MI - unemployed 10 months - time for BK?

[JackFrostMI]

I'm new here & have been reading tons of threads before I decided to post this. I'm in MI - unemployed over 10/mo & I'm 6+ months behind on CC pymts so I'm thinking I should file Chp. 7 BK. Questions I have: Can I file as an individual or will my husband have to file also? He's working ($30K annual) & I'm join on house & a couple of loans we have (which I don't want to file on). Can I file on just my bills & only the ones I'm behind on?

Also - I have a 401K worth $10K in my name. Do I have to cash that out to file?

What if I want to cash it out to pay off the join loans with my husband - will that affect filing BK?

I can't find a job & my unemployment extension is suppose to end this month (Apr 10'). Creditors/collections are calling non-stop...I haven't talked to them in months because I don't have any $$$ to send them.

Any advice is APPRECIATED. THANKS!

[blessed]

I think I'd try to wait until you've got a job. What if things get worse without the unemployment? Are you still using your CCs?

[JackFrostMI]

Haven't used a CC since I lost my job. I'm getting lawyer letters from all the CC so I don't think I have the option to wait. I can't pay them anything & I haven't even had an interview in 10 months. Without unemployment the only income we will have is my husbands and that just barely covers the basics (house/elec/insur) so I'm at a loss of what to do right now.

[Migal]

Haven't used a CC since I lost my job. I'm getting lawyer letters from all the CC so I don't think I have the option to wait. I can't pay them anything & I haven't even had an interview in 10 months. Without unemployment the only income we will have is my husbands and that just barely covers the basics (house/elec/insur) so I'm at a loss of what to do right now.

If you'd like an opinion on an attorney to talk to, let me know. I was in the Western District of MI.

[JackFrostMI]

I'm on the Eastern side (Saginaw area) - anyone you'd recommend over here?

Also - any advice on the questions I asked?

[AngelinaCatHub]

Yes! Your 401K is gold. Do NOT cash it in. It is protected by law. Yes! you have to file on ALL your debts. You cannot pick and choose. That is called preferential and is a no, no. At this point, stop making any payments to your unsecured debt. Use that money to exempt items such as storeable foods, blankets and such. Keep a low bank balance if you have one. Go pro se if you are up to it. Get the Nolo book on C7 from nolopress.com for about 17 bucks download. Worth while and read this forum for sure.

The forum on pro se' is very good but questions here are better but AFTER you read all the stickies on the front of forums.

I hear your area is a disaster zone. I am sorry for this, but it will get worse is my fear. 'Hub

[JackFrostMI]

What about the loans I'm on with my husband - do I have to go bankrupt on those too? My husband doesn't want to be involved in this at all - he doesn't want my filing to affect him which I've told him shouldn't happen but honestly I really don't know.

I have a couple of loans that I've been paying on and hope to have paid off with our tax refund - I'm assuming that's OK to do??

Plus I'm in the process of taking $1500 out of my 401K to pay property taxes that were due last year. Will making that withdrawl affect filing for BK? I'm sure if I file BK I'll have to take the lawyer fee from the 401K too as I don't have the money to file otherwise.

[LadyInTheRed]

If you think you'll file bankruptcy, don't pay any one until you consult with one or more attorneys. Do not take money from your 401k to pay debt!!!!!!!! That is your nest egg. Creditors can't get it. It will cost more in tax and penalties than paying off the debt is worth. If you can stop the 401k withdrawal, find another way to pay the property tax, even if it has to wait.

If you are going to file, paying off dischargeable debts is a waste of your money. Any debt with your name on it must be included in your bankruptcy.

As was already suggested, read the stickies and even more threads. Based on the questions you've asked, there is a lot more you can learn from reading here.

[Migal]

Talk to an attorney BEFORE you do anything at this point. Yes, you have to include anything with your name on it, however, it still may not do anything to your husbands credit score. It WILL NOT be dischargeable though, your husband will be held responsible for it. The only way it would be dischareable is if you husband included himself in the bankruptcy filing. Quite paying your unsecured debt and use that money to pay your property taxes. Leave your 401k alone. Keep paying your mortgage and utilities.

Most of all CONSULT WITH AN ATTORNEY and be completely open and honest!

[Migal]

I can't suggest an attorney for that area, but maybe someone else can.

