Question Advice please! Going for it Chapter 7

[jeff6645]

Okay over the weekend I finally admitted to myself that we are in real trouble and going to have to take some drastic steps. So today I made the dreaded call to a bk lawyer to setup an appointment. My wife is still in denial and worried about what our friends and family will think and say... we are working through that... I say screw it; if they are true friends they will understand.

The last straw was Friday we got a nice letter from the IRS saying we under paid a couple of years back and they need me to send them a check for $4500 this month.

So here's our situation, we both work and have a very small side business, but CCards got out of control, my pay was cut, my wifes pay was cut and our house payment has went up by several hundred $$ a month due to insurance rates in our area. All ccards are behind 3 -6 months and the house payment 2 months.

I have been reading everything I can find out about BK and wanted to be informed before setting down with the lawyer. I have been on this site for 4 hours straight and still have a few questions that I need some help with:

1. We live in Alabama is that good, bad or doesn't matter?
2. Have 3 cars all paid off - 1 is mine ($3500 value), My wife's ($12000 value) and our daughter's ($7500) she drives to work everyday and getting ready to start school (she 18) to late to sell it to her... will we lose them?
3. We have a $40,000 balloon note on the house coming due on March 2011 - we will not have the funds
4. Also have an old boat (1974) that's not running will they take it? Was hoping to some fix it up someday (value $2000 as is). If it has to go, it has to go.
6. Will the small business effect the out come? It brings in around $900 month in profit. We started it a couple years ago to just to stay afloat.


Sorry for the long message but just trying to my mind around this decision and trying to make sure we are doing the right thing.

Thank you,
Signed stressed, depressed and broke.


PS: If I ever see another credit card in this house I need God himself to come down and restrain me.

[despritfreya]

You have a lot on your plate and need to

meet with a qualified bk attny. Here are just some issues:

1. Have 3 cars all paid off -

Unless you can fit the vehicles into exemptions allowed in your State you are going to lose what ever is non-exempt to a Chapter 7 Trustee. You probably will be filing a Chapter 13 so that you do not lose them.

2. We have a $40,000 balloon note on the house coming due on March 2011 -

Assuming you want to keep your home a Chapter 13 will allow you to do one of two things: a) If this is not a 1st lien position on the home and there is NO equity in the home after consideration of the senior lien(s), you can strip it off OR b) you can extend the balloon payment out over the life of the Plan (60 months max) and pay it through the Plan. This second option may not be feasible as the Plan payment may be too high. There are ways to structure the Plan to help in this issue but explaining the methodology on this forum would be too time consuming. Discuss this with the attorney.

3. have an old boat worth $2,000. Will they take it -

In a Chapter 7 probably. In a Chapter 13 no.

4. Will the small business effect the out come -

In a Chapter 7 maybe but probably not. In a Chapter 13 no.

Lastly, living in Alabama is really only a consideration as it relates to the exemptions you are allowed. Bankruptcy is Federal law. It applys to all States. Only the interpretation of that law may be different.

Hope this helps.

[keepmine]

You need to clatify some things. As the previous poster pointed out, a lot depends on the Chapter you intend to file and, what you want to do with the house.
Al. has some very puny exemptions and does not llow you to use Federal.

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

[olivies]

Well, just with the info you've given, I'm not sure bk is your only option.

The $4500 IRS debt can easily be worked out in a payment arrangement- typically they like to have it paid within 5 years. That debt won't go away if you file bankruptcy. So this won't solve that.

Is selling the house a possibility? Would renting be cheaper? Have you tried to negotiate with the credit cards?

You list equity you have on hand that you could tap into: you could feasibly sell yours, your wife's and daughters' car, purchase replacement vehicles for $2000 each (perhaps even sharing just one vehicle for the time being with your wife, or telling your daughter she needs to purchase her own vehicle), and sell the boat as well (since you don't have the $ to fix it up) and use the $19K towards credit cards. Plus, there's the $2-3K you won't have to pay the bk attorney that you can throw at the credit card debts. There are other options, but you probably have to dig deeper into changing your lifestyle.

My thoughts are: if you file 7, you very well may have to give up the boat and cars anyways, depending on your state's exemptions. If you file the 13, you may have to give up the house anyways since the balloon payment may make your monthly payment too high in a 13. So, if you're facing possibly having to let go of these material things and make lifestyle changes like that anyways, why not just buckle down and do it yourself, negotiate like hell and pay it all off and be done with it in a couple years as opposed to a 13 which will take 3-5 years or a 7 which will dent your credit for 10 years?

[DEBTCHAINS]

Just want to add:

Why should your friends and family know about this? That's YOUR choice. Nobody in our families, nobody we work with, and none of our friends know we went through a BK.

Best of luck to you

[jeff6645]

[despritfreya]

In response to:

"I wish there was someone we could trust that we could meet with and lay everything out and get an open honest unbiased option. The Bk attny is going to say BK is the way to go…"

An attorney's job is to counsel. The attorney should give you all of your options, pros and cons, and should allow you to make an intelligent and informed decision. While they also have to consider their bottom line, they have an ethical duty to do right by the client and if filing bk is the wrong choice, then by gosh, they should tell you.

You as the potential client, should be discussing your situation with more than one attorney. Some are sharper than others. Some give better counsel than others. Regardless, each time you meet with one you will learn something. In the end, if you decide to file a bk you will go with the one that gave you the best counsel and comfort in your decision making.

[olivies]

The CCards guys tell me that if they turn us over to the collection guys they will come after the full amount and will not be willing to settle for a lesser amount.

Well, their primary objective is to collect on what you owe. They will sell you ocean front property in AZ if you will let them. "Collection guys"- if they mean their collection department, chances are you are already dealing with them. If they mean third party collectors- who buy YOUR debt from the CC company for pennies on the dollar- well, wouldn't YOU be willing to collect say 50% on a debt a you paid only 10% of it's value on??

[Pandora]

first thing you need to do is tally up what your actual debt is.... home, cars, credit cards - everything - and go from there.

Second thing is what is your home loan to value and is it worth keeping? Can you afford it? Homeowners insurance seems astronomical! Is it a McMansion?! Ouch! What are other homes in your area selling for if you had to let your house go? Renting for equivalent size, etc?

As far as keeping vehicles - yep - trustee will probably take them in a 7, but even in a 13 you'll have to pay the value back if you cant exempt the entire amount - so the value will go back into your payback. Thats what our 13 is based upon, solely our vehicles' valuations as thats our only assets and we own them outright.

Dont sell anything if you're even considering a BK...wait until you know for certain what it is you're going to do, even if its 6 months from now - know with certainty before you sell. Better yet - consult an attorney and discuss the options of "if I do this..then what...."

As for the Mrs. and worrying about what "others think" - pshaw... aint nuthin' but a thang - No seriously - if everyone would worry less about what "others" think, then think about what a better place this world would be and how much happier we'd be! We've taken on the attitude of "so what" - because after all - if someone wants to judge us then they're welcome to pay my bills so they dont look "down" upon us if it bothers them that much. I'll take their money just to shut them up - so be it! LMAO! they're the ones that look stupid for how they're acting.. not us.