How do you know when to give up and declare bankruptcy?

iVillage Member
Registered: 03-01-2008
How do you know when to give up and declare bankruptcy?
13
Tue, 02-28-2012 - 11:15pm

I have reached a point that I feel I am getting nowhere in this debt battle. Its been almost 3 years and Im no better off now. I guess I do see things getting somewhat easier later this year after my car is paid off freeing up almost $400 a month, but thats only if nothing else comes up, and it probably will, if things continue as they are now.

Im not trying to be a downer but to be realistic. Each month I am having to borrow from my banks early access fund just to have money to live on. I pay my bills but there is nothing left after that and some months not enough to do that. I have tried a budget that someone on here generously worked out for me but too many unexpected things came up to blow that, car repairs, medical bills, etc.. Though overall I have cut my debt in half, I still have so far to go (and compared to many on here it wasnt that huge to begin with). I did do something that Im sure would be frowned upon here but I felt I had no choice. My dog got very sick and I had to open a credit card with Care Credit to save her life. It is interest free for 6 months but there is no way I will have it paid by then and the interest rate goes up to %25. I also was offered another high interest credit card which I opened and intended to keep for emergencies which kept coming up and now that is maxed out. So while I paid off half of my original debt I have added about $3000 to that figure. I knew it was wrong but I couldnt figure out other options. I have no one to lend me money and nothing of value to sell so

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iVillage Member
Registered: 12-31-2010
Tracey is the best for these questions, but I know you are looking for some answers.

There are a couple types of bankruptcy, complete dissolution of debt and reorganization of debt. Most likely you would be the reorganizing person since you have an income and are paying on debts now.

That means that the court would control your paycheck for the next 5-7 years and they will give you a stipend to live on, and will take the rest to pay your creditors. Your house may or may not be part of that equation if you decide to keep it or let it go.

This is not easy, just ask Norma or look at her countdown. They do not let you build a cash reserve, they take the money. If you get a bonus or tax refund, they get it first.

Will it affect your job, money could be taken directly from your check, so the HR person might know due to paperwork. If a company requires a credit check for an apartment, it might ding you there as well.

So you will have a LARGE ding on your credit report, you may still have to pay all the debt, the court will control your paycheck, and you have less choices on where to live and you will have to pay an attorney to do this - another bill you do not have now? Hmmm.

These are all suppositions without knowing your situation, but a lot to start to think about and you should talk to at least 3 attorneys before choosing one to go this route - they will all at least help you to learn more about the process.

Could you work with a debt counselor and look at your budget to see where they can help? Maybe they can get you on a plan and call the CC companies to lower interest rates for you?

OR can you call the CC companies and ask for a hardship department and see if they can lower rates and payment amounts?

What if you just sold the house or gave it up in foreclosure instead and found a less expensive place to live? That might be your overall issue and could help you. It sounds like renting might be better as you are not good at the repairs anyway?

There are still a lot of possibilities out there for you, maybe you have to really explore them all?

Just some thought, please don't take any of this as professional advice.

-Marie
#Marie
iVillage Member
Registered: 10-28-2009

Is your home the primary source of debt for you? I don't remember your numbers. Maybe selling your home and ridding yourself of that burden will make all the difference. And if it doesn't, and you still have some major debt issues, bankruptcy can still be on the table.

I think the best first steps are to consult a realtor and a lawyer. A realtor can give you more info

iVillage Member
Registered: 10-01-2008

Hi Mruns,

Norma


"Patience is the best remedy for every trouble"- Plautus


Community Leader
Registered: 07-26-1999
I'll get back to the original post in a minute, but Norma, you can motion the court to get your roof fixed. You would get a quote or two from reputable companies and submit it, as well as a payment plan, to the BK court. They can, and I've seen it done plenty of times, amend your plan, it would reduce how much your creditors get over the long run, but it would give you teh breathing room to get the roof repaired without any further potential damage to your home. I would talk to your BK attorney about it. I just didn't want you to think its not possible, because it is to still do things like major NEEDED household repairs during BK.
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iVillage Member
Registered: 11-14-2008

I seem to remember your original cc debt being 12,000, then you paid half = 6000 and added 3000 more =9000? That is not a lot of money to be owing. I'm not trying to diminish the fact you have had trouble paying it back, just the specific amount. And that is still progress, plus you don't have the car payment anymore.

It seems to me the real thing dragging you down is your house? I cannot remember if you owe mor than it is worth or not? Perhaps forclosure is the way to go and should be explored instead of bankruptcy. What does your husband have to say about all this. Is he contributing to the finances yet?

Good luck. We are here for you!

Community Leader
Registered: 07-26-1999

RNRuns, I am sorry you are in this situation.

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iVillage Member
Registered: 03-01-2008

Thanks everyone for the advice. As always this board and the people on it are a treasure and have helped me more than I can say. Yes, the details are right about the debt, about $8000 in credit card debt still. I know thats not terrible compared to many. As for the house, it is definitely our biggest problem. We are not upside down per say and our

iVillage Member
Registered: 12-31-2010

Another possible option that hit me in your case is to get a few estimates on ALL the repairs that are needed in the house but put them in two categories:

#Marie
iVillage Member
Registered: 10-01-2008

I think the biggest stress for you is the home.

Norma


"Patience is the best remedy for every trouble"- Plautus


Community Leader
Registered: 07-26-1999
Marie has an excellent point if you already have some equity built up in it. I agree that refinancing like that is not always the best idea, but if its that or BK, getting a home equity line of credit may be the way to go.
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