Some Ch7 concerns Need advice

[tweety1]

Reading this forum has been very helpfull.

I'm thinking of filing Ch 7 around October -November. Here are my concerns

I work as a registered nurse. There is no problem being employed in this industry. The job duties require moving and lifting patiens. I now have some back problems that forced me to cut my hours as I can't handle my back pain working full time. Given that, I decided to go back to school starting in September to get my masters, so I can hopefully land an office job in the industry. I currently have about 70K in unsecured debt. I used to live with a boyfriend, who promised that he would help making payments while I'm in school. Now he's gone. I haven't been using any of my credit cards since April and still making minimum (sometimes a little more) payments on all of them. Once the school starts in September my income will be very limited. I won't be able to keep up even with my minium payments. That's when I want to file Ch7. Should this scenario give me any issues when filing? Do I have to worry about it being classified as fraud? That's my first concern.
Of course, I will eventually consult with an attorney, but still want to hear your opinions before that.

If I do file here is my next set of concerns. I have a condo. I haven't decided if I want to keep it or include it in BK. It is secured by mortgage and a HELOC (which is full). I owe 185K on it. If hypotheticaly I'll sell it today (which will never happen) I might come out even. The way things are going here I anticipate it will go down to 150 -130 within a year. If my CC debts are discharged in BK I will be able to make payments on it even while in school. I can also rent it out (as of today with about negative $200 -300 cash flow a month) and live with my parents or I can just forget about it and give it up in BK. The mortage is 5 ARM which I will need to refi in 3 years, which will make it nearly impossible with what will happen to my credit after BK, not even mentioning that the market value of it might be lower than what I owe banks.
What would you do? I'm not in any way attached to the place and don't care if I loose it. Just want to see if it makes economic sense (as an investment) to keep it. If I include it in BK, how is it going to reflect on my credit report? Is it going to add a foreclosure entry to my credit report? Or should I just try to do deed in lieu of foreclosure?

On to the vehicles. This is my biggest concern. My old car broke down in Nov. 2007 and was junked. I needed a reliable car right away as my job was 30 miles away. My father had an extra car he wasn't using at the time, so he gave it to me on the condition that I will insure it under my own policy. My insurance co. required car to be registered in my name. To do that we transfered it in my name as a gift, with the agreement that I will transfer it back to him when he needs it. Now, he wants it back ASAP as his other car is breaking down, and my current job is within walking distance. The car is worth about 11K and is paid off. If I transfer it now it will be within a year of BK. What affect can it have on my BK? My state (MD) only allows $6K exemption. If needed we can make a backdated written agreement about car transfer. Do you think it might help? I can't afford to loose it in BK as it is really not mine.
I have another car that is co-registered in my name. I helped my friend get a car loan 3 years ago as a cosigner. He uses the car and makes all the payments on it. We still owe about 6.5K on it and it is valued about 10K if we trade it in. He just informed me that he might be trading it in soon, as his credit is good now and he wants to get another car on his own. Can it have any affect on my BK? It will be another transfer within a year if he does that. If he keeps it while I'm filing for BK any way the trustees can take it away?

I think that's it for now. Any advice is greately appreciated.

[keepmine]

Nothing about your credit card situation comes close to fraud. Life's circumstances change. It happens in bk court everyday.
The condo-why on earth would you drag something through bk that will have %40K worth of negative equity? Let it go.
The cars will be a mess. Actually, transfering property to an insider has a 2 year lookback period. I'd not make that transfer. Plus, you'll need to buy that excess equity baqck from the trustee.
The other car may not be an issue since you have a paper trail as to payments and insurance {I assume the friend is paying the insurance and registration fees}.
For goodness sake, don't backdate anything-that is fraud.
You may need to explain to Dad that he's gonna need to wait on getting that car back or, you'll need to postpone that bk.
Maybe your lawyer has some other ideas.
End of the day, why wait unril Sept. to stop making payments?. If bk is the option, stop making payments now and start saving money to move and buy excess property back from the trustee as well as lining up your own place to live and transportation.

[Phillymanhere]

First of all, I want to congratulate on such clear thinking and planning ahead of time. Also your mastery of the details is impressive. I say this because a lot of us facing bk engage in fantasy.

Your case sounds complex and you definitely will need to visit 4 or 5 good bk lawyers to consult with them on this. You can tell them all the facts of your case--just as you did here--and tell them of your plans/desire to return to school in the fall in order to move to a safer, healthier job. Run your plan by them. You might wanna even print out your original post and take that in as it describes, seems to, your situation succinctly.

