Question Is doing nothing ever an option?

[emanze]

HI there!

Well, I had a free consultation with a bk attorney and am stuck how to proceed.

I recently lost my full time job and am now living off my weekend job which takes in $700 a month. I've moved back with my (very generous) parents, rent free.

Here's my financial situation:
Credit cards and loans - $10,600
Student Loans - $12,000
Private car loan - $10,000
I have one asset, a paid off car worth about 10k.

The bk attorney recommended:
a) Stop looking for more work immediately
b) Sell my car and buy another one for 5k (which is what is exempt in Arizona)
c) Give him 2500k as a retainer fee with my severance package I will be receiving.

But this means I'd be filing a ch. 7 over 10k in dischargeable debt and losing my car in the process.

Another option:
a) Take my 3k in severance package and finish up my education (I'm 10 classes away from my bachelor's)
b) Continue to look for work but concentrate on finishing school while putting of my collectors

So here's my question, sorry this is so complicated! I know you can't give advice but, if you were me, would you...

1) Use your severance package on retaining an attorney and filing?
2) Give your severance to your creditors, reducing your debt from 10k to about 7k
3) Use your severance to finish your education. Try to negotiate with creditors, keep looking for work but, if you have to, stop paying them for now.

I'm just so confused on what would be the wisest, most ethical and smartest way to go forward.

Thanks so much for any thoughts you have!

[HakunaMatata]

HI there!

Well, I had a free consultation with a bk attorney and am stuck how to proceed.

I recently lost my full time job and am now living off my weekend job which takes in $700 a month. I've moved back with my (very generous) parents, rent free.

Here's my financial situation:
Credit cards and loans - $10,600
Student Loans - $12,000
Private car loan - $10,000
I have one asset, a paid off car worth about 10k.

The bk attorney recommended:
a) Stop looking for more work immediately
b) Sell my car and buy another one for 5k (which is what is exempt in Arizona)
c) Give him 2500k as a retainer fee with my severance package I will be receiving.

But this means I'd be filing a ch. 7 over 10k in dischargeable debt and losing my car in the process.

Another option:
a) Take my 3k in severance package and finish up my education (I'm 10 classes away from my bachelor's)
b) Continue to look for work but concentrate on finishing school while putting of my collectors

So here's my question, sorry this is so complicated! I know you can't give advice but, if you were me, would you...

1) Use your severance package on retaining an attorney and filing?
2) Give your severance to your creditors, reducing your debt from 10k to about 7k
3) Use your severance to finish your education. Try to negotiate with creditors, keep looking for work but, if you have to, stop paying them for now.

I'm just so confused on what would be the wisest, most ethical and smartest way to go forward.

Thanks so much for any thoughts you have!

Are you not eligible for unemployment benefits?

Do you have a private auto loan for an auto that isn't in your possession? (I don't understand the private car loan and the paid off vehicle at the same value coupled with your one car statement).

How far behind are you on CC payments? Are you actively paying your student loans?

Is the $2500 an attorney retainer fee or the total cost?!

I'm not sure if you were sold on the idea of BK when you had your BK consultation. If so, I can understand the directions of the attorney. If you were simply seeking advice, your attorney appears to be a hard-sell. The options he/she presented relate exclusively to planning and pursuing BK.

To me, your biggest problem is lack of income rather than unsecured debt. While $10k may not appear manageable now, you're living rent-free and if you secure employment this can be cured. Selling your car and purchasing a less expensive vehicle will gain some relief. While I commend you for exploring possibilities, I think you're jumping the BK gun here especially since you recently lost your full-time job (and I say this from a business perspective...ethics doesn't factor into the equation).

I'm an education advocate; although, there are very few guarantees education will provide you with immediate, sustainable employment. I recognize this is a goal for you. Bear in mind, education will always be available.

If I had to select an option, I'd select #3 based solely on seeking employment and creditor negotiations. Expounding upon the listed options, I'd adjust the severance usage and apply some/all toward credit obligations (#2). I'd also sell my vehicle, purchase a less expensive vehicle, and pay creditors. I'd entirely skip the #1 option as your attorney appears ridiculously expensive for your situation. Applying your severance and your vehicle difference nearly places you out of credit card debt (remaining balance of $2k). Factor in rent-free living (hopefully with food included) and your part-time job, you can be ahead of the game in a short time. During this process, I'd secure full-time employment and build a nest egg with the ultimate focus being placed on returning to school.

