Where to begin? Current on Most debt

[FullOfIt]

I *think* at this point chapter 7 is inevitable. My husband and I Gross about 8500.00 (self employed). Taxes and health/life insurance come out of that number as well. We have approx. 45k unsecured credit card debt that we are current on. Another 4000 in medical bills (in collections) and 10k in taxes from 2011. We have not yet filed 2012 taxes. We have a mortgage that we will re-affirm on, 1645 a month (we have a co-signer we don't want negatively affected and we want to keep our home). We also have approx 6k in private student loans also with a co-signer from Wells Fargo.

My main questions,
1.How will the co-signer on the student loans be affected? If at all? We are not wanting to keep it a secret from them or anything we just don't want them negatively affected and we know this debt won't be included in our BK. Same goes for our home.

2. I have a Care-credit card that I just used in April for 5400.00 (cosmetic procedure-dumb, I know). Will this be a potential red flag?

3. When should we begin defaulting on our credit cards and how long should/do they need to be in default prior to filing?

4. We have 3 drivers in the home. We have 2 cars and need one more. Can we get a loan now and still file and re-affirm on 3 vehicles?

Thank you so much for any help.

[keepsmiling]

Not an expert by any means, just my humble opinion:
1) Student loans are funny creatures. You just can't ever be sure what will happen with them. Probably not going to be an issue for the co-signor if you keep paying, but I can't swear this 100%.

2) If you put enough time behind you this isn't going to be an issue, especially if you have been making payments. I wouldn't worry about it and ask the lawyer when you have your meeting.

3)You don't HAVE to default on your cards before filing. BUT there is no sense throwing money down the toilet by continuing to pay. Some people file as soon as they have their ducks in a row. The sooner you file, the sooner your fresh start can begin.

4) The whole car thing... you want to discuss this a bit more. Depending on what you owe on the cars, you may want to buy more than one... and don't be in a hurry to reconfirm. Tell us more about the cars. AND... have you made any sitdowns with a lawyer yet?

[FullOfIt]

We traded in a very expensive car in March 600.00 a month for the 2 new cars. They are both under warranty and we owe 23000 on one and 14000 on the other. A 2012 van and 2010 car. Together the car payments are 675.00. We have a 16 year old child that will need a car. It has to be dependable so I would prefer a newer cheapish car (10,000). He will be driving 40 miles a day 5 days a week for school and picking up our other kids. I want to keep our cars. We have good interest rates and the payments are do-able. We are not upside down either.

No, we have not met with an attorney. Today is the day we have finally decided enough is enough. After paying our large CC payments and then having to use our cards because of this it is an absolute endless cycle.

[LadyInTheRed]

It is rarely a good idea to reaffirm a mortgage. As long as you stay current on your mortgage and student loan, there should be no problem for the co-signor. It a BK notation ever shows up on their credit report, they should file a dispute.

If 90 days have passed between the date of the charge to care-credit and your filing, it is very unlikely to be a problem. The worse that could happen is the creditor would try to have the debt declared not dischargeable. It would not jeopardize your entire case. But, after 90 days, it is not an easy case to win and is not worth the trouble for $5400.

If as part of your pre-BK planning you decided to buy a car, it's best to have good credit. So, you don't want to be 30 days late on anything when you apply for financing. As keepsmiling says, you don't have to be late on debt payments to file BK. But, paying on dischargeable debt when you know you will file BK is a waste of money.

If you buy a car, you probably will not have equity in the car at the time you file BK, so reafirming the loan would not be a good idea. Just keep making payments.

Do you realize your 2011 taxes are not dischargeable?

It is possible you won't qualify for a Chap 7. Is $8,000 before or after your business expenses? Does the $1645 mortgage payment include taxes and insurance?

If you end up in a Chap 13, reaffirming is no longer an issue. A car loan would be paid off during the plan and a mortgage on a home you intend to keep is not discharged in a 13.

Do you have any equity in your home? How much? Do you have any other significant assets? How much are your cars worth? Are there loans on your cars?

