To File or Not To File - That is the question

[JDinNV]

Hi everyone,

I have been reading the forum a lot today and there is so much information that it is overwhelming. Our family has had significant credit card debt since
'04 - '05 when a family business venture went seriously awry. The $15,000 settlement did little to pay off the debt because the payments were spread out over 15 months and once the lawyer took his portion, it amounted to little more than $700 a month which did little to pay off the $30,000+ in debt the whole fiasco caused.

The past few years have been a roller coaster ride of getting a little ahead then the slightest bump in the road only put us back down and we still maintain over $30,000 in CC debt. School loans are actually not that high but the wife is currently back in school so we DO NOT want to interfere with the payback or access to this money especially because they are currently in deferrement.

Our other biggest debt is the two car loans we have that are currently at about $36,000 but the recent drop in sales has dramatically decreased the values of our vehicles and I am sure we owe more on them than what they are worth (Kelley Blue Book states about $25,000 for both)

We have absolutely no assets but after struggling for 4 years to pay off our debt we are starting to wonder if bk is the answer. I have been the primary earner in our family but my business has gotten so bad that many weeks I am in the red. My wife works full time but with a recent pay cut she only takes home about $10,000 a year after taxes and childcare ($27,000 gross). She gets full benefits for the whole family but it seems almost a hollow perk as we are quickly realizing that we will soon be unable to pay for the neccessities of life much less the mountain of debt that we have continued to stay on top of. BTW, we have NEVER missed a payment and even with significant debt my wife and I both have scores over 700.

Our AGI for 2007 was $31,000 and for 2008 it will be about $57,000 but more than half of that is now gone as my business has all but dried up. Nevada currently has one of the highest unemployment rates so finding work has been next to impossible and as a small business owner since 2007 I cannot even file for unemployment. At this point I do not even know if we would qualify for bk much less know if it would make sense for us. I was hoping to get some opinions on our situation to see if we should just try to ride this out or take the next step of contacting a lawyer. Thanks in advance for any help or suggestions.

[Dst1]

as a small business owner since 2007 I cannot even file for unemployment.

In my own humble opinion this is perhaps one of the real hidden issues in the current crisis. For the last 15 years we have encouraged entrepreneurship as a matter of public policy. Unfortunately, our unemployment laws are still stuck back in the 1970s. It's a huge problem not just in NV but everywhere and it's going to get worse.

Back to your situation. Given your facts, I would encourage you to seriosuly consider BK. The one tricky aspect that I noted was this: "School loans are actually not that high but the wife is currently back in school so we DO NOT want to interfere with the payback or access to this money especially because they are currently in deferrement." BK is not going to impact anything with your current student loans. But it will make it impossible or next to impossible to get any student loans in the near future. Is it possible for just you (and not your wife) to file BK? Or perhaps you could hold off till she no longer needs the loans if the time frame is short (6-12 months).

[keepmine]

But it will make it impossible or next to impossible to get any student loans in the near future

This isn't correct when it comes to federally guaranteed loans. As long as your are not in default on those types of loans, bk will not affect your eligibility for future loans.
Private loans are another matter.

[Dst1]

But it will make it impossible or next to impossible to get any student loans in the near future

This isn't correct when it comes to federally guaranteed loans. As long as your are not in default on those types of loans, bk will not affect your eligibility for future loans.
Private loans are another matter.

Thanks for pointing that out, you are correct. I was assuming that because of her income and working full-time they would not be eligible for loans based upon financial need. But that is an assumption that may not be true, so I am glad you clarified that matter.

[JDinNV]

School Loan Should Be OK??

Thanks for the feedback. Despite our income my wife has continued to qualify for both grants and loans, but she is still about 2 years out from a BA. We are going to contact a bk lawyer tommorow and hopefully get a better idea of the the current and long term effects.