holiday or vacations.. Make me wonder why bother with college only to get a job that doesn't pay all that well.
So if I can't increase my income, I need to drop my debt load and if a cha 7 will drop the 3 big monthly bills, then I'm game, but I don't want to turn my life upside down trying to make it work.
Again, I need to speak with a atty to get their opinions.

have you tried working with the bank and having them lower the monthly payments....just tell them you can't do it anymore and they need to adjust the payment. nowadays, some work with you while others laugh...but it's worth a shot for you to call them and say...hey...listen here..it's either i'm going bk...or i'm going send you 200 monthly until i get on my feet...

they will either slam the phone down on your ear...or counter and work with you...worth a shot i think if that's your biggest bill.

[DoctorPC]

The big question is 'Can I live on a cash basis for the next 8 yrs?' If you can't honestly say yes, a BK might not be your best option.

That would probably be a No, too much of our society requires the use of credit cards or debit cards. Just to buy gas you need a card to use the machine. so to lose the credit or debit card is simply not a realistic option.

[DoctorPC]

Citi bank, not exactly known for their humble nature, US Bank, maybe... Worth talking to both.
Maybe time to talk to credit consolidation people as well? Would cha 13 provide a better avenue to eliminate debt over a longer time frame?

[ccsjoe]

The big question is 'Can I live on a cash basis for the next 8 yrs?' If you can't honestly say yes, a BK might not be your best option.

That would probably be a No, too much of our society requires the use of credit cards or debit cards. Just to buy gas you need a card to use the machine. so to lose the credit or debit card is simply not a realistic option.

Doc, cash only basis includes debit cards. I couldn't live without my debit card!!