How much is enough?

[ElmoElmo]

My brother is thinking of filing for Chapter 7 bankruptcy. He has $18,000 in credit card debt, $90,000 in student loans (which I know cannot be discharged), and he also owes my husband and I approximately $3,000. He made less than $10,000 last year and is currently unemployed, due to mental health problems.

Is $18,000 (well, $21,000 including what he owes us) too small of a debt to file for bankruptcy? Will the court (or the trustee) just say that he should be able to pay that back in 3-5 years if he gets a job? Also, he is currently looking for a job. Would it be better to file before he gets a job, or after?

[SinkingFast]

Besides his student loans, you brother's debt is only about 1/5th of ours. And we still own a house with a substantial mortgage as well. Our debt was accumulated over years and years, due to house repairs, medical bills, other unexpected life expenses, a period of unemployment, and supporting 2 households for over a year now. If we had your brother's debt level, we could work thru it and wouldn't even be considering BK. We've already had a Credit Counseling session and there wasn't anything they could do for us. The Debt Management Plan they figured for us was $100/month higher than our current minimums that we cannot pay now. We literally have no other choice.

BK isn't something to enter into lightly. Especially for younger people with a relatively small amount of debt. While the student loans are larger, the other debt is not. Filing BK will have long term effects on areas of your brother's life I'm sure you may not have considered. BK can impact your brother's ability to get a good job, ability to get insurance and insurance rates, ability to get loans and interest rates on all kinds of loans, most especially car and home loans. He really needs to seriously consider all alternatives before considering filing.

I would suggest you all go to a few Consults with attnys. Reputable attnys will probably tell you the same thing.

[ElmoElmo]

I understand your point, and I certainly know that there are a lot of people out there with much more debt than my brother has. However, he is not going into bankruptcy lightly. He has spoken with a few credit counseling agencies, but they are asking for money up front, which he can't afford. He tried to settle with the credit card company (with money my husband and I agreed to loan him), but they were not willing to negotiate. His minimum payment is $400+ a month (which the company refuses to lower), and that barely covers the interest. He attempted suicide two days before Christmas, and has not had any income since then, so he can no longer afford to make any payment toward the balance.

I know the debt may no seem like much to some people, but he has not been able to hold down a job for over two years because of his mental illness. He's trying to get his feet back on the ground, but that's really difficult to do when you have to pay $800 a month between the credit card and the student loan.

He has spoken with two attorneys, both of whom suggest that he has a good case for Chapter 7. Should we be distrustful of those opinions?

[SinkingFast]

The New Law is gonna look at his last 6 months of income. That will be the average/month set for the Means Test.

You can go here to learn more about the New Law:

http://www.usdoj.gov/ust/

Here's a link to info about the Means Test:

http://www.usdoj.gov/ust/eo/bapcpa/meanstesting.htm


And maybe, just as a last check, you might try contacting one of the DOJ approved Credit Counselors:

http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm

The Credit Counseling Company we contacted is DOJ approved. If we had moved forward with a DMP thru them, we would have had to pay a small fee to set up the program. Less than $100 type small fee. And there would have been a monthly administration fee included in the payments.

Ch 7 sounds logical if your brother doesn't have any assets he is worried about loosing. A 7 is also known as "liquidation BK". You only get to keep a small amount of property to allow the debtor to start over fresh. Each State has it's own set of exemptions for Homestead, household goods, and vehicles. Some States allow you to choose State or Federal. Some Homestead exemptions can be applied to things other than a home. If your brother had a home, or car, or annuity he wanted or needed to protect, Ch 13 would be maybe a better choice. You need to check on your State's exemptions relative to your brother's personal situation.

Maybe, also, chat with a couple more attnys to get more advice and opinions. You learn more with each visit and Consults are free.

[SinkingFast]

Thank You, Credit, for the reality check there.

I too saw the difficulties with the situation. But when you're dealing with your own "mental" issues, sometimes you don't think to say the appropriate things to others who are in a bad way as well.

See to the most important thing first. Life. Then worry about the finances later.

[ElmoElmo]

Thank you very much for your responses to my posts, both the bankruptcy information and the reminder to focus on the more important things, like health and safety.

My brother was hospitalized for a week after his suicide attempt, and then he spent a month in an intensive out-patient program (six hours a day). I think it's tempting to focus on the financial issues, because they are very concrete and there are clear steps one can take to work them out, whereas the mental health issue is very complicated and none of us really knows what to do about it. I have struggled with depression myself, but fortunately never got into any financial difficulty. So I understand at least some of what my brother is going through, and I'm just trying to do whatever I can to help.

Perhaps it is best to take a step back at this point. Just let the bills sit, see what happens over the next few months or so, and then re-evaluate the situation.

Anyway, thanks for letting me vent a bit.

[SinkingFast]

Elmo,.......... If your brother doesn't have any assets to amount to anything, and he's not working steady right now, do let the financial issues sit and wait.

One thing you might research, so you can be prepared, is your State laws regarding garnishment of wages. If your brother has no assets, about the only thing any one can do is garnish any earnings he may have.