[tiredmimi]

PLEASE DON'T CASH OUT YOUR 401K MONEY. Let me give you an example of what will happen from someone who did this past year. I withdrew 22,000 from my 401 K in March of 09, paid 2200.00 in taxes at the time of withdrawal. When we filed our taxes for 2009, because this 22,000 was added to our income, it put us in such a high tax bracket, we now owe 5400.00 more dollars on top of the 1800.00 we would owe anyway, leaving us owing the IRS 7200.00 for 2009. This is the biggest mistake I have ever financially made. We are filing for chapter 13 next week and our lawyer is including this in our plan, but out of the 22,000 withdrawal I took I only ended up with 14,000 of my actual withdrawal with the tax penalty I incurred. If that doesn't discourage you from taking it out keep in mind that the only thing I did with that money is buy some time, to keep from facing what I am doing next week afterall anyway. Please see a lawyer, you will get some good advice and things will not seem so hopeless after all. My situation is a whole lot worse than what you described above, and I felt much better after finding the right attorney, even though we are not finished.

[Flamingo]

What about the loans I'm on with my husband - do I have to go bankrupt on those too? My husband doesn't want to be involved in this at all - he doesn't want my filing to affect him which I've told him shouldn't happen but honestly I really don't know.

I have a couple of loans that I've been paying on and hope to have paid off with our tax refund - I'm assuming that's OK to do??

Plus I'm in the process of taking $1500 out of my 401K to pay property taxes that were due last year. Will making that withdrawl affect filing for BK? I'm sure if I file BK I'll have to take the lawyer fee from the 401K too as I don't have the money to file otherwise.

Stop right now, take a step back and chill...you are broke/insolvent and the anxiety over that will drive you crazy. No job also. It doesn't matter what your husband wants it is what has to be done. First, realize that filing bankruptcy will not solve any cash flow or job issues you have. You will file and get rid of the debt but you will still be without a job and no money. Secondly, all your debt, including that joint with your husband, gets included - you can't pick or choose what you want to do...I would quit worrying about the details, quit worrying what your husband thinks and both of you go together for a few bankruptcy consultations. Finances and debt can destroy a marriage...your hubby needs to grow up a bit and realize he is part of the marriage and can't run and hide. Put together a complete listing of all your bills, monthly payments, sources of income, paystubs, listing of assets and copies of your most recent state and federal tax returns. Take those with you to your appointments. Best of luck to you both.

[JackFrostMI]

PLEASE DON'T CASH OUT YOUR 401K MONEY. Let me give you an example of what will happen from someone who did this past year. I withdrew 22,000 from my 401 K in March of 09, paid 2200.00 in taxes at the time of withdrawal. When we filed our taxes for 2009, because this 22,000 was added to our income, it put us in such a high tax bracket, we now owe 5400.00 more dollars on top of the 1800.00 we would owe anyway, leaving us owing the IRS 7200.00 for 2009. This is the biggest mistake I have ever financially made. We are filing for chapter 13 next week and our lawyer is including this in our plan, but out of the 22,000 withdrawal I took I only ended up with 14,000 of my actual withdrawal with the tax penalty I incurred. If that doesn't discourage you from taking it out keep in mind that the only thing I did with that money is buy some time, to keep from facing what I am doing next week afterall anyway. Please see a lawyer, you will get some good advice and things will not seem so hopeless after all. My situation is a whole lot worse than what you described above, and I felt much better after finding the right attorney, even though we are not finished.

I was told that if you make an early withdrawl from a 401K that they will take 20% for taxes + 10% for the early withdrawl penalty. How can they add more tax again at the end of the year when you do your tax return? I was told just figure what amount I need and add 30% and that is what my withdrawl will be. Is that not right?

[keepinitreal]

I was told that if you make an early withdrawl from a 401K that they will take 20% for taxes + 10% for the early withdrawl penalty. How can they add more tax again at the end of the year when you do your tax return? I was told just figure what amount I need and add 30% and that is what my withdrawl will be. Is that not right?

The 20% + 10% is off the top, but the 20% part is just an estimate of what you'll ultimately owe the IRS. Once you file your Federal income taxes, you may end up owing more than 20% on the 401k withdrawal, based on your total income and what tax bracket you're in.

[JackBondLove]

I had unsecured debt of about $140K and a total retirement accounts of about $200K. One of my creditors "suggested" that I take an early distribution of my retirement, pay the penalty and taxes and get a "fresh start" LOL! Instead I am having the unsecured debts discharged and keeping the retirement accounts, and will be living on those account more or less (I plan to augment with some work from time to time.)

Bottom line - DO NOT DISTRIBUTE THE 401K UNTIL AFTER THE BANKRUPTCY FILING!