Advice re: Ch. 7 and will they take my engagement/wedding ring?

[Laurie77]

Hello. First, a bit of background. My husband and I are considering Ch. 7 bankruptcy. We just got married a few weeks ago. He's working a good, steady job, but I lost mine in May 2009 and have been unable to find another one. My unemployment will be running out very soon and if we have to live on his income alone, we would only be able to afford our living/household expenses. We live in an apartment, we don't own any real estate, and we have 3 cars, which we own free and clear. One of them is actually disabled and not driveable, since my husband has been unable to put any money into it to get it driving again. It's not a clunker, it's simply a project car for him. A majority of the furnishings in our apartment are hand me downs from my parents and I don't think would really be worth anything. Honestly, we don't have anything that is of huge value. (except my engagement/wedding rings, which I'll get to in a moment)

The both of us together have about $40,000 in credit card debt. I have $39,000 in student loans, which I know aren't dischargeable. My parents are helping me make those payments until I can get a job and pay them myself. We are able to make our payments just fine if we have two incomes, but unfortunately that's looking like it won't be the case in a few weeks, hence the Ch. 7 consideration.

My engagement ring was purchased from Robbins Bros. and we currently owe $6,100 on that credit card. My wedding band was purchased with Ben Bridge for about $1,600, we put it on their credit card, but immediately paid it off, so nothing owed there.

We moved to Washington 6 months ago after living in California our entire life, so I think we would be able to file based on California's exemptions, from what I've read. I've also read that California has a pretty huge wild card exemption, so based on the "pawn value" of my rings, I think I would be able to keep them. I don't think we'd get more than $1,000 from a pawn shop and that's being generous.

Advice please. Thank you!

[despritfreya]

My engagement ring was purchased from Robbins Bros. and we currently owe $6,100 on that credit card. My wedding band was purchased with Ben Bridge for about $1,600, we put it on their credit card, but immediately paid it off, so nothing owed there. We moved to Washington 6 months ago after living in California our entire life, so I think we would be able to file based on California's exemptions, from what I've read. I've also read that California has a pretty huge wild card exemption, so based on the "pawn value" of my rings, I think I would be able to keep them. I don't think we'd get more than $1,000 from a pawn shop and that's being generous.

1. If you used a store credit card to purchase the ring and still owe over $6k on it then, if you want to keep it you will either have to reaffirm the debt or redeem it for fair market value. Who ever financed the purchase has a lien on the ring and will be contacting you once the bk is filed. You can't keep the ring if you do not pay for it. Since it is not worth what you owe on it the bk Trustee will not care about it. While you can exempt the ring if you find an exemption that applies it really does not matter as there is no value in the ring for the bk estate - the ring has no equity.

If you purchased the ring using a typical visa type credit card then the ring is free and clear of any lien and could be taken by the Trustee if you are unable to fully exempt it. I am sure that someone familiar with California exemptions will be along to advise you on what exemption can be used.

2. Since the wedding band is paid off you do want to find a way to exempt it as, if not exempt, the Trustee could take it.

You would be using California exemptions.

Des.

[Laurie77]

We purchased it with the Robbins Bros. store credit card and their agreement does say they have a security interest in the ring and that it will remain as security for all purchases until such time as that purchase is completely paid for.

So even if I am able to use California exemptions to exempt it and the bk trustee wouldn't care about it because it's not worth what we owe, does that not matter? Can Robbins Bros. still come after us after we file and ask to take the ring back? I'm confused.

[despritfreya]

We purchased it with the Robbins Bros. store credit card and their agreement does say they have a security interest in the ring. . .So even if I am able to use California exemptions to exempt it and the bk trustee wouldn't care about it because it's not worth what we owe, does that not matter? Can Robbins Bros. still come after us after we file and ask to take the ring back? I'm confused.

An exemption protects you from all creditors except those that are secured by the item you are claiming an exemption in.

For example. . . many claim a homestead but that does not mean they don't have to pay their mortgage. If they don't pay the mortgage the property is lost to a foreclosure. Same thing happens with a vehicle that is subject to a lien. You can claim an exemption in the vehicle but you still have to pay Ford Motor Credit. This is no different for your ring. I tell my clients that you are "renting" the item until you finish paying for it. Once paid for, it belongs to you.

So, while the Trustee does not care about the ring due to the prior interest in it held by the store, the store has the right to payment, or, it gets its property back. Does this clear it up for you?

Des.

[Laurie77]

Yes, that clears it up. Thank you very much!

If my parents were willing to loan us the money to pay off the balance with Robbins Bros., would that be alright? Then we could make payments to my parents instead of to Robbins Bros. To me, Robbins Bros. obviously wouldn't care because they would be paid off and that's all that matters to them. Then as far as the value, I'm sure we could exempt it so the trustee doesn't take it, correct?