The other thing--if you want to continue payments on cc until meeting with lawyers (I was afraid to stop paying until I met with and found a lawyer whose logic I trusted)--definitely do NOT make more than the minimum ... that's wasting money at this point .....

The people who will weigh in here are extremely sharp. I just want to wish you well in moving to a healthier profession. My sister is a nurse and she has back and leg problems. She walks with a limp, and I don't know how much longer she can do her job. She recently told me she's paying more into her retirement accounts in order to be able to retire earlier (She's 58). Hearing that made me feel better about her situation. So I can connect with the job thing.

Anyway, good luck. Get to those lawyers ASAP because school is fast approaching and you need to have your strategy in place, I think.

[tweety1]

Nothing about your credit card situation comes close to fraud. Life's circumstances change. It happens in bk court everyday.
The condo-why on earth would you drag something through bk that will have %40K worth of negative equity? Let it go.
The cars will be a mess. Actually, transfering property to an insider has a 2 year lookback period. I'd not make that transfer. Plus, you'll need to buy that excess equity baqck from the trustee.
The other car may not be an issue since you have a paper trail as to payments and insurance {I assume the friend is paying the insurance and registration fees}.
For goodness sake, don't backdate anything-that is fraud.
You may need to explain to Dad that he's gonna need to wait on getting that car back or, you'll need to postpone that bk.
Maybe your lawyer has some other ideas.
End of the day, why wait unril Sept. to stop making payments?. If bk is the option, stop making payments now and start saving money to move and buy excess property back from the trustee as well as lining up your own place to live and transportation.

Thanks for your input.
If I stop making payments now but technically can afford to make them until September how will it look in court, will I need to explain what I did with the money I was making? If I save that money wouldn't the trustees take it anyway.
If I include my condo in BK at what point of the process I will actually be forced to move out?
Regarding the car. After I bought a condo I borrowed 15K from my father to buy some stuff for the house, make some improvements etc(there is a paper trail to prove the transaction, although no written promissory note, just a bank deposit). We agreed that I'll pay him later (no specific terms). We were thinking that if my property will go up in value when I sell it (was I naive or what?) I'll pay him from the proceeds. I didn't pay him back anything yet as of today. If I transfer that car in lieu of that money he gave me how will it be treated in BK court?

[keepmine]

Many of us stopped making payments months before we filed. It's no big deal.
With a reduced income on the horison, you'll need that money for HH bills, at some point a deposit for a rental plus, utility deposits and all the other expenses of moving. Not to mention, legal fees and the need to have some money to buyout excess equity in the car.
You keep coming back to the same issue with the car. It's an insider transaction and the trustee has the authority to sue your father for the return of the car. Leave it alone until you speak with a lawyer.

[CindyLou]

Are you sure that the wholesale/trade in value of the car is 11,000? Have you checked edumunds.com and subtracted out mileage deductions, etc??

It looks like Maryland has the following exemptions:

Maryland Bankruptcy Exemptions
Real or personal property $5,000
Tools of trade, including wearing apparel, books, tools, instruments, or appliances $5,000
Household goods and furnishings, wearing apparel, books, animals kept as pets, and other household items
$1,000
Wildcard - cash or property of any kind exempt, if within 30 days from the date of the attachment or the levy by the sheriff, the debtor elects to exempt cash or selected items of property $6,000

If you use your wildcard and your homestead, you should be fine. Just look at the value again and don't over value it so you will have some left for your personal belongings....

But DON"T, I repeat, DON"T transfer that property back to your dad until after you are discharged. You will be better off keeping it and exempting it.

As far as the condo.....run away, fast!!!!! This is about fresh starts!!!

Good luck,
CindyLou, RN

[CindyLou]

here is a link to the updated MD exemptions....look like the add'l 5000 is now under personal property as of Aug. 2007....one site I looked at said homestead but that is incorrect.

Cindy

http://www.thebankruptcysite.org/exemptions/maryland.html

[Phillymanhere]

Tweety,

When you say you can "technically" still make cc payments, I saw a red flag shoot up.

This may or may not apply to you, but here's the deal: Until I stopped all cc payments in April, I would have said, "technically" I could afford maybe $200 a month in debt payments.

Well, guess what?: I didn't have a dime left in April. The car needed a repair I wasn't expecting but mainly, I realized I didn't have nearly the money I thought.

This month, May, I've been very tight on the spending, really economizing. I'm going to have several hundred dollars left over, but only because next month I go to auto inspection and face repairs, the month after that I begin monthly car insurance payments (after charging them for a while). In October my student loans come out of forbearance, which they have been on forever. I haven't bought any clothes in about a year. I have a pair of good shoes that have soles coming apart .... yada yada ...

