Considering BK - Seeking Feedback

[jn1520]

I know that each of our circumstances are different, but I'd like to take a stab at providing a summary of my situation. Any feedback would be extremely helpful and appreciated. Thank you in advance!


- My wife and I live in NJ and have two small children.

- My wife and I have excessive credit card debt, now in collections - in the 10s of thousands (most of this is my fault, spending out of our means). There is also a few grand in other debt - medical, misc. ***Total debt somewhere in the $85K range - best guess, haven't tabulated in long time.

- We are renting our condo, the value of which is under water due to the housing crash. As a result, we are renting a townhome.

- We own one car, and have car payments on another.

- Collectively, we make approx. $142,000 per year (so income is certainly not a problem).



That being said, I have a few questions/statements:

1) We have been the victim of fraud, having enrolled in a "debt resolution" program. Currently in process of getting full refund (fingers crossed). At this point, I'm fairly certain BK is the only viable option. I will seek help/advice of BK lawyer soon.

2) With regards to "primary residence" - how is this handled in BK if you have a mortgage on a condo, renting this unit (not making any money), but live in another home (renting) and this is actually our primary residence. In other words, will BK consider the condo an "asset", thereby having us lose this? Under this type of circumstance, does BK allow you to keep the home that's actually yours since they obviously can't take the residence in which you live.

3) In "The Office", Creed amusingly referred to BK as "nature's do-over".....Given that we have really good income, will BK offer us the opportunity to actually put a lot of our money into savings? At this point, I'm pouring money into bills I can't afford - depending on the BK type, will we suddently have tons of income we haven't previously seen?


I know there's so many variables that come into play, but just looking to see where I stand. I'll be happy to provide more specifics if it helps. Again, thank you!

[AngelinaCatHub]

First of all, is your state a homestead state? Next you have to live and have lived in your primary residence so I'm afraid you would lose on the condo.

Also you do make a lot of money, so you may not get a full discharge as in 7. You may be tossed into a 13 to repay in five years. It certainly will help. You will be judged by what you save or intend to save. If you have a saving retirement plan in place, that would help, but to invent one to divert money away from the Trustee will probably not go over well. Best of luck. 'Hub

[HHM]

Concur with above...

Median income for a household of 4 in NJ is $94,4xx. you make significantly more that that, so unless there are other things going you haven't told us, you almost certainly will NOT be a chapter 7. That shouldn't be viewed as a problem, Chapter 13 will still get your DEBT FREE within 5 years (something, presumably, you can't do without BK).

If you don't live in the condo with the intent to make it your home, you won't get the homestead on the condo. The issue is whether there is any equity in the condo. If no equity, and the rental income pays for "most" of the expenses, the condo is not really an issue.

[keepsmiling]

Welcome back Hub. Missed ya!
NJ is not a homestead state. We're a sucky-when-it-comes-to-BK state but we do get to use Federal exemptions.

[kornellred]

jn1520 - there's nothing like the sinking feeling you get when you realize that you are literally (sic!) throwing your money away when you attempt to repay unsecured debt. Debt resolution offers are absurd - instead of throwing your money at your creditors, you throw it at a middleman who can ostensibly get the creditors to settle for less but usually can't.

When your income is over the median for a particular state and family size, Chapter 7 is virtually impossible, unless there are extenuating circumstances. Everyone should realize that Chapter 13 is the default filing since the 2005 BAPCPA legislation. Prior to 2005, Chapter 7 was a casual presumption, and debtors could just walk away from their unsecured debt when indebtedness lost it's appeal. Not anymore.

Now you understand the meaning of the term "between a rock and a hard place". Go see a bankruptcy attorney and get ready for a revelation or two.

[AngelinaCatHub]

Welcome back Hub. Missed ya!
NJ is not a homestead state. We're a sucky-when-it-comes-to-BK state but we do get to use Federal exemptions.

