Drowning in debt but cannot file for another year. Thoughts?

[youngman]

I owe $43,000 in unsecured personal loans with about $1400 in payments. I have around $22,000 in credit card debt and make around $1,000 minimum payments on them. I have a $500 car payment, $1,500 rent plus at least another $1000 in food, utilities, and gas. I am in the middle of a divorce and probably looking at some healthy child support payments beginning soon. I bring home about $5,000 after taxes and health insurance as well as a small 401k contribution.

Obviously I cannot keep everything up once the child support obligations begin. I am going to move to a cheaper place once the wife and kids have their living arrangements set. Then I planned to file bankruptcy once the child support begins and I can deduct them from my income. The problem is that I switched jobs and did not finish paying off a 401k loan with a $30,000 balance. The penalties and taxes will not be assessed until this time next year. I cannot keep up the minimum payments for much longer on all this debt and I don't see the point of filing when I will have all those taxes due next year. Any thoughts on the best path to take?

[bbeagle]

I cannot keep up the minimum payments for much longer on all this debt and I don't see the point of filing when I will have all those taxes due next year. Any thoughts on the best path to take?

If bankruptcy is the only option in the future....

1. See what other credit cards you can get. Try to get balance transfers with lower rates.

2. See what other credit cards you can get, and use them for day-to-day spending. If you spend $1,000 a month buying food, utilities and gas on credit cards, you don't have to pay the full amount back, just the minimum. Make sure you pay the minimum though, if you're using your credit cards, otherwise it's 'fraud'. You'll have $800+ more cash left. Of course this is unsustainable. This might get you through another 6 months to a year.

3. Just stop paying your credit cards and unsecured loans! You'll save $2500 right there. You say you rent, i.e. don't own a home, so what could someone take from you if you just don't pay loans or credit cards back? Don't answer phone calls. You won't have to worry for about 6 months until they try to sue you for the money or garnish your wages. That will take another 3-6 months.

But you'll be able to live for the next year or so, with no problems.

Then when everything is hitting the fan, in a year from now, you'll be able to file bankruptcy.

I know it sounds so wrong, but that's generally what people who make 60K or so like you do before they file bankruptcy, they just don't sit down and plan it. It just slowly happens that way.

[Geeznowwhat]

First, why can you not file for another year? I didn't see anything in what you wrote that prevents you from filing.

I suggest to you that you read through the bankruptcy chapter 7 law (nolo press has good books). I think you can plan this and manage to come out of BK ok. Nothing wrong with strategic bankruptcy filing. If you are going to do it anyway...then, tuck money into that 401k as fast as you can (it is exempt) and look to make sure you do not take on more debt within the time frame where the creditor can claim fraud.

Look at your exemptions, and make sure you are putting resources into those and not into the ones that you lose. And for sure...do not pay those credit cards in the final 6 months...it is a total waste of money. If you plan to let the car go, then stop those payments too, just be sure that you file before the car is repossessed....that way you get a couple extra months to get another car.

If you find it is too much to study this yourself...go get a good BK lawyer to give you advice on the when and what you need to know to do this in a strategic manner.

[youngman]

I don't want to file for another year because I am going to be hit with a huge tax bill next year and I want to save the bankruptcy filing until after I file my tax return next year.

[jo23171]

I decided to file for BK 2 yrs earlier than my actual filing date. Of course the day I decided that I stopped paying all my credit card bills. I was surprised I didn't receive many letters from bill collectors and I changed my phone number so it was pretty much quiet for 2 yrs. If you are 100% sure you will file for BK why continue paying them? I am not sure BK covers taxes.

[despritfreya]

I don't want to file for another year because I am going to be hit with a huge tax bill next year and I want to save the bankruptcy filing until after I file my tax return next year.

What? You do understand that a bankruptcy filed in 2017 (next year) is not going to get rid of taxes owed for tax year 2015 (or 2016)? Or are you contemplating a Chapter 13 as a way to pay back that huge tax bill?

Des.

[youngman]

I want my ch 13 payment to pay the taxes, if I am forced into a 13. If I qualify for a 7, then I would pay them after getting rid of the unsecured debt payments.