I still need to purchase renters insurance and my health costs could be going up as I'm experiencing more and more back pain recently ....

In other words, there's a good chance, you THINK you have money left over, but the reason you think that is because you've probably been living on the edge and you probably have not counted expected expenses like car repairs, clothes, shoes, computer (mine broke last fall when I wasn't expecting it), bed, linen ....

Just thinking out loud. Ignore if this doesn't apply. So you might be more eligible for Chapter 7 than you think. Anyway, good luck.

[justplaintired]

Just another quick question for the board. Don't they look back 6 months on your income? So if your are going to be staying with this job until Sept. won't they go back to the previous 6 months? I am unsure of how much of a pay cut you will be taking, but keep that in mind. I just wanted to remind you of this as it could effect which Chapter you will file. If nothing else wait it out until your income only reflects what you will be earning while in school. I wouldn't want you to end up in trouble over that.

It seems if you were to wait and quit paying closer to Sept when you will no longer be able to meet the payments no questions will be asked. Ofcourse this may delay filing, but you would have plenty of time to file as most creditors will not bother you for awhile.

I don't know on cars, but, I would recommend calling a few attorneys and get a consult on this issue. They are there to help you prepare for what is coming. We went to our attorney almost 6 months before we actually filed. Besides it can be costly and making those payments to your attorney while you are still employed will help you get this done quicker when the time comes.

Best of luck and it sounds like you are on the right track, getting prepared is a great move. When the time comes you should do great.

[Cali]

Yes, they look at the 6 mths prior to filing.

[tweety1]

Thanks for all your comments. I'm feelinng much more confident about it now.
I never questioned my eligibility for BK based on income. Starting in May and on, my income will be below the median for the state. It will drop even more in September once the school starts. So starting October I can file. My concern was this. Can they question why am I going to school instead of working and paying my debts?

Looks like I will be including the condo in BK. Given that in what point in the BK process I would absolutely have to move out?

I also feel much better about the car situation. First of all the car value is only $9500. Maybe it will drop even more by the time I file. Previously I was looking at the retail value. I understand I can use trade in value. Is this correct? There is a 5K real/personal property exemption, 6K wildcard, and 1K household things. I would assume car is considered personal property? So I should be fine. The worst case scenario I would have to maybe pay 1-2K. It all depends on what the final vaule of all my things combined would be. I don't have anything special, so I'm pretty sure they will not take my household junk anyway. At first I only saw the wildcard exemption and thought I would need to shell out 5-7K to keep the car, which would be tough.

As far as stopping paying my bills. That's what I don't understand. If I'm to stop paying cc and mortgages today, it would leave me with about $1700 extra each month in my pocket until September. That's over 5K. Can they ask me why weren't you paying your debts all this time. How can I spend them without having any problems when filing? What am I allowed to do? Can I for example take a vacation and go to carribean for a week? I understand that I might incur expenses that I'm not counting on, but other than that what's appropriate in that case. If I just save that money and all of my exemption is used on other things, will I loose it when filing?

And the last question. I'm planning to get student loans when I go back to school. Since it's a grad school, if I take the maximum amount, I should have some money left over that I'm planning to use for living expenses while in school, as I anticipate my income from work will not be more than 1K. Will the extra loan money be counted as income in BK calculations. I never thought of this before. It has just occured to me. Should I have any other concerns regarding taking the student loans? If my BK goes successfully will I have problems getting student loans for future semesters, or federal student loans are given regardless of credit?

[Cali]

I am going to school f/t and my attorney said it was fine. The reason being is because I am trying to make myself more employable with a new career.

As for the car, you use the trade in value.

Many people usually use their CC's to pay bills, and once they stop using the CC's and paying cash for their bills, they really don't have that much left over.

[Phillymanhere]

[danaf]

You are smart for pre-planning. If you stop paying now - 5k isn't really alot in the grand scheme of things. A lawyer will cost around 2k and maybe you can pre-pay for certain things such as car insurance, car registration, maybe even school tuition? Or you can put a little extra into your 401k if your exemptions allow that. Or maybe you can have some dental work that needs to be done. And if you are going to let your condo go, you will need deposit money to rent somewhere (unless you are going to live with your family). And also, if you will be going back to school full-time, what about health insurance? Just some ideas..... Also - you said you haven't used your cc's since April. Was your cc usage just average stuff or did you take out any large cash advances? This fact matters.