Need Help and Advice About Filing for Bankruptcy

iVillage Member
Registered: 01-02-2013
Need Help and Advice About Filing for Bankruptcy
6
Thu, 01-03-2013 - 3:46pm

I’m hoping someone can help us or steer us in the right direction in regards to bankruptcy.  To tell you a little bit about ourselves, my husband works and I’ve been out of work for several years--I returned to college and graduated 2 years ago but still am unable to find work.  The kind of work I’m looking for is in the accounting field which I’m worried will be a big problem if I have bankruptcy on my record.  Some of the debt we have is two mortgages, student loans and almost $60,000 in credit card debt.  We drained my husband’s 401k and an IRA just to get by and now we are really struggling since all the savings are gone. 

We’ve gone to two different lawyers but haven’t been real happy with our consultations.  The first lawyer really won’t answer questions until we pay $500 up front to have the means test to determine if we qualify for chapter 7 or 13.  My husband’s income is about $10,000 over the median income for chapter 7.  The second lawyer we saw immediately said chapter 13 with high payments that would still leave us in trouble with debt.  We questioned him about the means test and then he ran through one quickly and said our payments would only be a little lower.  I guess we thought we would qualify for chapter 7 with the debt we have and the income we have. 

There are some additional problems.  One problem is my husband will be 66 years old this year.  He could retire but since we have no savings and so much debt, he’s hoping to keep working.   We really need help so we can hurry and try to save some money but I want him to be able to retire sometime in the near future so he can enjoy some time off. 

Another problem is our home equity line of credit.  Right now we are only paying the interest on this loan.  In two years it will come to an end and we will need to refinance this loan--the bank said we will need to be approved again and will have to go through another closing.   We still owe $44,000 on this loan.  This bank has our checking account, the two mortgages and one credit card that we owe $15,000 on.   I’m worried if we’ll be able to refinance with them if we go through with bankruptcy and because one of the credit cards is with this bank. 

We were wondering if it would be a better idea for my husband to start taking his social security now while he’s still working for some extra income and file for bankruptcy later this year?  I’ve read online that social security should not be included in the means test or in chapter 13 repayment but I don’t know if that’s true? 

Another problem is our cars.  We have two older cars with high mileage.  One car constantly has problems.  I thought if we had the social security income that we could possibly get a car loan to replace this car.  Would it be a good idea to try and get a car before filing bankruptcy? 

Should we try to refinance the home equity line of credit before filing for bankruptcy?  I don’t know if that’s possible even if we have the social security income?  or is it better to leave it go and hope we can get financing?

I’m just lost on what to do.  I’m not sure if we should try to find another lawyer or not. 

I’m so sorry this post is so long and thank you so much for your help.

Avatar for CMEvelyn
iVillage Member
Registered: 05-29-2012

Hi Oscarpal, and welcome to the boards! I'm sorry I can't answer your questions, but we have several members who are quite knowledgeable about filing for bankruptcy. If someone doesn't come along soon with answers for you, please try the Debt Discussions board or the Debt Support Group Introductions board.


iVillage Member
Registered: 12-31-2010

There are a lot of questions there and without answers I can understand how hard it is to make a decision.

First of all, YES the bankruptcy could affect your abilty to find a job in the accounting or any financial field. Most financial positions do a screening of your credit report and a bankruptcy would definately show.  Many banks or other financial companies cannot hire anyone with dings on their credit report.

At the income you indicated for your spouse you would be on a repayment type of bankruptcy. Bankruptcy is not a magic solution that vanishes debt, wherever possible they will implement a mandated repayment program and wages you earn will go throught the court to repay the creditors. You will be put on a strict budget and your wages will be used to repay your creditors for the next 7 years. We have people on the Debt support forum going through that process now.  An unexpected dental bill, car repair, home repair expense, those are not things you can usually go to the bankruptcy trustee to just ask for more money for.  You have to live within a strict budget and that will exist for years until the time period of your bankruptcy is over. 

The Social Security income is not included as income for the respect of calculating a payment on your current debts, but if your husband is 66 it is not early as he has reached his full retirement age, so please talk to someone about that possibility as it might be in your best interest. 

The most important thing you can do is to secure a job and bring in income.  It is really not as much a debt problem at the levels you indicted, but an income problem.  Your debt level (if you have disclosed all of it here) is not that high that you cannot work to pay it off on your own without going through bankruptcy.  One word of caution is to avoid only seeking jobs on the internet, only 1% of jobs are found that way.  Go to a local temporary job agency and hound them until they find you something, arrive there every day if needed until they find something, or go to a couple agencies who specialize in placing accounting people.  Tax season is upon us and there are jobs in that field now more than any other time during the year.  Also you might try calling every accountant in your local phone book and asking them if they need help this time of year and maybe you can find someone in need of help.  No, these jobs may not pay top dollar, but something in your pocket AND the vital experience will help move you forward.  It will help you with connections and experience.