You need to start making appointments for free consultations with experienced bankruptcy attorneys. Your self employment complicates things a bit and you want to make sure you find an attorney who isn't going to say "you make too much money for a Chap 7", without fully investigating your situation.

Talk to attorneys about whether you should buy a car. If you are on the edge of qualifying for Chap 7, having a
Also, do some reading on these forums so you understand the process better. What you learn here will help you make attorney consultations more productive.

[LadyInTheRed]

We traded in a very expensive car in March 600.00 a month for the 2 new cars. They are both under warranty and we owe 23000 on one and 14000 on the other. A 2012 van and 2010 car. Together the car payments are 675.00. We have a 16 year old child that will need a car. It has to be dependable so I would prefer a newer cheapish car (10,000). He will be driving 40 miles a day 5 days a week for school and picking up our other kids. I want to keep our cars. We have good interest rates and the payments are do-able. We are not upside down either.

No, we have not met with an attorney. Today is the day we have finally decided enough is enough. After paying our large CC payments and then having to use our cards because of this it is an absolute endless cycle.

Saw this after my post.

If you have to use your cards to allow you to make minimum payments, stop making payments. Save what you don't need for living expenses for attorney fees. Consult with attornies asap, so you can decide before your next payments are 30 days late whether to buy a car. If you just made paymens, it sounds like you have a couple of months to make the decision.

It is good you have realized you need to file BK before everything has crumbled. You have time to do some planning that will help your case go smoothly.

[LadyInTheRed]

I meant to give you a link the the Chap 7 means test calculator: http://www.legalconsumer.com/bankruptcy/means-test/

It will help give you an idea of whether you will qualify for a 7. But, it is not a substitute for the advice of a good attorney.

[FullOfIt]

Thank you for your reply. I do believe we will qualify. Right now I am in research phase (attorney). Our mortgage does include tax and insurance. Our health/life insurance is 650 a month. We have our private student loans at 200 a month and then we also have our big student loans at 355 a month (for 25 more years). I did the means test and it looks like we stand a pretty good chance. I am aware that our taxes will not be included. Since they are not deducted from salary does won't they be considered a deduction. We need to be paying in approx 1000.00 a month to keep above water with the IRS and state taxes after we get 2011 taken care of. My main question with the cars was, being that we have 3 drivers would we be allowed to re-affirm on 3 cars? Right now our credit is okay. Low 700's. We've just gotten in a bind I don't realistically see getting out of w/o BK.......chapter 7 or 13.

[LadyInTheRed]

With the additional information, it does sound like you have a good shot at a 7.

I'm pretty sure that you are allowed expenses for one car per driver in the household and that payments on the 2011 tax debt are allowable deductions. Deductions for current year tax liability is definitely allowed, even though you don't have a salary for them to be deducted from. Take your expected tax liability for the year, and divide by 12. I don't think student loan payments are allowed as deductions on the means test.

You can read the US Trutee's position on most common means test questions at http://www.justice.gov/ust/eo/bapcpa...ne_by_line.pdf

[LadyInTheRed]

Just found this article on student loans and the means test. After reading the very beginning, it sounds like at the time of the article, the law was unsettled and depends on where you live. But, this is from 2008, so things may have changed. http://www.sbli-inc.org/archive/2008...nt%20Loans.pdf

[FullOfIt]

Thank you again for your help. I'm not sure the student loans make a lot of difference. After filling out the means test it shows that we have 30.00 disposable income. LOL. What is the allowable disposable income? I guess it's really just time for us to pick an attorney. I know I will be around getting a lot of help from others who have been in our shoes. It's nice to have found such a place.

[LadyInTheRed]

If your DMI is less than $124.58, you pass the means test. If it's above $207.91, you don't pass. If it is somewhere in between and is equal to or greater than 25% of your non-priority unsecured debt divided by 60, then you don't pass. Based on what you posted, it sounds like you have $55,000 in priority unsecured debt, so can have up to about $229.16 in monthly DMI and pass the means test. I think I got that right. See Part VI of the means test: http://www.uscourts.gov/uscourts/Rul...rent/B_22A.pdf

Be sure to interview at least 2 or 3 attorneys before you pick one.