[emanze]

Thank you for your response! I'm learning so much from this board already (and I've been a member a week).


1) Are you not eligible for unemployment benefits?
Just barely. My weekend job, of course, cuts into it but I should qualify for a roughly $400 a month. That is money I need!

2) Do you have a private auto loan for an auto that isn't in your possession? (I don't understand the private car loan and the paid off vehicle at the same value coupled with your one car statement).
Sorry, that is very confusing.
The private loan was from my family. The car is in my name but paid off by them(they paid cash for it). So I now make montly payments, 0% interest payments to my family. But they are allowing me to suspend payments until I find another full time job.
So it is my asset because its in my name. But I need to pay my family back.

3) How far behind are you on CC payments? Are you actively paying your student loans?
Yup, everyone was current until just now when I was laid off. So I'm 30 days past due on cc. The student loans, however, are now in forebearance until January.

4) Is the $2500 an attorney retainer fee or the total cost?!
I'm not sure if you were sold on the idea of BK when you had your BK consultation. If so, I can understand the directions of the attorney. If you were simply seeking advice, your attorney appears to be a hard-sell. The options he/she presented relate exclusively to planning and pursuing BK.
The $2500 was the total cost. I've since been told by others who have filed that it would is pricey considering my case. I do understand what you are saying that they are selling their services to you. That's why I'm hesitant to cough up the 2,500 when I have so very little money right now.

(and I say this from a business perspective...ethics doesn't factor into the equation).
This is a huge relief, just reading this in print. I hate not paying or feeling like I'm hiding from creditors. But the money is literally not there, at least right now. I'm wondering what will happen, say, 6 months down the line if I have a new job and can start paying again. Will they even negotiate with me?

Bear in mind, education will always be available.
Very, very good point. I guess I"m bracing myself for a long job search. I'm trying to remain as positive as I can but if my days are long, I figure I might as well use it educating myself.

If I had to select an option, I'd select #3 based solely on seeking employment and creditor negotiations. Expounding upon the listed options, I'd adjust the severance usage and apply some/all toward credit obligations (#2). I'd also sell my vehicle, purchase a less expensive vehicle, and pay creditors. I'd entirely skip the #1 option as your attorney appears ridiculously expensive for your situation. Applying your severance and your vehicle difference nearly places you out of credit card debt (remaining balance of $2k). Factor in rent-free living (hopefully with food included) and your part-time job, you can be ahead of the game in a short time. During this process, I'd secure full-time employment and build a nest egg with the ultimate focus being placed on returning to school.

This is terrific! It sounds very reasonable and fair. I did want to mention my problem with selling the car...
It seems like a nobrainer, I know. The weekend job I have, however, is in another city. It's a long freeway drive to get there, over 30 miles. So that's another thing I'm weighing. I really need a reliable car since it's my one source of income right now. To complicate matters, they are extremely supportive of my education and have told me I am welcome to do my homework on the job. (IT's a very slow job). So it's another reason I want to hang on to it instead of just filing unemployment. So tricky, this one.

Thanks so much again. I'm going to reread what you wrote and think on it some more.

[JRScott]

Probably I'd do 3.

If you file bankruptcy you'll lose the car, if you don't do what the lawyer suggests your family will either have to rebuy the car off the trustee, or he'll auction it off and distribute the funds to your creditors and he'd probably intercept your severance pay too.

Take your classes this semester finish up the Bachelors while you can. Maybe by the time you graduate the economy will start to improve and jobs will be available. Considering your low income and low assets I doubt the credit cards would sue you for 6 months at least.

[emanze]

Probably I'd do 3.

If you file bankruptcy you'll lose the car, if you don't do what the lawyer suggests your family will either have to rebuy the car off the trustee, or he'll auction it off and distribute the funds to your creditors and he'd probably intercept your severance pay too.

