My Husband Is In Denial!

iVillage Member
Registered: 09-30-2009
My Husband Is In Denial!
23
Sun, 10-25-2009 - 4:49pm

Hi-


My husband is in denial of our huge debt.

iVillage Member
Registered: 03-27-2005
Mon, 10-26-2009 - 8:49am

After our son was born prematurely with four heart defects and mild cerebral palsy in Oct 1993 we ended up with over $250,000 in medical bills. We had no choice and in June of 1995 we filed bankruptcy.

In 1999 we bought a used car and took out a small loan for it.

In 2002 we bought our home.

Last year we refinanced at 4.87 %. Our credit scores where in the high 790's and low 800's.

We have no debt besides our mortgage.

There is life after bankruptcy. It just takes a while for it to clear your credit report. Until it does, you can expect to pay higher rates for things like car loans and such.

stacy

Community Leader
Registered: 07-26-1999
Mon, 10-26-2009 - 11:05am

Given the fact that your minimum payments exceed your monthly income, unless your DH can get a serious income increase, I don't know what other choice you do have.

Photobucket
iVillage Member
Registered: 12-10-2003
Mon, 10-26-2009 - 11:56am
It sounds like in your situation bankruptcy might be a blessing. Your minimums on the debts are way too high considering your income and even cutting other living expenses isn't going to give you any breathing room. I filed chapter 7 bankruptcy back in 1996 during my first marriage and the relief of not having to worry about having creditors calling or wondering what bills weren't going to get paid so others got paid. Chapter 7 bankruptcy completely wipes out the debts so you get a fresh start. I can understand your DH's concerns but life does go on after bankruptcy and you can and will recover from it. Right now your credit is bad and not looking to get better any time soon. You are also at risk for getting sued on a debt. Since filing bankruptcy my credit has recovered and I have purchased a car and a house. Currently my debt load is slightly higher than what you have due to major repairs to the foundation of my house, 2 cc's, and student loans but my family's income level is sufficient to pay all these bills and live comfortably while paying down what we owe. Like Marie, I recommend checking out Dave Ramsey's TMMO or Financial Peace University. Since the consultation for bankruptcy is free I suggest making an appointment with a lawyer and taking DH along asking him to keep an open mind. Talking to the lawyer would allow your DH a chance to ask questions and find out from a legal standpoint what filing could do and how it would affect you guys for the long term. He might feel better about things then. Good luck.
iVillage Member
Registered: 12-10-2003
Mon, 10-26-2009 - 12:01pm
What you are describing is chapter 13 bankruptcy. If they file chapter 7 then their debts will go away and they will not have to make payments to the court. Going by what their income level is verses their debt it is unlikely that filing a chapter 13 would be recommended in their case.
iVillage Member
Registered: 10-01-2008
Mon, 10-26-2009 - 12:17pm

As many here on this board know, I joined the board on Oct. 1, 2008.

Norma


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


iVillage Member
Registered: 11-28-1999
Fri, 10-30-2009 - 10:17pm
I had to post here because I am a bankruptcy lawyer and what you are saying it totally incorrect. For the oP, who does not own a house, has low income and huge credit card debt, bankruptcy is totally the best option! They will not have to pay ANYTHING--bankruptcy never goes 7 years. Even w/ a ch. 13 plan, which is a monthly repayment plan, it's usually 3 yrs and no more than 5 yrs, and people may only have to pay 10% of their total debt, based on what their income is. And then the cc debt IS gone.
iVillage Member
Registered: 09-30-2009
Mon, 11-02-2009 - 7:30pm

Hi musiclover12-


Since you are a bankruptcy attorney I have a question as to how to select a good bankruptcy attorney.

Community Leader
Registered: 07-26-1999
Tue, 11-03-2009 - 9:08am

ars10705, just a bit of info while you wait for an answer from musiclover12, the court isn't going to make you sell your Honda Civic.

Photobucket
iVillage Member
Registered: 05-21-2003
Tue, 11-03-2009 - 9:28am

Hi there,

Do not be afraid of changes, here is our story:

A couple of years ago (2002 to 2004) we found ourselves in a very bad position. My husband had left his very secure job in the Army and took a job as an IT specialist in MA, he was making a better income than the Army paid him. We were very thrilled about that, bought a house, a car etc. Then came September 11th and boy, did with it burst our bubble. My husbands employer started to pay his income later and later each month, which of course lead to us not being able to pay our bills on time, so of course we were stupid enough and catch this using credit cards and that's where it all started, we could go on another year with that problem, but then noticed that we had accumulated around 40 000 dollars in debt (credit cards, cars, new windows the house badly needed etc.)

