Question Advice on whether I should or should not file

[jtsscoop]

I'm a 27 year old college graduate with a job at a 501(c)3 nonprofit where I make just under $50,000.00 annually/net $3,100 a month. I'm in quite a predicament and looking for advice or feedback on others who have experienced a similar situation...

Age: 27
Current Credit Card Debt: $30,000 (monthly minimums are approximately $650-700, all current but struggling to stay afloat)
Federal Student Loan Debt: $113,000 (participating in the public service loan forgiveness program already where my debt will be forgiven after 10 years. Monthly Payment: $345)
Private Student Loan Debt: $103,000 (monthly payments are $840)
Current Car Loan: $19,900 (monthly payment is $370. Financed at 0.9% for 55 months. I need to keep the car and hope to keep it out of bankruptcy)
Necessary Expenses (rent, utilities, groceries, etc.) total approximately $1,500 a month.

While I understand student loans cannot be forgiven, the main thing I am looking to take care of is the credit card debt since I also want to keep my car. The credit card debt was largely accrued while I attended undergraduate and graduate school (no lectures about reckless spending required, I know) and am barely staying afloat making the minimums. I met with an attorney here in Chicago for a free consultation this afternoon and he's recommending that I file Chapter 13 and do a 5 year program for $430 a month that would include the credit card debt and the car. I'm apprehensive about including the car and do not like how tied down I'm going to be with the 5 year program. I was really hoping for Chapter 7 to discharge the debt and start fresh. When I asked about Chapter 7 he really didn't give me a direct answer and kept focusing on Chapter 13.

Another caveat is that I am on a joint checking and savings account with my parents. The savings has approximately $50,000 but that is a significant portion of their retirement to live off of in addition to pensions and SS. The attorney said that if I went to take myself off the account (because it's truly not my money) it would be viewed by the courts as fraudulent activity.

My questions to members here in this forum are:
- Were you in a similar financial situation where Chapter 7 worked for you?
- Whether it be chapter 7 or chapter 13 will the courts go after my parents accounts if I'm on it? I'm not the primary account holder but I do have access to the money (figuratively).
- Can I reaffirm my car loan in chapter 7 without them affecting my interest rate? I really hope to keep the loan at 0.9%.

Any other general thoughts and advice are appreciated. Been considering bankruptcy for a few months now but really starting to consider it but am naïve to many aspects so constructive feedback is welcome.

[LadyInTheRed]

I think you should consult with at least 2 more BK attorneys. Many have been told by one attorney that they can't qualify for a Chap 7 to later hire a different attorney and get a Chap 7 discharge. That said, as I will discuss later, I can see why a Chap 7 may be problematic.

You say the account with your parents is a joint account, but then you say you are not a primary account holder. If it is a joint account, it is considered your account as much as it is your parents account. The account may or may not be an issue. If your parents are the only ones who make deposits to the account and you are a joint account holder for convenience, then an attorney representing you might argue that you have no equitable ownership in the account. I have a joint account with my mother. It was listed on my petition as containing only her social security payments. It was not questioned. So, if your parents have SS payments deposited to that account, those payments might be exempted in your BK, even if you do have to list the account as an asset. If attorneys you consult with say that the account will be considered your asset, ask what will happen if, without your involvement, your parents withdraw the money from the account and deposit in a separate account without your name on it.

If it is not actually a joint account, but just an account that you have signatory authority on, it is not an issue.

Yes, you can reaffirm the car loan without changing any of the terms of the loan. Depending on the lender, you may not have to reaffirm the car loan at all. Ask attorneys about doing a ride through where the loan is discharged by you continue to make monthly payments. If a ride through is not allowed in your district, you may also be able to indicate on you Statement of Intentions that you intend to reaffirm the loan, but then change your mind and not sign a reaffirmation agreement. The lender may still allow you to continue to make payments. Remember, the lender wants the money, not the car. There is no advantage to reaffirming a debt if the lender and court will allow a ride through.

The reason you will have difficulty qualifying for a Chap 7 is that, assuming you are a one person household, your income is above median and your student loans will probably not be allowed on the means test. So, you have to pass the means test without including those debt payments. I did find some old articles saying that there are some decisions allowing student loan payments on the means test. But, everything I found that is more recent says that you can't. So ask attorneys about the current state of law in your area on that issue.

Your car payment is part of your plan even if you pay it directly to the lender. Why are you so resistant to including the car payment in a Chap 13 plan payment? The loan would get paid off in full and then your unsecured creditors would get the balance. I am 51 months into a Chap 13, the car I bought right before filing is now paid off. Because my DMI was so low, my attorney said that including the car payment in the plan payment would help avoid an objection by the trustee because it would give her something to earn a fee on. That is fine with me because if that DMI wasn't going to trustee fees, it would go to unsecured creditors. This is usually true if your Chap 13 plan does not pay 100% of unsecured claims.

If you have to be in a Chap 13, it is not the end of the world. You will be replacing your car payment and credit card payments, at least $1,020 per month, with a plan payment of $430 a month. You will pay $25,800 to eliminate a $19,900 car loan and $30K in credit card debt. Even when you add whatever attorney fees aren't included in the plan, that is a great deal. Can you eliminate your credit card debt and car loan in 5 years without BK? Chapter 7 is preferable if you can do it, but don't be afraid of a Chap 13, especially when your plan payment will be significantly less than the payments it will replace.

Before you file BK, weather a Chap 7 or a Chap 13, make sure that it will resolve your problems well enough to allow you to go forward without having to use credit cards to cover living expenses while paying off the student loans.