Take your classes this semester finish up the Bachelors while you can. Maybe by the time you graduate the economy will start to improve and jobs will be available. Considering your low income and low assets I doubt the credit cards would sue you for 6 months at least.

Oh, good point. I hadn't realized they would take the severance. My plan was to give most of it to my attorney for the fee's.

Thanks for your input here. I'm really thinking the school option while looking for work might be the way to go.

My fear with this option is, 6 months down the line, say I land a new job. But after 6 months of no payments, I'm afraid my creditors will either sue me for my car or just otherwise refuse to accept any sort of payment plan from me.

It seems like that this thing will land in the courts, either through me filing or that I'll get sued.

[HakunaMatata]

Emanze-

Aside from your creditor issues, you have two recurring themes: full-time employment and education. I think you're in a "what comes first, the chicken or the egg?" situation.

Your auto loan is on hold until you secure full-time employment. Your CC payments are on hold until you increase your income. You won't need to negotiate with creditors if you are able to pay them.

You have a part-time job AND you can apply for unemployment benefits. Your part-time job encourages education. You're bracing yourself for a long job hunt and you wish to utilize your time wisely.

I read an interesting article this morning outlining the struggles of recent college graduates. With the ever-increasing available experienced worker pool, new graduates are experiencing increased difficulty securing employment. Education will give you a foothold in the employment domain; although, economic conditions serve as the platform. A foothold doesn't matter much when the platform doesn't exist.

http://www.msnbc.msn.com/id/32468172/ns/business-reinventing_america/

Bankruptcy is an educated business decision. This decision doesn't require a degree; although, studying the process and applying it to your situation while maintaining a focus on business (not morals or ethics) is advantageous.

True, you're insolvent now. Most of us have led our lives this way. When my finances were at a positive peak, had someone demanded immediate repayment of my mortgage, I would have been insolvent. You have a future ahead of you. With careful planning, you have the ability to rectify your insolvent state with or without BK.

If I adjust my original plan, the numbers and timeline change; although, this doesn't affect my opinion. If you apply your severance to creditors, you become current on your debts and gain some relief (reducing nearly 1/3 of your CC debt). Obviously you need your car and selling it for creditor payment isn't an option due to the family loan. I would apply for unemployment benefits (something is better than nothing) and exert energy into securing full-time employment (perhaps a good time to do this is while at your part-time job?). I suspect your living costs have changed since you achieved free-rent status. I'd keep this in mind during the job hunting phase. More than likely, you will not need to make the same amount of money as you previously needed. You have the opportunity to get a jump start paying off your debt (severance, part-time job, student loan forbearance, suspended personal loan payments, rent-free living situation); and, you can quickly move forward if you secure full-time employment and maintain some of the aforementioned features.

Obviously, this is your decision. If you deem immediate education as a priority, you will need to reevaluate your finances. I'd also consider the cost of education as well (I don't think $3k will get you through ten classes). If there are strong employment incentives tied to your desire to get your degree immediately, this may be the best business decision for you.

Wishing you success!

[keepmine]

You're so close to the degree, I'd make that my priority.
Move back home and try and get another pt job or a fulltime job and go to school/
Don't get hung up on getting sued. You really have little anyone can take.
6 months or a year down the road-whenever you get yourself stablized, you can start the settlement process.

[emanze]

Emanze-
Aside from your creditor issues, you have two recurring themes: full-time employment and education. I think you're in a "what comes first, the chicken or the egg?" situation.

Your auto loan is on hold until you secure full-time employment. Your CC payments are on hold until you increase your income. You won't need to negotiate with creditors if you are able to pay them.

You have a part-time job AND you can apply for unemployment benefits. Your part-time job encourages education. You're bracing yourself for a long job hunt and you wish to utilize your time wisely.

I read an interesting article this morning outlining the struggles of recent college graduates. With the ever-increasing available experienced worker pool, new graduates are experiencing increased difficulty securing employment. Education will give you a foothold in the employment domain; although, economic conditions serve as the platform. A foothold doesn't matter much when the platform doesn't exist.

http://www.msnbc.msn.com/id/32468172/ns/business-reinventing_america/

Bankruptcy is an educated business decision. This decision doesn't require a degree; although, studying the process and applying it to your situation while maintaining a focus on business (not morals or ethics) is advantageous.

