Need advice on: Stop paying? When?, bank accounts, who to pay?, rental property...

[rfan]

We've been facing the facts and it looks like we are going to have to declare bankruptcy. I've been reading here quite a bit lately and feel a little better about it but still anxious. Now, I need to figure out when and if we should stop paying our debts. Here's are situation:

-My income will force us to use the means test. I did the online one and came up with about $300 left over every month.
-Large house payment but don't want to lose the house. If I understand correctly the exemption for a house in Nevada is around $500,000 and our house is not worth anymore than $400,000 and probably less.
-About $85,000 in credit card debt. This is what's killing us. Some of it we've carried for years and then we've added about $35,000 in the past year. Our last "big" charges were about 2 months ago and there were probably 4-5 charges $1000-$2000. We did do once balance transfer of $6000 right around the same time. Also, have 1 warehouse store card that was used for gas and food and we just stopped using recently. We've used several of the other credit cards recently but most purchases have been small and none more than a couple hundred dollars.
-We have two cars. One is paid for and worth about $6000 and the other is financed at $450 month for the next 5 years. I believe the vehicle exemption in Nevada is $15,000.
-We have credit cards with our bank so it looks like we will need to close our accounts and stop direct deposits and automatic payments before we stop paying any cards. I've read about banks taking money out of bank accounts to cover credit card debt.
-We have a rental house that is currently occupied but that lease expires soon. We are a little bit upside down on it and lose $100-$200 per month on it right now. No problem giving it up in the bankruptcy.
-All of our payments are still current but we are just about out of money to keep up with them.
-I don't think we have any assets that would be not be exempt.

So, if you were in my shoes, what would you do? I'd love to stop payments on the rental property but I think we need to keep paying the credit card payments for awhile to get some time from our last big charges. Would that screw things up? Is closing the bank accounts a problem? How do you handle your paychecks after that? When should we stop paying on everything (if we can keep paying)? When should we talk to a lawyer? One of my biggest concerns is harassing phone calls to my work and family. I've read a lot of horror stories about that stuff. Not sure what I'm going to do about that yet.

Sorry for all the questions but we are in a mess and trying to figure out the best way out. Thanks for your help!

[chicagoannie]

Hi rfan - everyone will chime in - put as much time between the $35K you put on the cards and your BK as possible. When you decide, for sure, you are going to file, that is the time to stop paying. Yes, pen up a new bank account somewhere "neutral" where you have no credit relationships (and do not use checks from that account to pay any bills you are including in your BK.) There are ways to cut down on the calls you get at work and for at home - just don't answer, or set your phone to silent, etc.

If you feel comfortable, post your numbers on the forum. I am sure we can help you eliminate that $300 DMI. NV's exemptions really are generous - wow. Whatever you decide, you'll get through this!

[frogger]

What were the big charges for and what did you spend the cash advance money on?

[rfan]

Our biggest charges were about a year ago. The two biggest being a $10,000 cash advance and a $7000 charge to buy some landscaping items for our house (trees, plants, grass, and fill dirt). The most recent big charges a couple of months ago were for various things like airfare to go see family (around $1500), a generator because we have a well and no power means no water $700, some repairs and maintenance on a family member's tractor that I'm using on our property to move dirt around $1000. That's all I can think of now. Most of the charges lately have been for food, little purchases from various stores, gas, etc. Oh, we did pay for pre-school for one of my sons using a credit card. I think that covers most of it.

[frogger]

You could flip a coin and probably get an answer as good as this, but your credit cards may or may not create you some problems. Cash advances are a little more sticky than the charges, but with charges like you have going on, it all could get troublesome. You must get at least 90 days in with no credit card usage, and IMO, you should have a full 12 months in on the cash advance.

Let's face it. You knew your financial situation and it "looks" like you ran up your credit cards. Time in is going to be your best friend.......

[rfan]

Thanks for the input. I'm almost 12 months from the cash advance now. How long do you think I should wait on the other charges, past 90 days? I definitely don't want anyone to think I purposely put myself in this mess so I will do my best to hold off and make payments for awhile. To be honest it's going to be tough to get by if we completely stop using the cards but we'll try to figure something out. With the increases on minimum payments and interest rates over the past couple years and our added debt our credit card payments are almost impossible to keep up with. With hindsight we did some stupid things but at the time we really thought we'd manage. Heck we'd carried thousands in credit card debt for many years and were doing just fine we thought.

[frogger]

Stop using the cards!

If you're almost 12 months away from the cash advance, that is good. As to the other charges, the longer the better, but you need at least 90 days with no card usage.

Since money is that tight, stop paying the cards, along with stop using the cards. Since you've been paying for 12 months on the cash advance, that will be helpful as well.

Once again, stop using the cards immediately.