Best way to go???

[Broken]

I am married with a 4-year-old daughter... and I have another child on the way. Like most everyone else considering bankruptcy, things have gotten pretty bad. The stress is getting unbearable, and I'm starting to worry about the stability of my family. We hate the thought of going bankrupt, but it's starting to look like the only way. We're currently working with the Debt Solution, but I'm not sure that's doing enough.

We have a house, that we owe about $125K on, and it is probably worth about that. We have about 8 credit cards, and a car loan. If we file bankruptcy, what would the best way to go about it be? Chapter 13 or 7? Should we stop paying on the house, save the money, and then go BK before they foreclose? We're not trying to shaft everyone, it's just not worth destroying our lives, and our family over. Thank you all in advance for the help!!!

 

[bigun]

Would it help your situation to sell the house and move to a less expensive apt.? I wouldn't let the house get near foreclosure. It's just impossible to say what your best course of action would be based on this info. What is your income? What is the mortgage payment? How much do you owe on credi cards? Lots of unknowns in your case. Try posting some specifics about your finances here or on the motleyfool.com site. You want the personal finance and then consumer debt/credit card boards.

 

[Broken]

Well... I don't know if we could sell the house right now and get the whole amount. Income is about $30K a year... plus my wife is waitressing, but that's going to end soon with the arrival of our second child. With the mortgages, car payment, & credit cards, we're about $150K in the hole. We've been paying the mortgages and the car payment on time... but it's just getting too tight. If something were to go wrong (such as the furnace goes out), we'd be dead in the water. The stress is causing us to argue, and it's even rubbing off on our daughter now... and that's just not good in my book. Without coming off as trying to screw everyone else, I'm just trying to figure out the best way to go about things for us to benefit the most.

Also, has anyone heard of this: http://www.700law.com/

They say you can actually file bankruptcy, and keep it off your credit report. Sounds a little fishy to me... but I'm new to this.

 

[Broken]

I'm sorry, I'm in Illinois by the way. I forgot to post that earlier. Thanks!

 

[dorenephilpot]

I don't know what the exemption levels are in your state, but I can share with you what they are in your neighboring state.

In Indiana, you can file jointly, as a married couple, or separately. Assets that you are allowed to keep in Indiana: $7,500 in home equity (double that, if filing jointly) $4,000 in personal property, which includes equity in your vehicle(s) (double that, if filing jointly).

Items that you cannot get discharged in a Chapter 7 bankruptcy in Indiana include student loans, child support, maintenance to a former spouse, most taxes and damages in a drunken driving accident.

Pretty much everything else is fair game for discharge.

The most common reasons that people file for bankruptcy protection are: 1. Job loss/business closure or downsizing. 2. Major uninsured medical bills. 3. Divorce.

There is no limit to the amount of bills or debts that you can get discharged. You just have to show that your income vs. your bills won't provide you with a way to make meaningful progress on paying off your debts.

You can choose which items you want to keep and continue to pay on, such as autos and your home. This is called reaffirmation.

The whole process from filing to discharge takes about four months.

I hope this basic information helps.

 

[ctwdjim]

reply

Hi broken! you have already received some good information, but I thought of another idea...what are rents now-a-days where you live?? are they anywhere around your mortgage payment?? if so, if you reaffirm your home, you will be able to use your interest & taxes as a deduction from your gross income on your yearly income taxes! whereas with rent, you have no deductions. remember, you have to live somewhere, and it will cost you no matter where you live. it all depends on what you can afford. also, when renting, you have to come up with the first months rent, and a security deposit that is usually egual to your monthly rent - an expense you just might be able to handle at this point. note: I don't know if it is common practice in your area, but in some areas, the landlord requires the first AND last months rent, AND a security deposit! THAT'S ILLEGAL!!! it is against federal guidlines within the fair housing act.
bk's where originated for people in finantial trouble, just for folks such as you. so retain an attorney who specializes in bk's, so you can get started on your bk, and stop the worrying!! I don't know if you know it or not, but financial problems are the NUMBER ONE reason for marital breakups! don't let that happen!
as an ex-illinoisan, I wish you the best in your endeavors.

