New here and new to this process, few questions....

[DirkDiggler]

I hope this is the proper section to post this

Wife and I are in the process of getting ready to file (hopefully) a Chapter 7. According to the online means test, we are over the median, but not by much. I'm currently trying to reduce my hours at work to be able to file Chapter 7.

Anywho, our situation is one of robbing peter to pay paul. While my wife was pregnant with our son in 2009, she was taken off work earlier than expected (about 4 months prior to our plans) and disability, well it just didn't help LOL So we used some CC's (we already had balances on them so its not like we put ALOT on them in this time), and then with the new CC rules, they raised our interest rates (even with NEVER being late) and our minimum payments skyrocketed to the point where we were having to put groceries, gas and other monthly expenses on the plastic, just so we had enough cash at the end of the month to make the payments.

After finally realizing that we were never going to get ourselves out of the hole, we consulted with a few local BK attorney's and we have one we want to use. He recommended us stop paying on the CC's since it would be throwing $$ away. That was in Feb/Mar and we haven't made a payment on them since. We are current and have never been late on our two vehicle payments, our 1st and 2nd mortgage, and any of our 3 student loans between the 2 of us.

My questions are these...

I've read about the CC companies suing us. When will that happen?

We want to open a savings account in my son's name for $$ given to him for Birthday's, Christmas, etc. but have been reluctant to. Would an account for him be safe?

We have about $13,000 in our savings account. Is that going to be taken?

We don't plan on keeping the house, but after the BK is done, maybe seeing if a loan modification is possible or perhaps a short sale, is that feasible?

I have tons of other questions, but can't think of them all right now LOL I'll add more as they come to mind. Thanks for reading and this is a GREAT resource, I've been reading ALOT on here

[AngelinaCat]

Hi DirkDiggler: Welcome to the forum. Yes, you posted in the correct section.

Since you are considering filing BK, and you have been reading, now is the time to stop making payments to the CCs. Stop using them also. You want as much time between the last use and your date of filing. This is to lessen the chance of an Adversary Proceeding against you. Also you do not want to have made any large dollar amount purchases, that could be considered a 'luxury'.

Your savings account, and the proposed child's savings account, may be okay. California has very generous exemptions schedules, and from what I have read, there are TWO schedules you can choose to use, not one.

You may wish to set up a 'college account' for the son. I believe that will be okay, but am not sure. One of our Moderators, LadyInTheRed, is a Californian, and will have better knowledge of that.

I should add, if you have your checking and savings accounts with the same bank/credit union that your CCs are with, or your mortgage, move those accounts now to a totally separate institution. The reason is, that there is a 'Right of Offset' that once you start defaulting on your cards, etc., those institutions can raid your checking and savings accounts to satisfy their payments, or the whole amount, leaving YOU with an overdraft status, and the resultant fees and penalties.

Again, welcome to you and your wife!

[BigJohn]

Why hasn't some of the $13,000 been converted into 'padding' in the mattress?

[AngelinaCatHub]

I hope this is the proper section to post this

Wife and I are in the process of getting ready to file (hopefully) a Chapter 7. According to the online means test, we are over the median, but not by much. I'm currently trying to reduce my hours at work to be able to file Chapter 7.

Anywho, our situation is one of robbing peter to pay paul. While my wife was pregnant with our son in 2009, she was taken off work earlier than expected (about 4 months prior to our plans) and disability, well it just didn't help LOL So we used some CC's (we already had balances on them so its not like we put ALOT on them in this time), and then with the new CC rules, they raised our interest rates (even with NEVER being late) and our minimum payments skyrocketed to the point where we were having to put groceries, gas and other monthly expenses on the plastic, just so we had enough cash at the end of the month to make the payments.

After finally realizing that we were never going to get ourselves out of the hole, we consulted with a few local BK attorney's and we have one we want to use. He recommended us stop paying on the CC's since it would be throwing $$ away. That was in Feb/Mar and we haven't made a payment on them since. We are current and have never been late on our two vehicle payments, our 1st and 2nd mortgage, and any of our 3 student loans between the 2 of us.

My questions are these...

I've read about the CC companies suing us. When will that happen?

We want to open a savings account in my son's name for $$ given to him for Birthday's, Christmas, etc. but have been reluctant to. Would an account for him be safe?

We have about $13,000 in our savings account. Is that going to be taken?

We don't plan on keeping the house, but after the BK is done, maybe seeing if a loan modification is possible or perhaps a short sale, is that feasible?

