Seeking insight on best possible options

[freshnfree79]

Single mom with/ two dependent children. I own my home with equity of roughly 50 grand. One vehicle is upside down, and my daughter has a car. I have about 40 grand in CC debt and a personal loan of 27 grand. I never had any debt until about 2019 due to not receiving a raise from my airline for five years while we were under contract negotiations. I am also part-time in school for my undergraduate degree, and my youngest is in competitive gymnastics. Anyway, for the five years without a raise during COVID until this past May, I have been living off my credit cards and my 2018 pay rate with a significantly increased inflation rate. Finally, in May, I received my raise and my bonus back pay, which I used to buy my daughter while I put half down, and she has a small car note that she covers from her grocery store job. I tried to pay down some of the debt, but it didn't make a dent. I thought I could finally get ahead of some of my debt with my raise. However, I am in over my head and can't seem to get ahead, especially with Helene wreaking havoc Sept/Oct. Anyway, I have been paying the minimum due on all except two cards, which I just haven't been able to manage. I do receive consistent child support from my ex-husband, but not consistent from my oldest daughter's father. My annual income falls at 88 grand, putting me within the necessary mean test bracket so long as they don't consider the one-time back payment almost 9 months ago. I guess my question is, do you think I qualify for Chapter 7 and could keep my house and cars? Should I default on the other cards to pay for an attorney since I don't have any savings? I really tried to avoid this for so long, and it's just too much for one person. I need a chance to regain my footing.
Any insight would be greatly appreciated.

[justbroke]

Welcome to BKForum.

From my understanding, California has two bankruptcy exemption schemes; one is known as System 1 and the other as, yup, System 2. How you protect equity in the home will depend on which system you choose to use. One system gives better protections for a homestead (home) over personal property, while the other offers better exemptions over personal property. Only an attorney in California can guide you through the best California exemption scheme.

I can't tell you to default on your current payments, but I can tell you that many people who are going to file for bankruptcy do stop paying since it is useless. They tend to use the money saved from suspending payments to hire an attorney for their Chapter 7 or Chapter 13 bankruptcy.

While you say your income from employment is $88K, did you add in the amounts of the domestic support obligations (DSOs/child support) from the other two parents? That will be added back to the $88K to determine if you meet the income guidelines for Chapter 7. I can't answer that question, but you must consider both amounts. How an attorney would deal with the "irregular" payments from the second of the two parents is something I can't answer. The back payment is beyond the 6-month lookback, so it won't be counted toward income to determine whether you have the "means" to pay back something to your creditors.

Another question will be whether your daughter, who has the vehicle you paid half for, is a dependent. Is she in school?

The best thing to do now is to find 4-5 local bankruptcy attorneys and get an initial free consultation. They will know more about how to deal with your specific DSO issues, the child for whom you purchase a car, and the effects of the DSO payments towards your income for purposes of the means test.

I'm sure there are things I missed. Someone else may come along and chime in.

[freshnfree79]

Thank you for this information. I'm in North Carolina. The income listed above does include both child support order amounts. Although one order is inconsistent, I calculated it as though it wasn't, just in case. My oldest is 17 and a junior in high school. She turns 18 in September.

[justbroke]

I believe your household size will be three for purposes of the means test. According to the UST's Means Testing guidelines, the current limit for North Carolina for a family of three (3) is $92,035 per year. You're pretty close. Just want to make sure there isn't any other income that is not accounted for. That's not to say that you can't file a Chapter 7 when you are over-the-median. It's just a quick check.

I don't know why I saw California.

Since I messed up, and it's North Carolina, you have some exposure on your home if the equity is above $35,000 (1C.16). You will also need to look at any equity in the vehicle or vehicles (are you on the title with your daughter)? Going through the exemptions is going to be the big thing for you with all the equity in the home. Your other personal property, such as your car and household furnishings, clothing, electronic gadgets (computer, cell phone, etc), jewelry, and other property, will need to fit in an exemption as well.

Your local N.C. attorney would be able to better address the exemption concerns.

Income Guidelines Source: https://www.justice.gov/ust/eo/bapcp...come_table.htm

[Carmella]

Research for a BK attorney with good experience in your area and get a consultation to see what your options are. It's best to see more than one attorney and make sure you find a good fit. If your gut says run from this attorney, listen. Find a good attorney it's the only real way to know what your options are.

In my state I was responsible for the car with my and my young adult daughter's car. But I had requested it because I didn't want to harm her credit and I paid the car off during the course of our Chapter 13. In my case I think she was on the loan, but not on the title which I didn't realize when we had bought it.