 

[Broken]

First off, thank you all for your help!

As far as renting goes, rent around here is about $200-$400 cheaper than my house payment. And unfortunately, our house is a little on the small side, so getting out of it into either a larger house or apartment would probably be best. I've read mixed opinions on filing for bankruptcy. Some people have said that they can't get a house or apartment for 10-years, and other say they've gotten back on track in under a year. How is it different for some people??? Also, can anyone either explain the difference between Chapter 13 and Chapter 7 for me, or point me to a web-site that does it in "english" , not law. Again, thank you all for your help... I'm glad I came across this site.

 

[ctwdjim]

reply

First off, thank you all for your help!

As far as renting goes, rent around here is about $200-$400 cheaper than my house payment. And unfortunately, our house is a little on the small side, so getting out of it into either a larger house or apartment would probably be best. I've read mixed opinions on filing for bankruptcy. Some people have said that they can't get a house or apartment for 10-years, and other say they've gotten back on track in under a year. How is it different for some people??? Also, can anyone either explain the difference between Chapter 13 and Chapter 7 for me, or point me to a web-site that does it in "english" , not law. Again, thank you all for your help... I'm glad I came across this site.

Hello broken! with rent like you mentioned, I know you don't live in chicago or it's suburbs!
first of all, I purchased my first home 2 years after my dis-charge...that's was a 4 year plan thru a bk 13, plus 2 additional years - a total of 6 years! banks would not even consider me until 3 years after discharge!!! but their are a lot of good mortgage cos. out ther that will work with you sooner than the banks. with a bk 7, all your unsecured debts are liquidated, giving you a "new start," whereas a bk 13 you make payments from 1 to 5 years on paying back a small portion of your debts.
so with a bk 7 the lenders know you have no outstanding debts, and you CANNOT file bk again for 7 years!!! that pretty much guarantees the lender their money back! I foud most of the answers to all my answers right here in this forum, at the "f.a.q." button...
Note: there are some new programs out there for purchasing a home 1) first time buyer mortgages. 2) only 5% down, vs. 10 to 20% down. when you are ready to purchase a home, these and possibly more options will be available for you. but remember, you will have to keep good credit after your bk for elegibility for loans!!
hope that might help. have a healthy baby, and STOP WORRING!

 

[pjs]

I'm not a lawyer or a financial consultant, just a normal 'joe' , have you thought of refinancing your house instead of losing it? The interest rates are incredible right now, a refi might bring your mortgage payment down to the same amount as renting and at least you'll have an investment to build upon. Closing costs can be included in the refi (at least here in CA anyway) so you won't need any money to do this. I sympathise with you, I was in the same postition 11 years ago and filed bk. Since then I have managed to pull my finances together and have just bought my first home. Filing bk is very scary to say the least, but if I were you, I would at least try to keep my home. Good luck to you and your family.

 

[pammy4711]

Sorry you are having to go through this - I was there myself four years ago and it's probably the most traumatic thing I've ever done.

As for getting back on your feet, there are variables which determine how fast or slow that process might be. I am fortunate in that I have a 20-year work history with a large company, and I make almost 70K a year. I'm single with no dependents. My credit was perfect up until the BK, and I've paid all my bills on or ahead of time since then. I'm slowly getting credit at reasonable rates - just got a credit card with a 7K credit line at 14%. I'm transferring higher interest balances over from a couple of 23% cards, which is usually the best you can get immediately after BK.

Since I have a perfect history of buying two houses and paying them off, I've been told I could get a mortgage right now at a decent rate (especially now that they're so low anyway). Coming up with down payment/closing is my only problem, since I suspect that they would want an even larger down payment after BK.

In short, you'll have to realize that nothing but time and stability will "fix" your problem. You'll need to get a couple of low-limit credit cards afterwards, and you must commit to not having ANY late payments once you start over. It is absolutely essential that you prove to creditors that you can be trusted again.

Hope some of this helps. Good luck!

Pam