Thank you KS I've been out of town working a little for my brother. Not much time to do what I enjoy doing, that is helping others. Now that we be broke, BK Forum is a very inexpensive way of doing that, and appreciated much more than giving a C note away, as that is further waste of money and does not do much good. BKF is a wonderful and most appreciated helping tool. 'Hub

[pamkev]

Thank you KS I've been out of town working a little for my brother. Not much time to do what I enjoy doing, that is helping others. Now that we be broke, BK Forum is a very inexpensive way of doing that, and appreciated much more than giving a C note away, as that is further waste of money and does not do much good. BKF is a wonderful and most appreciated helping tool. 'Hub

Hub,
I for one is most grateful for all your support and encouragement

[SMinGA2]

If the condo is under water and you're losing money by renting it out - you may seriously want to consider if there is any point in trying to hold onto it. The idea behind bankruptcy is a 'fresh start' and holding onto to this condo might defeat the purpose.

Some general thoughts:
If you're certain bankruptcy is the way you need to go, stop paying on credit cards and other unsecured debt. Keep up secured payments for anything you want to keep. (Such as a car.) Start assessing your budget, to figure out what you need monthly. And I imagine you've already taken steps to curb your spending - as you indicated that overspending was part of what got you here. (I think most fall somewhere between overspending and life happens, with their current financial mess a split between the two. Whether its 50/50, 90/10, 10/90 - not really important. Learn from the past and move on to a better future.) If you have made cash advances or balance transfers in recent months, you may want to keep payments on those accounts for a little longer. (Good topic to discuss with an attorney.) Stop using the credit cards - get into a cash cycle habit.

[AngelinaCatHub]

If the condo is under water and you're losing money by renting it out - you may seriously want to consider if there is any point in trying to hold onto it. The idea behind bankruptcy is a 'fresh start' and holding onto to this condo might defeat the purpose.

Some general thoughts:
If you're certain bankruptcy is the way you need to go, stop paying on credit cards and other unsecured debt. Keep up secured payments for anything you want to keep. (Such as a car.) Start assessing your budget, to figure out what you need monthly. And I imagine you've already taken steps to curb your spending - as you indicated that overspending was part of what got you here. (I think most fall somewhere between overspending and life happens, with their current financial mess a split between the two. Whether its 50/50, 90/10, 10/90 - not really important. Learn from the past and move on to a better future.) If you have made cash advances or balance transfers in recent months, you may want to keep payments on those accounts for a little longer. (Good topic to discuss with an attorney.) Stop using the credit cards - get into a cash cycle habit.

Right on! Exactly sound advice. If I simply was told this up front, I would not have become an asset case by doing everything wrong. So simple a solution to do. My ignorance cost me 10.5K. 'Hub

[jn1520]

To all, thank you for the feedback thus far. Here are some more details based on questions above:

- Condo: We had lived there from April 2007 until July 2011. Will this make any difference?

- Credit Cards: At this point all accounts have been in collection and no payments have been made in several months.

- Income: Given that we will likely require the Chap 13 route, can someone give me a general breakdown of what this means? For example, once you go through the process, it is essentially an agreement with creditors to pay "x" amount on the dollar and this is all paid over 5 years? What happens to all other income left - does this stay as our money to save, or do the courts make you pay almost every penny you have in the plan (minus "living" expenses)?

Again, thank you!

[keepsmiling]

The answer is " It depends".

All of your dmi will go to pay creditors. The key is developing a workable plan so that you can afford to actually continue living and to stay in the plan.
Keep reading and you will have a better understanding of what people's plans look like. The ones that are well-crafted allow for relatively smooth sailing. Others suffer. It depends on how good your lawyer is, how well you can adjust to living according to a budget, and how tough the tt's in your district are when it comes to things like tax refunds and raises.

What have you been doing with the cash you have not been paying to creditors?
Luckily your income is decent, so even if you have to suffer for a few years, you should come out in a few years smelling like a rose.

If you want to put your expenses out there, folks here are usually pretty good about tweaking.

Very often it makes sense to buy a car before filing. Possibly for you it does, because we don't get much exemption for your "owned" car, and depending on how old/reliable it is, it may be difficult to get thru the next five years with it.

[ValleYum]

I'm going to throw this out there (because 2 small kids in daycare is not cheap):

With the condo gone and your CC payments gone - could your wife not work and stay with the kids - saving you daycare?? Would the absence of her income get you into Chapter 7 filing territory??

[jn1520]

That's a great question. I have to take some time to work on the means test to determine this.

I'm going to throw this out there:

With the condo gone and your CC payments gone - could your wife not work and stay with the kids - saving you daycare?? Would the absence of her income get you into Chapter 7 filing territory??