I have tons of other questions, but can't think of them all right now LOL I'll add more as they come to mind. Thanks for reading and this is a GREAT resource, I've been reading ALOT on here

Have you filed yet? You need to spend down (don't put it into a mattress) that savings. It is a major asset and will be considered so and yes you will become an asset case, a far more complicated situation. Watch what you buy and who you pay. Preferential payments to "favorites" can be reclaimed. You may purchase needs such as food, shelter, clothes medicines. Now would be a good time to stockpile storable food at today's prices. It may even be too late to put it into an IRA or exempt savings. For sure, don't cut hours if you are fortunate to have a job. If you have a job, eek it out a bit longer. Time is your friend and you are far from being sued. A suit usually takes about six months to 'ripen' into serious action. I'd give it a go to hold out longer. Take part of that saving and pay off your lawyer that is exempt. If you are keeping your car and paying through use that money, but you can't pay ahead. That is preferential. Seems you are marginally a C7 C13. 'Hub

EDIT: P.S. No. The account for your son belongs to you not him by law. He has to be of age of majority, usually 18. A Trust made to him by some relative is different. But, the Trust belongs to the Trustee still until the age of majority.

[ValleYum]

Here is a link to LadyintheRed's blog about California's bankruptcy exemptions:

http://www.bkforum.com/entry.php?336-California-Bankruptcy-Exemptions

Californians are lucky to be able to use their choice of the two sets - whichever fits their situation best.

[debee]

Another way to help with the means test is to look into all of your insurance policies. Increase coverage and lower deductibles on the house and cars. Term life for both parents. Disability insurance.

The means test is your first obstacle. Once you pass it, you then have to start working on schedules I and J to make sure your disposable monthly income (after the allowed expenses) is not too high.

Good luck and welcome aboard the Bk-train.

[momofthree]

In CA, as long as you don't have any home equity, you can use system 2 exemptions which have a large wildcard $21k+ which can be used towards ANY property, including cash. Your $13k is safe if you use system 2, no need to rush out and spend it down.

[DirkDiggler]

In CA, as long as you don't have any home equity, you can use system 2 exemptions which have a large wildcard $21k+ which can be used towards ANY property, including cash. Your $13k is safe if you use system 2, no need to rush out and spend it down.

Yeah we don't have any equity in our house, we're WAY underwater! lol

Another way to help with the means test is to look into all of your insurance policies. Increase coverage and lower deductibles on the house and cars. Term life for both parents. Disability insurance.

The means test is your first obstacle. Once you pass it, you then have to start working on schedules I and J to make sure your disposable monthly income (after the allowed expenses) is not too high.

Good luck and welcome aboard the Bk-train.

Hmm, interesting point on the insurance to help with the means test....right now I have high deductibles set up to save $ monthly....I'll have to look into lowering them to help out, thanks!

[DirkDiggler]

Also, regarding the house....our plan was to keep current on it until after the BK was discharged, and then going about doing a short sale or even just letting it go to foreclosure.....we owe around $248k on our 1st and $47k on our 2nd with the house being worth about $140-150k.....how would a short sale work? Would the 2nd just not get a dime? Would we have to settle with the 2nd company to get them to release the lien? Maybe I'm getting ahead of myself LOL Its just that the house issue was a big factor in us deciding to go the BK route, its too small of a house and we're way too much underwater to do anything about it.

[Isobel]

You're in a very similar situation to mine and I'm also in California. I decided to go the BK route (will file July 1st) largely because of my 2nd mortgage. I investigated short sales but discovered that only about 60% actually come to fruition and having a 2nd makes it really difficult. If you do a short sale, both the 1st and 2nd have to agree on accepting the offer and, depending on who the 2nd lender is, this can be quite challenging (meanwhile many potential buyers will walk because of delays). My 2nd lender is PNC Bank, who has a pretty bad reputation regarding short sales (they often want 50% or more of the principal owed and refuse to budge). Be careful because you don't want to be stuck with a collection agency coming after you years later for the 2nd, which I've read can and does happen if you just have the house foreclosed on. The statue of limitations in California for such collections on a 2nd is 4 years, so often the collections agency that bought your 2nd will come after you at 3 years and 11 months, 'cuz they think you might have the money...

[Logan]

In CA, as long as you don't have any home equity, you can use system 2 exemptions which have a large wildcard $21k+ which can be used towards ANY property, including cash. Your $13k is safe if you use system 2, no need to rush out and spend it down.

I had 11K when I filed and I kept it. All in CA.