The only other option I can think of, after doing a lot of research, is to attempt to reaffirm the debt. See if Robbins Bros. would be willing to work with us and give us a lower monthly payment until I'm able to find a job. I'd be willing to do that, but the monthly payment would have to be very reasonable. We'd be strapped on his income alone after paying our living expenses, and that's my other worry. If the trustee sees that we are living extremely tight, would we be allowed to reaffirm a debt? Wouldn't they want to make sure that we could make any sort of payment?

[Laurie77]

Here's another idea we're thinking of for the Robbins Bros. credit card. We have no problem paying back the debt and not having it discharged in bankruptcy if that's what we need to do to keep the ring. (we're not willing to give up my engagement ring) It just needs to be at a reasonable amount per month. Robbins Bros. wants a minimum of $215/month. We thought we could try to "refinance" it, basically, and do a balance transfer to a Visa or Mastercard. This way, not only would the interest rate be much lower, but our monthly payment would likely be less as a result. Then we could probably manage the payment. Whatever card we transfer it to, we just wouldn't include that in our bankruptcy and would continue paying it. We would not, of course, try to discharge it, as that would be fraud. Is this alright to do?

If that idea won't work and we do have to keep the Robbins Bros. credit card, I would like to contact them to see what they could do for us. If they would be willing to reduce the interest rate and the monthly payment, then it might be doable to just keep the balance with them. Can I do this before we file bankruptcy or should I wait until I speak to an attorney? I know that at some point in the bankruptcy process, I wouldn't be able to contact them or I would be showing them preferential treatment over my other creditors and I know I could get in trouble for that. (something to that effect) Or does that only apply if we were to include them in the bankruptcy? If we didn't, would I be able to contact them as normal?

We are early in the process, as we haven't met with an attorney yet. I know they will answer most of this for us, but I thought I would do as much research online as I could. Everyone here seems so nice and knowledgeable, I want to get as much info as I can. :o)

[clevelandmom]

Hi Laurie,
I don't have an answer to your questions, but I just wanted to chime in and tell you I'm sorry you have to go through this kind of thing so quickly after getting married. That being said, money management is an important lesson to learn, and I'm glad you're going through it at this stage in the game (I wish I'd learned many years earlier how to save money). Going through hard times with your spouse, however, will help you become stronger in your relationship. I hope you're able to get a fresh start, learn to save, and have a happy long life together. BTW, I'm originally from California too. I am very happy to be the heck out of there! Best of luck my friend. And you found a great board here - these people are awesome. Happy Thanksgiving!!

[Laurie77]

Thank you ClevelandMom! I very much appreciate that and that was very nice of you to say. :o)

Yes, I've thought that what we're going through right now pretty much sucks considering we just got married. We didn't even have a honeymoon and not sure when we'll have one. But it is what it is, that's how it had to be, and things won't be horrible forever. My new hubby and I have already been through a lot. We both lost our jobs last year, but he was lucky to get a really good job in WA so we moved for it. I thought it would be easier for me to get a job here, but nothing so far. I've had a few interviews, which is more than I got in California, but I'm never chosen. Makes me think I'm doing something wrong. My husband and I are good people and had always planned to pay back our debt the old fashioned way. But if I'm not working, that makes that plan impossible. His income just can't pay everything. And what families are lucky enough to live on one income? Most families need both incomes to survive, even if it is just my unemployment. We were able to stay afloat with it just fine, but when I stop getting it, we're in trouble. His income alone can pay our rent and necessary things like that, but not the debt we have. We feel bad about bankruptcy, but I think our situation is exactly what it was designed for. Our situation is a result of a bad economy, something that was out of our control. Yes, we should have made better decisions and not gotten into debt in the first place and saved for a hardship such as job loss. But hindsight is 20/20. If we're able to get a fresh start, I don't think I'll feel so bad about it then. We can truly start over and make better financial decisions. I think our marriage will be better for it and I'm actually looking forward to it! We'll finally be free and that will be a good feeling.

[despritfreya]

In response to:

"If my parents were willing to loan us the money to pay off the balance with Robbins Bros., would that be alright? Then we could make payments to my parents instead of to Robbins Bros."

Yes, this will work but I strongly recommend the "Bank of Mom and Dad" (ah, I know it well) does not step in until your case is "closed". Between the filing and the closing you stall the creditor even if you have to get advances from your parents to keep Robbins Bro at bay. This way the ring will continue to have a lien on it and the Trustee, regardless of the exemption issue, will have no interest in the ring. Once your case is closed, and I mean closed where the Trustee has done his final report, then you can pay off Robbins. Bro.

"We thought we could try to "refinance" it, basically, and do a balance transfer to a Visa or Mastercard."

Absolutely a very bad idea. Forget the fact that you would be incurring the visa debt under contemplation of bk which could be fraud (regardless of your intent to pay), the bigger issue is that you will lose the benefit of the secured status of Robbins Bro and the ring will be "free and clear" and only subject to any allowed exemption. Since I do not know California exemptions I cannot comment on whether or not the ring would be protected.

Des.

