Question Should I file?? Please help

[lcern343]

Hi there!

I am new to this forum and I could really use some help. I am at a point in my life where things are just not getting any better. I can't make any dent into my debt. I owe about 25 in student loans and another 25 in loans and a credit card. I just got a new job making more money than I have ever made, around 30 a year. 90% of my paycheck goes to my debt. This is how I have been living for years. I can't take it anymore. Luckily I live with my boyfriend so I don't need to worry about rent or food.

I made some really poor decisions in the past that got me here, but I learned my lessons, and I am trying to hard to do the right thing. I can't handle the stress anymore.

My boyfriend is strongly suggesting filing for chapter 7. I don't know enough about it and it makes me really scared. I have really good credit and I am worried about the things it will prevent me from doing down the line. ie. a new car, marriage, mortgage, etc.

I took out all of my retirement cause I figured it was gone either way. My thought is to put it to my debt that isn't student loans and then I could pay off my unsecured loan 11k, my car 4k, and my credit card another 4k. That would leave me with my line of credit at 7k and my wonderful student loans at 25k and I would save the last 2k so I could finally have a safety net that isn't credit. My boyfriend wants me to file, wipe away most of my debt and use my retirement to pay off my car and most of my student loans which would leave me with only 6k left in student loans. I just don't know if that is the right decision or not. Is bankruptcy as bad as it sounds?

I am glad I am not alone in this cause right now I feel like scum of the earth. Thank you for your time and any feedback!!!

[Drazil65]

Hi, do some research and read, read, read here, there is a lot of experience and many stories, knowledge is power. No one, I repeat, no one, can make the decision to file except for you. You have an obligation to yourself and your future to learn as much as possible about filing chapter 7 (or bankruptcy in general), so do not make the mistake of not educating yourself. Make 2 or 3 appointments (free consults) with bankruptcy attorneys, ask them a lot of questions and interview them as well.

I am sorry you drained the retirement account, take this as a learning experience and another unfortunate financial mistake. Live and learn, you will regret it at some point but what is done is done. Filing bankruptcy is a foundation to a fresh start BUT if you do not commit to making different decisions and making a permanent lifestyle change, then you will be right back here again in 8 years. Do you have a clear understanding of what you need to do to change your habits (ie: no more credit cards, learn to live on cash, is it a want or a need, etc.). It is all part of the process or it doesn't work.

Things may be great right now with your boyfriend and he is paying the rent etc, but honey, please, please do not continue in a situation where you are depending on a boyfriend (or anyone else for that matter) to finance your living expenses. Work 2 jobs if you need to but you are creating a situation for disaster if things go south, be smarter than that. Live well below your means so that you would be able to live on your own should the need arise.

Bankruptcy is not a temporary fix but a commitment to building your future and living well within your means. Start with a financial attitude adjustment and you will be well on your way. Do what you need to do to get on the right track, none of it is easy but well worth the change for your future. The future will be here before you know it!

[lcern343]

Thank you so much for your time and your opinion.

I want to say first that my lifestyle has completely changed, I haven't used a credit card in over a year and I was doing sorta good and then I lost my job. I actually had a savings to get my by, but it wasn't enough. I had to use my line of credit to pay my bills. I do currently have two jobs. My debt wasn't all shopping, I had no help with college or getting a car. I know pulling my retirement wasn't a good move, but it was my only choice. I can't use anymore credit and I can't work anymore than I already do.

I absolutely hear you about my boyfriend, but this is how I have been my whole life. I relied on my parents for rent and food and then now my boyfriend. We want to get married one day, but my debt is what is holding us back, especially if I have to file bk. I wish I never went to school because, I was unable to get any grants and my parents didn't have anything saved up for me. I got as much student loans I could, but it still wasn't enough, I had to use credit for books and the remainder and any other emergency that came up.

This has been my life for a long time. I have been holding steady for a long time, but I can't hold out anymore. I just don't know if using my retirement is enough to avoid filling. I know I have more research to do and all your advise helps. Thank you so much for taking the time out and giving me hope!!!

[keepmine]

The damage is done and this is a really poor decision to raid your retirement accounts. Those would be exempt assets in a bk-meaning, you keep them.
First thing you need to do is calculate your tax liability for your 2015 returns and save some money to pay that.
The rest, just payoff the highest interest unsecured debt and forget about bk.
Concentrate on working hard and paying down the student loans and remaining credit card debt.
While I know next to nothing about student loans, have you looked at income sensitive payment plans, consolidated,etc.?

[BKAttyMI]

If you can put your retirement money BACK into your account, you should immediately do so. Those amounts are completely SAFE and EXEMPT from any bankruptcy you file. If you've already deposited these amounts into your bank accounts, it may be too late, which is a real shame. Before you make ANY other decisions or assumptions, go visit a bankruptcy attorney.

[LadyInTheRed]

If you can put your retirement money BACK into your account, you should immediately do so. Those amounts are completely SAFE and EXEMPT from any bankruptcy you file. If you've already deposited these amounts into your bank accounts, it may be too late, which is a real shame. Before you make ANY other decisions or assumptions, go visit a bankruptcy attorney.

Yes, put that money back into your retirement account and consult with an attorney (or two or three) about bankruptcy.

If you can't put the retirement money back into the same account, you may be able to put it into a roll over IRA if no more than 60 days have passed. For information, see http://www.irs.gov/Retirement-Plans/...-Distributions

[LadyInTheRed]

I have a few more comments

My boyfriend is strongly suggesting filing for chapter 7. I don't know enough about it and it makes me really scared. I have really good credit and I am worried about the things it will prevent me from doing down the line. ie. a new car, marriage, mortgage, etc.!!!

Your credit rating should be the last factor in deciding whether to file BK. If you don't do something about your debt, you will eventually get to a point where you will default and your credit rating will be destroyed anyway. If 90% of your income is going to pay off debt, then default must to be too far off. If you file BK, your credit rating will recover with time. Many people get car loans immediately after their BKs are discharged. It is possible to qualify for a mortgage 2 years after filing BK, but you would more likely have to wait at least 3 years. A BK will be off your credit reports in 7 to 10 years. There is no reason why filing BK should get in the way of you marrying, except perhaps the attitude of your intended spouse.

Is bankruptcy as bad as it sounds?

Bankruptcy is not as bad as some make it sound. There is a lot of misinformation out there. But, you do need to make sure BK will help you in your situation. If you discharge your unsecured debt, will you be able to handle your car loan and student loans? Are your student loans federal or private? If federal, have you looked into income based repayment plans?

Your retirement money should be saved for retirement! If you can't put it back or roll it over, do not use it to pay of dischargeable debt, unless or until you decide definitely not to file BK. If you are going to use it to pay off debt, put it towards your student loans. Be sure to keep enough money to pay the income tax and early withdrawal penalties. Don't assume that what was withheld will cover the taxes. If necessary, make an estimated tax payment now so that you don't end up with a huge tax bill next April. But, consult with a BK attorney before you make any more financial moves.

Drazil65 is right that you need to start supporting yourself. The fact that you have always depended on someone else to support you is not a good reason to continue to do that. Don't rely on your boyfriend until he is your husband. Even then, I suggest you continue to support yourself unless you have children and you both agree that you will be a stay at home mom. You need to learn to manage your own money and live within your means.

You are not alone and are definitely not the scum of the earth. You just need to learn from your mistakes and change the way you deal with money. Start by learning as much as you can and making an informed decision about whether filing BK is the right solution for you. Make an appointment with a BK attorney now, then come back and read more on this site and ask whatever specific questions you have. We can't tell you weather or not you should file. But, we can help you understand the process and give you things to think about.