So here is my story...

[tonsOdebt]

I am slowly starting the drowning process, and here is how it started.

15 months ago I was in 24K of CC debt. 16k for me, 8k for the wifey.
Decided that it would be very wise to stop paying 6% interest on 30k of student loans and do 15 months interest free on CC's.
So i've been floating 54k of CC's debt, mainly interest free for a year and a quarter.

Not bad right? Well, Wifey (we) had a baby in march and quit her part time job. It didn't bring in much money anyway, as it was just something to do and paid for insurance. Plus the baby is much more important! But now I have an added 900 dollars a month just for health insurance! ack... Thats when the drowning started. I saw the bank account get smaller and smaller every month.

Ok so some numbers to work with:
Assests:
Household income: 70k
Cash reserve: 6k

Debts:
Mortgage Loan (Bought in 2005 for 150k with 80/15): 100k and 24k
House Value: 80k

CC debt: 54k
Car loan: 5k

So I humbly ask the community for some advice. Should I file Chapter 7? After taking an online means test, I did pass. I still have my job, but being in Michigan, it could go any day. Will the student loans going to CC cause a problem?

[BKOnce]

Student loans went to CC was.. a smart move! (premeditated)

[SMinGA]

Not sure if it will be a problem, student loans to credit cards. Good news is it happened 1+ year ago - and before your financial outlook changed. (Increase in family size, decrease in income.) Have you made payments on those accounts?

Passing the means test is only 1 part of the equation. You also need to consider actual net income & expenses.

What is your DMI when compare actual #s? On $70k gross, what is your net per month? Have you adjusted withholding to reflect the new family size? If not, you may need to do that. Between household income decreasing, healthcare cost increasing (assuming that is a pretax deduction), and increase in family size - you probably should have less tax held out than before.

Also what is your intention regarding the upside house? Keep, or let it go?

[tonsOdebt]

All accounts as of right now are current. In fact, never have been late in a payment. I'm trying to nip this before that happens, or at least pre-plan.

I actually haven't adjusted the W-4 at work.. Totally missed it.

As for the house, I'm not sure. We love the house, it just stinks that it's worth 1/2 of what we bought it for. I'm still undecided on that one.


on the income per month:
Net 4K

expenses:
House 1,200
utilities: 300
1 car + ins: 350
gas: 200 /m (70 miles round trip to work)
CC's: ~1200
phones/cable/internet: 260
Groceries/etc/cost of living: The rest!

[SMinGA]

When calculating your DMI - you don't count credit cards as you would not be paying them after filing.

You may need to sit down and consider what you need to spend in the course of a normal month, and get used to living in a 'regular' budget in terms of spending. Groceries, clothing, household needs, personal care items, diapers, etc. Some things might not happen every month - but you need to account for them. Such as vehicle maintenance - figure out a yearly estimate, divide by 12. You should aim to set that amount aside each month so you'll have it when the expense occurs. If you are certain that you will file - one chapter or another - stop paying the credit cards and start living a cash lifestyle. Better to learn that before filing, rather than after.

As for the house - one question to ask yourself is if you can rent elsewhere for less. If not, staying where you are (for now at least) is a reasonable choice. If you can ultimately file a ch. 7, you would NOT want to reaffirm on an upside down house - meaning if you decided to walk away from it later you could do so without owing $. If you can rent for less, and the house is worth 1/2 of what you owe - try to keep the emotion out of it and figure out what makes the most sense from a business perspective for your family.

This may also be a time to consider if there are things you need that you have been putting off. Do you have life insurance, for example? Are you deductibles reasonable? Assess what you need so that your family can be on sound financial footing in a year, 5 years, etc.

[helpmeout]

All accounts as of right now are current. In fact, never have been late in a payment. I'm trying to nip this before that happens, or at least pre-plan.

I actually haven't adjusted the W-4 at work.. Totally missed it.

As for the house, I'm not sure. We love the house, it just stinks that it's worth 1/2 of what we bought it for. I'm still undecided on that one.


on the income per month:
Net 4K

expenses:
House 1,200
utilities: 300
1 car + ins: 350
gas: 200 /m (70 miles round trip to work)
CC's: ~1200
phones/cable/internet: 260
Groceries/etc/cost of living: The rest!

How much would rent be in your area? If it is around the same as your mortgage, then you may want to consider discussing a chapter 13 with a lien strip since the equity is less than the first mortgage. But this is something that you will really want to research and read about (I suggest the Chapter 13 forum here) as doing a Chapter 13 can be difficult.