[Laurie77]

In response to:

"Yes, this will work but I strongly recommend the "Bank of Mom and Dad" (ah, I know it well) does not step in until your case is "closed". Between the filing and the closing you stall the creditor even if you have to get advances from your parents to keep Robbins Bro at bay. This way the ring will continue to have a lien on it and the Trustee, regardless of the exemption issue, will have no interest in the ring. Once your case is closed, and I mean closed where the Trustee has done his final report, then you can pay off Robbins. Bro."

So are you saying that we would not include Robbins Bros. in our bk proceedings and continue paying them the minimum payment? Then once our case is closed, then we could pay them off? Do I have that correct? Or are you saying we could include them in the bk, but would make arrangements to reaffirm the debt? Can our attorney contact Robbins Bros. on our behalf to make payment arrangements and work out a lower monthly payment?

An additional note: I'm weary about asking my parents for a loan. I know they would help me if they could, but I don't know if they could. In the event they can't loan us the money to pay off Robbins Bros, could we call them after our case is closed to make some sort of payment arrangement? They would have to lower the interest and the monthly payment in order for us to be able to do it. How long does it take to close a bk case? If we're talking more than 3-5 months, it would be a hardship for us to have to continue paying Robbins Bros. if I still am not working.

[Laurie77]

In response to:

"Yes, this will work but I strongly recommend the "Bank of Mom and Dad" (ah, I know it well) does not step in until your case is "closed". Between the filing and the closing you stall the creditor even if you have to get advances from your parents to keep Robbins Bro at bay. This way the ring will continue to have a lien on it and the Trustee, regardless of the exemption issue, will have no interest in the ring. Once your case is closed, and I mean closed where the Trustee has done his final report, then you can pay off Robbins. Bro."

So are you saying that we would not include Robbins Bros. in our bk proceedings and continue paying them the minimum payment? Then once our case is closed, then we could pay them off? Do I have that correct? Or are you saying we could include them in the bk, but would make arrangements to reaffirm the debt? Can our attorney contact Robbins Bros. on our behalf to make payment arrangements and work out a lower monthly payment?

An additional note: I'm weary about asking my parents for a loan. I know they would help me if they could, but I don't know if they could. In the event they can't loan us the money to pay off Robbins Bros, could we call them after our case is closed to make some sort of payment arrangement? They would have to lower the interest and the monthly payment in order for us to be able to do it. How long does it take to close a bk case? If we're talking more than 3-5 months, it would be a hardship for us to have to continue paying Robbins Bros. if I still am not working.

[Laurie77]

P.S. I apologize that my last reply posted three times. Computer glitch.

[despritfreya]

So are you saying that we would not include Robbins Bros. in our bk proceedings and continue paying them the minimum payment? Then once our case is closed, then we could pay them off? Do I have that correct? Or are you saying we could include them in the bk, but would make arrangements to reaffirm the debt? Can our attorney contact Robbins Bros. on our behalf to make payment arrangements and work out a lower monthly payment?

Robbins Bros is listed as are all creditors. Robbins is a secured creditor, secured by the ring. Your Statement of Intentions will tell the creditor you are either surrendering the ring, reaffirming the loan or redeeming the ring for fair market value. Yes, you can negotiate with Robbins but I do not know if they will reduce the balance owed and let you make payments on the reduced balance. All I am suggesting is that you do not pay them off until you case is closed.

In the event they can't loan us the money to pay off Robbins Bros, could we call them after our case is closed to make some sort of payment arrangement? They would have to lower the interest and the monthly payment in order for us to be able to do it.

As indicated above, you can always try to negotiate a lower payment. Robbins, however, does not have to agree to anything other than a reaffirmation of the debt, payment of the ring's value (redeem) or the return of its property.

How long does it take to close a bk case? If we're talking more than 3-5 months, it would be a hardship for us to have to continue paying Robbins Bros. if I still am not working.

The closing of the case depends upon whether or not you have any non-exempt assets that the Trustee wishes to liquidate. This would include any expected 2010 tax refunds. If there are no assets your case should be closed within 4 months. If there are assets there is no way to guess.

The reality is that if you cannot afford to pay Robbins (redeeming is the cheapest way to go but usually requires a lump sum payment), then you will most likely have to give the ring back. The ring was/is too expensive for your financial situation. There is nothing wrong with letting it go and replacing it with something cheap until you have saved enough cash to purchase a ring in the price range of the one you currently have.

Des.

[tcreegan]

Hi Laurie,

the Robbins Bros. credit card, I would like to contact them to see what they could do for us. ...this is the best idea of all, they hold all the cards so it is going to come down to what they are willing to do....best way to find that out is to ask them.

Happy Thanksgiving and hope this works out for you!

Tom in Colo

[Laurie77]

It's likely that we will reaffirm the debt with Robbins Bros. and have a family member help us continue to make the payments every month until I'm able to get a job and we'll take over payments again.

Can I contact Robbins Bros. now, before we file bk, to see what payment arrangements they'd be willing to make? To see if they could put us on some sort of hardship program? Or should I wait and contact them after we file?