Here is our mistake:
We had absolutely no emergency funds NONE
We did not bother saving up at least 6 months of income before we bought the house
We were the whole time only making minimum payments, of course we could afford those, but without money, you can't even do that anymore
Late fees started to accumulate

At the 1 1/2 year marked it dawned on us...if we do not take action NOW, we will lose EVERYTHING. We can not go on like this and we weighed all the options, even if I got a job (I didn't work at the time) most of my income would go towards child care and the money that is left over, would so not solve our problem, it was way to big.

Well, we knew we are going to lose everything, so we did it on our own terms. We were ready and willing to relocate and since my husband was prior service, it was no biggy re-joining the military. We sold the house, we sold one car and since he was back in the service could do a voluntary repossession on the other car. (this did not pay off the cars, I still owed 2000 on mine and 6000 on his, we still had 12 000 dollars in credit card debt, 10 000 on a home improvement loan) We also sold everything we could not take with us, which made enough money for the everyday expenses, until a regular paycheck came in. This reduced our overall debt A LOT (not all of it though) and the burden of paying the mortgage was lifted off.

We relocated with 800 dollars in cash, no car but at least we had a free roof over our heads. (military on post housing, very small, very old, but who cares, we were safe).

Well, as the regular paycheck started to hit every month we started to make huge adjustments, we spent less on everything, which enabled us to pay for the rest of our debt. Basically we managed to live on about 35% of his income, the rest went towards debt. Later I got a job which enabled me to pay for the weekly groceries, more money piled up and we paid off more debt , within a year we were mostly debt free, but we already were so used to our "new habits" that more and more money started to pile up and in the end we were able to invest 30 000 dollars in a CD.

We moved again this year, but this time with 50 grand in our pockets and credit scores that are through the roof and only 3% in of HIS income in debt (that's my brand new car, his pre owned we bought cash last year). We were pre-approved for a 400 000 dollar home in NC (what you kidding me? house prices are not that high here) but stayed well below that. (we bought a brand new 1222 SF brand new house in a very good area in one of the best school districts).

Now the situation is the exact opposite of what it used to be. The house we have is very small, but so is the mortgage, the only other debt is my car payment, but that's only 150 dollars a month, we still save 10% of his income each month. We have 3 months of emergency funds and 9 months of expenses saved up. Now I am not in a hurry anymore to find some kind of job to help pay for the bills, which is priceless, we have reached a very comfortable level on one income and the second income would not necessarily buy us more stuff we do not need, it would pay for extra retirement savings, paying of the mortgage quicker (according to our plan we will pay a 30 year mortgage in less than 15 years). These days, we look far ahead into the future and since we were hit so badly in our 20s, life in our 30s has become very comfortable.

What I am saying is, we are just average people, with an average income, and if we can do it, anyone can do it without filing bankruptcy. We didn't want that at all, we were not afraid of major changes, we didn't mind losing our "things", it just "things" after all and as you can see, we have it all back AND, we sleep tight at night, no more money worries.

iVillage Member
Registered: 11-28-1999
Tue, 11-03-2009 - 10:47am

You could find an atty. by asking around, but usually people don't want to discuss w/ their friends that they are filing for bankruptcy. You could call your local or state bar association and ask for a referral. And I agree w/ the person who said that you might want to consult w/ more than one person. I really don't want to be giving you legal advice, but in some states you could choose whether you want to take the state or federal exemptions. In MA, the state is better if you have a lot of equity in the house.

If you sell the car to your parents it would have to be for fair market value so that really wouldn't improve your situation at all. don't sell or give away anything of value before you consult a lawyer because there are questions at the end of the bankruptcy petition that ask if you have paid any one creditor more than $600 in the past 90 days and if you have made any payments to any insiders (friends or family) in the past year. They also ask if you have transferred any money or property in the last year so you would have to say that you sold the car to your parents and for what amount. I did have a client who sold his car recently but he sold it to a dealer and because he could make some profit from the sale, he could use the money to pay his attorney's fees and some normal expenses. The thing was that he couldn't afford the monthly payments anyway.

Some people have a kind of moral aversion to filing bankruptcy. My opinion is that's why they have bankruptcy laws! I really don't have that much sympathy for people who just charge up their credit cards w/o thinking how they are going to pay the bills, but on the other hand, do you think the credit card companies & banks care about you at all? No, you miss one payment & the interest rate goes from 6% to 20%, thereby making it even harder to pay--if they just kept the low interest rates, maybe people would keep paying & not have to go bankrupt. But many people have to file because they lost their jobs, they got sick and couldn't work or they got divorced. As far as people selling all their stuff to pay their bills, that's their choice but it's not like anyone is going to give you a prize for doing that. Financially sometimes it's much better to file for bankruptcy, get rid of all of the debts and start over. Sure it's on your credit rating, but since you don't have to pay the cc payments, you could start saving that money, then if you need to buy something or pay for some repairs, you could just pay cash.