Asking for a little guidance

[Aspen]

I found this forum about a year ago and have lurked reading various threads (sticky and otherwise). I tried to write these words a dozen times or more only to erase them and go do something else.

I find myself considering the bankruptcy option. I need some advice on what is reasonable to expect from this.

I am employed and have been for almost 20 years. I have been forced back into my parents house so that I can keep paying my bills. I am currently not behind on anything. I have 9 credit cards with 6 of them at 26%-29.99%. I owe a total of around $72,000. I owed ~$94,000 about 4 years ago and have gotten it down to where it is now in spite of the CC banks 'helping' me through exorbitant interest rates.

I have 4 vehicles that I own. I have the titles to each. 1 is a 1993 mustang with no engine/trans. - not useable. I have a 1996 explorer which I use to get to work. I have a 2002 Ninja motorcyle and a 1986 Ninja motorcyle that is wrecked. The 1993 mustang was co-signed by my father. Otherwise, the other titles are in my name only.

We have had several layoffs where I work. While I don't think I will be laid off, I can very easily see my pay getting cut or reduced. It has already been reduced to about 60% of what I used to make. I am now under the median for my state. I have gone from a low 60s pay to a low 40s pay.

I have had to keep using a couple of my credit cards to pay to keep my explorer running. To be clear, all of my debt is on credit cards. I have now reached the point where continuing to make payments on my cards will start to become impossible. A couple of the cards have recently made interest rate jumps from 19% to 29.99% thus pushing the minimum payment beyond what I can pay. I don't see an end to this cycle unless I do something about it. The only option that I have, really, is the bankruptcy option.

Is the next step just throwing in the towel on making payments and saving up the money for a lawyer to start going down the bankruptcy route? It seems that several people have done just that. Is my situation bad enough to warrant going though bankruptcy? I am asking this question because I have read on this forum several times that one of the typical problems was that people waited too long and lost years of their lives trying to keep up with a situation that they couldn't continue with. I need another outside opinion to tell me if I am one of those people. I think I may be.

Any help? Please.

[Flamingo]

The reason your interest rates are rising is because of your debt load and you becoming more of a risk to the credit card companies. You have about two years' salary worth of unsecured debt. As you state it will soon become impossible to make the minimum payments on these cards and the next step you will probably take is to take cash advances from one card to pay the other (robbing Peter to pay Paul) going back and forth between cards until the banks finally catch on as to what you are doing and either close your account, raise your interest some more or elimate any remaining credit available. When you get to that point or think about doing that, that is the sure sign that you are definately in deep financial trouble and reality starts to hit hard. Bankruptcy usually almost always follows when you reach that point. As you can see, delaying filing just puts you deeper in debt.

Right now you are surviving off of credit cards. What you need to do is stop using them totally (which will be extremely hard for you) but it needs to be done. With the money you will have from not making the payments, you can retain an attorney. If you were smart, you would stop making those payments now and get a few free BK consultations to find out exactly where you stand. Best of luck to you!

[Aspen]

Thanks for the advice and the recommendations. I guess I am one of the people that kept trying to keep up with everything for too long. For the past week I have been thinking about all of this and working myself up to making an appointment/consultation with a bk lawyer.

Time to quit thinking about it and just do it.

Is my father at risk since he is also on the title of the 1993 mustang that is paid for? Is there anyway that through my doing this I could be exposing him to being roped into my problems?

[BobMango]

So it sounds like the only assets you want to protect are your vehicles? Making the call to file should not be that hard.

If you are in a state that allows use of the federal exemptions you can probably protect all of those assets with the wildcard and unused homestead exemptions. Even if you can't protect them, think about what you could do with your paycheck every month without all of that debt. You can replace those assets (which are depreciating every day anyway) in fairly short order.

Bankruptcy will stay on your credit report for 10 years but will have a really serious impact on your ability to get credit for only about 2-3. If you were able to spend a quarter of your gross income (right!) on your current debt at the interest rates you have now, it's going to take you more than 10 years to pay it off. The math seems simple to me.

You're probably struggling with the guilt and shame associated with filing. Get over it and make the correct business decision for yourself.

[Aspen]

So it sounds like the only assets you want to protect are your vehicles? Making the call to file should not be that hard.Well, they are the only assets I have. Actually, I am only interested in keeping the mustang and the explorer. I no longer care about the bikes.

If you are in a state that allows use of the federal exemptions you can probably protect all of those assets with the wildcard and unused homestead exemptions. Even if you can't protect them, think about what you could do with your paycheck every month without all of that debt. You can replace those assets (which are depreciating every day anyway) in fairly short order. I want to keep the explorer for getting to work, I want to keep the mustang because it is something that means a lot to me.

Bankruptcy will stay on your credit report for 10 years but will have a really serious impact on your ability to get credit for only about 2-3. If you were able to spend a quarter of your gross income (right!) on your current debt at the interest rates you have now, it's going to take you more than 10 years to pay it off. The math seems simple to me.

You're probably struggling with the guilt and shame associated with filing. Get over it and make the correct business decision for yourself.