True, you're insolvent now. Most of us have led our lives this way. When my finances were at a positive peak, had someone demanded immediate repayment of my mortgage, I would have been insolvent. You have a future ahead of you. With careful planning, you have the ability to rectify your insolvent state with or without BK.

If I adjust my original plan, the numbers and timeline change; although, this doesn't affect my opinion. If you apply your severance to creditors, you become current on your debts and gain some relief (reducing nearly 1/3 of your CC debt). Obviously you need your car and selling it for creditor payment isn't an option due to the family loan. I would apply for unemployment benefits (something is better than nothing) and exert energy into securing full-time employment (perhaps a good time to do this is while at your part-time job?). I suspect your living costs have changed since you achieved free-rent status. I'd keep this in mind during the job hunting phase. More than likely, you will not need to make the same amount of money as you previously needed. You have the opportunity to get a jump start paying off your debt (severance, part-time job, student loan forbearance, suspended personal loan payments, rent-free living situation); and, you can quickly move forward if you secure full-time employment and maintain some of the aforementioned features.

Obviously, this is your decision. If you deem immediate education as a priority, you will need to reevaluate your finances. I'd also consider the cost of education as well (I don't think $3k will get you through ten classes). If there are strong employment incentives tied to your desire to get your degree immediately, this may be the best business decision for you.

Wishing you success!

I can't begin to tell you how helpful this is! I think sometimes when you are too close to a situation and reacting emotionally, you can't see things clearly. You have laid it out for me here in a way that I now can see a solution.

I'm going to do everything I can to get out of this situation and make wiser, better decisions with my $$ in the future. I've learned so much (well, I'm still learning through this process).

The article you referred to was eye opening(if not, terrifying). I especially liked reading how the graduates are working through this recession by looking for jobs overseas, volunteering, etc.. It's that kind of creativity that I'm trying to put to my own situation.

Your post is actually very, very motivating. My focus will be on finding a full time job, applying my severance to most of my debt and finish my degree. Reading other threads on here has been humbling. I realize my situation is not great but, even still, I have been given some lucky breaks that I'm really grateful for now.

Thanks again for keeping me sane through this!!! I'm not sure what your background is, if you are the voice of experience or you are just motivated to help others but this board is lucky to have you.

[emanze]

You're so close to the degree, I'd make that my priority.
Move back home and try and get another pt job or a fulltime job and go to school/
Don't get hung up on getting sued. You really have little anyone can take.
6 months or a year down the road-whenever you get yourself stablized, you can start the settlement process.

Thanks for your comment, that's exactly my plan now. Finish the degree and, hopefully, pick up another job soon. I'm not nearly as freaked out as I was yesterday when I posted this (which was full fledge, panic, freak out mode).

Thanks again!

[whipster1]

Change your phone number, and forget about your creditors except the student loan.

2500 for a chapter 7 is very excessive unless you have some sort of business. He is trying to screw you IMO. You don't need a BK at this point.

Keep track of each "Date of Last Activity" on each account, as that will be important as you later clean up your credit. Good Luck!

[HHM]

Change your phone number, and forget about your creditors except the student loan.

2500 for a chapter 7 is very excessive unless you have some sort of business. He is trying to screw you IMO. You don't need a BK at this point.

Keep track of each "Date of Last Activity" on each account, as that will be important as you later clean up your credit. Good Luck!

Prices vary wildly between areas, its a bit unfair to say that $2,500 is excessive. Attorneys offer diffrent levels of service, the fee quote is not just based on complexity of the case. Most attorney's who charge less than $1,600 limit their representation in some and will charge extra for items that the more expensive attorney's include. In any event, never base your decision on hiring an attorney on fee alone.

In any event, I am never a big fan of ignoring a problem. If you do nothing, in 3 years, that $10K becomes $21,500+. Even though $10K does not seem like a large amount to BK over, it is not going to get any better. You might as well get it overwith now, be free of the debt and begin recovery now, instead of waiting a few years, totally trashing your credit and THEN trying to get out from under the debt.