One of the attnys we saw told us to wait. Hold off. Come back and see him in a year. He said it will take the CC companies a long time to move. They typically wait several months for payment, turn you over to internal collections to try to get payment, then outside collections, before they finally proceed legally. Unfortunately for us, unless our house sells, we cannot afford to wait. Our Lender could start Foreclosure forcing us to do something.

If that attny is right about the process, you probably do have some time to set aside the financial issues. When you get a chance, research and learn so you'll know better how to address the financial issues. Visit here and read people's posts of their experiences. I've learned a lot here.

Concentrate on your brother's health first.

[StaciMM]

There is no preset amount that is 'enough' for Bankruptcy. It depends on the individual situation, and whether or not there is a decent chance of being able to repay it over a 5-10 year time. (Meaning, I have no idea of what your brother's earning potential would be if he were to get counseling and be able to work again.)

First & foremost, getting help for the underlying issues is a good idea. Filing BK would get rid of the credit debt, but that should be a very low priority in comparison to the mental issues.

[edwards2]

I can sure identify with your brother's desperation and like everyone else, please continue to get him help. My husband was diagnosed as bipolar and the meds he is taking saved his life. My heart breaks for you and your brother. You feel so helpless and so scared that he could be driven to such a drastic action. My husband was and I never had a clue he was in such despair. There were no notes left behind but God decided it wasnt his time and spared his life. There absolutely is nothing worth taking your life over. We all know about the financial overload and at times it can seem so futile to keep on living but of course it is. When you think about it your credit score is so not on the radar screen of just living. We are all praying and pulling for you and your brother. Please keep us posted. While we can provide financial help we can sure give you all the emotional support you need. Good luck...and remind your brother how much he is loved and needed.

[lilgoose]

I, too, hope that all ends well with the whole situation. One thing, as I was skimming thru, that I didn't notice (may have missed, so I do apologize if I did) was regarding the student loans....

If bk is the last resort and there is no other choice in filing, do look into having the student loans discharged as well. My friends just got thru filing and his student loans ($40,000 plus) was completely and totally discharged due to his inability to pay them off.

Of course, as all has told you, seek counsel for this, but it is worth checking on as all laws are different in each state. This was in Ohio.

Good luck and take care!

Always remember that you are not alone!

[phill99]

I, too, hope that all ends well with the whole situation. One thing, as I was skimming thru, that I didn't notice (may have missed, so I do apologize if I did) was regarding the student loans....

If bk is the last resort and there is no other choice in filing, do look into having the student loans discharged as well. My friends just got thru filing and his student loans ($40,000 plus) was completely and totally discharged due to his inability to pay them off.

Of course, as all has told you, seek counsel for this, but it is worth checking on as all laws are different in each state. This was in Ohio.

Good luck and take care!

Always remember that you are not alone!

Your friend's student loans were discharged? How was that possible? What were the situations? He's disabled?

[Minnymouth]

Student loans CAN BE DISCHARGED in hardship cases..... which this may fall under.
A chapter 7 case with mental depression or mental illness involved (and the inability to work) can get student loans discharged.

This you really need to discuss with an attorney. The doctor has to be willing to fill out papers, and you say he was committed temporarily..... That alone can help get ALL OF IT DISCHARGED................

Check into this before he goes back to work or tries to go back to work...........

Meds will probably help stabilize him and help straighten him out.... financial depression has probably brought all this on.....

Let the mental depression help him get a hard ship on the student loans and get them discharged..............

Right now you say he's got no job and being treated for mental depression........... excellent info for a "hardship" discharge on student loans.......

Let us know what you find out......

Good Luck!!!!

[Danielle1981]

Why hasn't he applied for a forbearance? He can put those in forbearance anytime a hardship or medical issue arises. He fills out his name, address, phone number, SS#, checks the box of why he is asking for it and signs his name and faxes it back. It goes away for a year. That's how mine are right now because I had to undergo cancer treatment. Do you know which lending company he has? You can usually get the forms online.

[lilgoose]

Sorry, just getting back here to this post......

Your friend's student loans were discharged? How was that possible? What were the situations? He's disabled?

No, he wasn't disabled. He was divorced and a couple of years ago, his ex filed bk. It took that long, but they came after him for debts as his name was on cc and other loans (some of which he didn't even know she had opened) for him to pay. Those along with the bills him and his new wife had, he couldn't make the pymts. (Oh, she is a home health nurse and he has a masters). In this area, there are no jobs available for him to make a decent living~he has applied for things that were not quite in his field, but was hoping for something that would provide enough income to pay on all these things....

So, when they filed, they listed his student loans, and seeing his income and hers combined, they were on the short end of the figures. They are the ones that got a better paying job (in his field) in another state and are moving this month.

So, I guess it is possible to have them discharged. It never hurts to ask!!

[StaciMM]

Scammer-most people here are looking for honest information. Most are not looking to pull off a scam thru bankruptcy. Perhaps you're thinking inward?