You are absolutely correct in this statement. It is part of why I started and erased this topic a dozen times in the past year. The other part was a healthy amount of denial of my issues and addressing them. I now am just concerned that I don't expose my father to any fallout from my filing if possible since he is also listed on the mustang's title.

[BobMango]

You are absolutely correct in this statement. It is part of why I started and erased this topic a dozen times in the past year. The other part was a healthy amount of denial of my issues and addressing them. I now am just concerned that I don't expose my father to any fallout from my filing if possible since he is also listed on the mustang's title.

So what state are you filing in? If you can use the federal exemptions then you will to be able to protect both (all) vehicles. Since there is no loan on the mustang jointly titled with your father, as long as you can exempt your equity I don't see how the trustee can involve your father. He won't be included in your filing other than as joint owner on the mustang. This won't have a detrimental impact on him. An attorney will be able to give a more definitive answer, but this does not look like anything but a no asset case to me.

Good luck. (And as my wife always tells my kids, - Make good choices!)

[catleg]

When your payments hardly cover the interest, yes, it's time to stop paying. You'll be amazed how fast they want to "help" you. LOL We're in a balance sheet recession/depression and the best thing you can do for yourself (and everyone else, for that matter) is default and start over. Once you do this your only regret will be the wasted years working as a debt slave.

[munchkn813]

Start calling lawyers and set up free consultations! Stop paying the credit cards and save that money to start living off of and save up to pay for the lawyer! I wish we had done this a year ago when we first mentioned it and gotten this all behind us sooner! I am nervous about it all (and my husband is even more so) but excited of our life to come without all this debt ove rour heads and set a better example in the future for our daughters who are too young to have any idea about all of this right now.
Good luck!
Oh yeah...I met with one lawyer already and asked him about our house (which we are going to reaffirm) because my father in law cosigned on it with us (we were moving out of town and so hubby and I were between jobs with it and it didn't look as good as when we started the process, so got a cosigner to make it all go smoother) and he said that FIL would not be affected by this credit wise or anything. We were worried about that too.

[Aspen]

I will be filing in Illinois.

I know I would prefer a chapter 7, but since I have a job yet does that mean I will end up a 13 no matter what? Part of what prompted this topic was to try and 'make good choices'. In order to accomplish that I need to learn a lot of the details of this process and try to benefit from other people's knowledge and experience of going through this.

Thank you to everyone so far for your comments, I appreciate it.

[BobMango]

I will be filing in Illinois.

I know I would prefer a chapter 7, but since I have a job yet does that mean I will end up a 13 no matter what? Part of what prompted this topic was to try and 'make good choices'. In order to accomplish that I need to learn a lot of the details of this process and try to benefit from other people's knowledge and experience of going through this.

Thank you to everyone so far for your comments, I appreciate it.

Ok, so no federal exemptions. Illinois does allow $2,400 for a vehicle and another $4,000 for a wildcard exemption.

As far as being forced into a Ch 13, it looks like the median income for a single earner in Illinois is $47,355 (or was last year, might have gone down a bit). There are a number of resources that can help you determine if you are under the median.

Bottom line is that you are doing a lot of unnecessary worrying at this point. Get a free consultation set up with a local attorney and you'll have a much better idea of what your risks are. Based on what you've told us about your situation, I think you're a good candidate for Ch 7, but the income and expense portion of the means test will tell the tale.

[HakunaMatata]

Aspen-

Entering data into the Means Test is a good starting point. Use it as a guide (it will commonly spur questions) and keep in mind, this isn't the sole determining factor in your C7 or C13 status.

http://www.legalconsumer.com/bankruptcy/means-test/state.php?st=IL

[Aspen]

I will be going through the Means test in a little bit. Based upon what I have going on, I seem to be a relatively easier case of bk.

Would there make much difference if I went through a lawyer or group of lawyers that just grinds out bks and one that does say, family law? I am sure I could go into the city(Chicago) and find bk lawyers everywhere. However there aren't that many around me, at least not that I have found as of yet.

[HakunaMatata]

There is considerable variation in interpretation coupled with a heavy dose of legal custom in BK. If you're going to pay for legal representation, I recommend retaining an attorney who is familiar with your local BK customs and standards. I was surprised to discover a BK attorney in my tiny, less than 1/2 square mile city. I thought we only had one gas station, one bank, one salon, and a few boutiques.

[LadyInTheRed]

If you can't exempt the Mustang, maybe your father can buy your 50%. I don't think that would be a problem as long as he pays fair market value. You could use the cash for attorney and filing fees. It would be a good idea to find some way to document what the fair market value is. Maybe get a couple of written estimates for installing an engine and transmission and subtracting that from Bluebook or Edmond's value. Save the estimates for the BK Trustee in case it becomes an issue.

Even if you can't exempt it and don't sell it, I can't imagine a trustee being interested in 50% of a car without a transmission or engine, even if he/she does have the good taste to like Mustangs.

Just a couple of thoughts. An attorney familiar with the trustee will be best able to advise you.

[Aspen]

My first appointment with a bk lawyer is Wednesday. We'll see how that goes and continue on from there. I do have a few others lined up as well. Thank you all for your contributions to this topic, I appreciate it and it has helped me to try and sort things out in my mind about how what I want to do.