Spouses debts

[darkover]

My spouse has about 60000 dollars in credit card debt. She has not been paying on it for about 4 months. She also cosigned for a student loan for her son. Both of them are currently unemployed.

We have never had any joint accounts except our home loan.

About 2 months ago she talked to a lawyer about filing chapter 7 separately, but was told she could not because my income is above the means limit.

It seems that the only thing that could happen that would affect me is a judgment against our house? We probably have $20000 in equity.

She also recently got an offer from Citibank to settle for 30% of the balance. Would it be in my interest to pay these credit card settlements. I do have the money saved. But it would wipe me out.

We live in Ohio, what is my best option?

[ScaredINMich]

Personally, I would settle the cards than to claim BK for that. They gave you a good settlement, and you have the cash and a job.

I wish my situation was as easy as this. We are stuck with 200K debt due to a failed business. I was just telling someone, I would not claim BK for $50K, but 200K is just too much to deal with.

[LadyInTheRed]

If an attorney told your wife that she can't file Chap 7 simply because of income being over median, she should consult with another attorney. Median income is only the starting point. Many people who have over median income still qualify for Chap 7.

If the offer for a 30% settlement is for the entire $60k, settling may be a better option than BK. But, if she has balances on other credit cards, settling with one card won't solve the problem. Also, if the 30% is their first offer, they may accept less.

ETA: If you decide to settle, investigate the possible tax consequences.

[HHM]

Personally, I would settle the cards than to claim BK for that. They gave you a good settlement, and you have the cash and a job.

I wish my situation was as easy as this. We are stuck with 200K debt due to a failed business. I was just telling someone, I would not claim BK for $50K, but 200K is just too much to deal with.

That is the dumbest advice. Sorry, but there is no objective amount of debt where it is or is not okay to file BK. For someone earning $30K a year with $50K in debt, that is insurmountable just like your $200K in debt was insurmountable and they need BK just as much.

Settling is NOT better than BK. That is the biggest myth out there. There is no aspect of DS that is somehow more favorable than BK.

[ScaredINMich]

That is the dumbest advice. Sorry, but there is no objective amount of debt where it is or is not okay to file BK. For someone earning $30K a year with $50K in debt, that is insurmountable just like your $200K in debt was insurmountable and they need BK just as much.

Settling is NOT better than BK. That is the biggest myth out there. There is no aspect of DS that is somehow more favorable than BK.

I said "PERSONALLY I wouldn't do BK". If I could avoid a BK I would. I was just saying if they are offering to settle at $18K and that would clear up everything for them without the lifelong hardships that go along with a BK, I would PERSONALLY do it.

I do understand what you are saying about debt feels different to different people. I totally get that and if BK is right for them, go for it, I just gave my opinion of what I would personally do.

[2BEDEBTFREE]

After having been bankrupted by a spouse in similar circumstances, I would recommend consulting with legal counsel first. You must assess what the charges are for; you take the risk that she'll get more cards, she can apply for new cards once paid off without your knowledge (in fact they might even give her more credit after you pay them off because now she has no debt); the cards in my situation were all held solely in my husbands name acquired before the marriage, so they sued him individually. They did not try to take a joint asset (home) to satisfy his debt; I had owned the house free and clear before marriage and added him to it (HUGE mistake, NEVER do it). Divorce judge had him quit claim property back to my name (including dower rights) so he could not borrow against it. It was several years before his creditors obtained judgments, so his creditors could not attach it. Not to say credit card companies won't, they seem to have their own set of rules. I also have seen where cc companies add prior balances (even discharged debts) to new accounts after you've re-established good credit) when you later apply for a new card, they add them to your new card as a balance transfer! Not sure whether it is legal but after the fact the damage has been done. You either pay or get a lawyer, either way more $$ out of your pocket. CC companies can be ruthless especially if you have good credit and they know they can collect from you.