Be sure to look nice, clothes ironed, hair as professionally cleaned up as you can (beg a friend who is a hairdresser to help or call an inexpensive hair place and ask for assistance, telling them you will pay full price when you can)  people are willing to help if you are honest, and might be able to barter.  Even offering to babysit some night for someone you know for a service or helping them with their taxes or accounting!!

BE CREATIVE!

And by all means come onto the Debt support board.   We have all been where you are and there are some great stories of those making progress. We post our issues there, and our successes.  We offer mental support and ideas.  Debt is just a number, it is not YOU, you are a vital person with a lot to offer. 

All this said, the one part of your post I do agree with is to see additional attorneys or seek non-profit debt counseling. 

Get all the information you can before making any decision. 

#Marie
iVillage Member
Registered: 11-28-1999

Just to make a correction here, for a chapter 13 bankruptcy, the payment period is only three years, not 7, although the bankruptcy stays on the credit report for 7 yrs.

iVillage Member
Registered: 11-28-1999

Generally you can find a means test calculator for your state on line--try the website of your local bankruptcy court.  IF your DH's income is higher than the median, yes, you would have to file ch. 13.  Ch. 13 only works if you can first pay all your regular expenses, so figure out your mortgage payments and basic needs like utilities, food, car insurance, etc.--if his income isn't enough to cover all of that, you can't do ch. 13 anyway.  Is there equity in your house?  I think one step in this process is to really examine if you can afford your house--if there's equity it might make sense to scale down, or if it's underwater, then you could possibly file for BR and give up the house--or see if there are loan modification programs in your area.  I don't really understand why, if you have a HEL, you would have to refi unless it's a balloon payment that you have to make in 2 yrs.  What happens if you don't qualify for refi then?

I do agree that your DH should start collecting his SS now--at least you'll have some extra income and he's probably reached the maximum benefit amt. for retirement so he can work & collect--there's really no good reason to put it off.  And if you have a car that's about to bite the dust, maybe the higher income will help you buy a car now--just don't get one with a high monthly payment so you have more debt problems.

iVillage Member
Registered: 01-02-2013

I just want to thank everyone for their replies--I really appreciate all the help. 

You mentioned in your post about possibly not qualifying for chapter 13 if our income isn’t enough to cover our basic needs--does that mean we wouldn’t be able to file for bankruptcy or would that mean we would qualify for chapter 7 then?  If we would qualify for chapter 13 but then my husband does retire in a year or two and our only income is social security, is it possible to convert from a chapter 13 to a chapter 7? 

I really don’t understand the home equity line of credit either and why this is ending in two years and why we have to go through another closing.  I don’t know if we should really try to refinance this when my husband gets the social security and not wait in case there could be a problem if we file for bankruptcy?  Right now it is a struggle to keep up with the mortgages and to have money for paying the property taxes and insurance--there is no equity in the home but we would really like to hang onto our home if we can.  It’s so hard with me not having a job and paying high interest rates on the credit cards that all the high minimum payments are mostly going for interest and not much towards the principal.  But then because of paying so much to credit cards, we are still using them to help us buy some necessities because we don’t have enough income.  I think if we got help with the credit card debt we would be in better shape to keep up with the house.  This is a nightmare and I don’t know what to do for sure.  I really don’t want to file for bankruptcy but the stress of this debt and my husband so near to retirement and that we have no money in a savings for retirement, I don’t know what else to do.  If we were both younger, maybe there would be more options?

iVillage Member
Registered: 01-02-2008

I am not sure but I would think Dave Ramsey would say sell your house .. I know how hard the market is right now but I have seen houses still selling.. I guess it would depend on where you live and all.. I also realize how people try and hang onto their homes but struggling doesnt seem the way to go atleast for me anyway.

If your husband is 66 then you could be eligible for over 55 living places.. Some of those places are very nice and come with gyms and swimming pools and recreation rooms and lots to do.. You would be surprised at how stress free you can live.. Just check them out where you live it wont hurt..and youmight like the change..

If I were you I would also be looking for atleast a part time job .. I do know how you feel as we age and it gets harder and more challenging. I am 58 and with no job and very limited income and looking for ways to keep above water I am out of options all the time.. I do know that I live very frugal and on bare bones and always looking for bargains and cheaper cell phone plans and just cutting all you can down as much as possible.. I mean if you have to cut back on eating then so be it and going out and living as cheapy as you can.

If your husband has too much stress it wont do either of you any good..and you both wont enjoy your retirement.

Good Luck