IMO, my personal experience in bailing a spouse out of debt, don't do it. It gives them free rein to do it again, and there is little you can do about it if they get new cards and repeat. $60,000 in cc debt is no chump change; can you afford to bail her out if a year from now she comes home with more debt? If she runs them up again, she could FORCE you into BR; then YOU will pay in the form of higher insurance, higher interest on current accounts, cancellation of accounts/cards, denial of employment, denial of health, medical, life and property insurance, even loss of your home; the ripple effects of a BR. You must nip the problem as she can continue to damage the marital estate. YOU NEED TO SEE A LAWYER TO PROTECT YOURSELF.

[darkover]

What is the best kind of lawyer to see in this case? We bought this home together 15 years ago. Would it be possible to quit claim it to me?

[shark66]

Let's downshift here for a second...

First of all, I'd agree that your wife needs to speak to another BK attorney. Being above the median is not the end of the world. A lot of people on this forum went through successful Ch. 7 filings although they were in that category...

A good thing - in my opinion only - about filing Ch. 7 would be that it would keep your wife from piling on more debt for some time...

Now to the other side of the fence...

Even if any of her creditors were to sue and get a judgment, it really isn't a big deal. You're not in a community property state so your wages can't be garnished. She's out of work. Yes, they can put a lien on your house but that would only affect you if you were to sell or refinance it...

I'm generally against the settlements, but if you chose to settle, I'd accept no more than 15% of the entire amount - presuming all $60K is owed to the same creditor - since they really have no way of collecting anything from her anytime soon. If the debt is owed to more than one company, I'd forget the idea of settling altogether.

My $0.02 only...

Good luck.

[2BEDEBTFREE]

you need to protect your interests. What if you suddenly lost your job? Would you want your savings going toward her unsecured debt or accessible so you could make your mortgage payments??? Consult your own bankruptcy or general attorney; I had to consult a bankruptcy, general and real estate attorney; eventually a divorce attorney.

Her unsecured debt could cost your your home. Most folks still just don't get this. They think credit cards are "free" money. My spouse racked up $93,000 in less than a year...unbeknownst to me because the statements went to his place of employment or his p o box. He clearly had no intention of paying it back because he used my assets to obtain the credit. And the credit card companies kept giving him more access, bigger credit lines. It was a scam all the way.

[2BEDEBTFREE]

To answer your question, quit claims can be construed as fraudulent transfers by the trustee if done before a BR filing. I researched and read everything I could before I filed. Luckily, my transfer ordered by the domestic judge took place 4 yrs before the filing otherwise I could have lost my property I owned 12 years before marrying him because of his unsecured credit card spending. It was evident to the trustee in my case who was responsible for most of the debts. If she can't file a 7 she would then have to file a 13, wherein the credit cards would be paid but only a small portion and after 3 or 5 years (whichever plan she qualifies for) the credit card companies have been paid but only a %; the rest is "discharged debt". Since you are married, they would use the joint incomes to calculate your monthly payment to the creditors.

[Pandora]

She also recently got an offer from Citibank to settle for 30% of the balance. Would it be in my interest to pay these credit card settlements. I do have the money saved. But it would wipe me out.

I agree with HHM - settling the debt isnt an "easy out" vs. filing BK. Your credit is still trashed for years to come either way, however the general consensus is BK is easier to recover from.

Think of it this way: How long did it take you to save up your little nest egg that you're willing to fork over to try to settle the debt? Chances are it will take you at least 1.5 times longer to re-save that same amount as you have nothing available to fall back on.

What another poster wrote is true - most are 1 paycheck / 1 job loss / 1 illness away from losing it all.

[airahcaz]

I'm generally against the settlements, but if you chose to settle, I'd accept no more than 15% of the entire amount - presuming all $60K is owed to the same creditor - since they really have no way of collecting anything from her anytime soon. If the debt is owed to more than one company, I'd forget the idea of settling altogether.

My $0.02 only...

Good luck.

if it is to more than 1 company, why is it a bad idea to settle? cause once settling one account, they'd all file suit to come after you for settlement?