Bankruptcy homesteading
 

Can anyone tell me if,when a family files bankruptcy if they are entitled to homestead their property for a time, like a year?

You don't have to give up your home when you file bankruptcy, at least in MA you don't. Check your state laws, but usually your home, personal possessions and car are not touched by it.

You have to include EVERYthing in the bankruptcy, but you can reaffirm anything you want. Reaffirming makes it like the bankruptcy never happened for that creditor/lendor.

So you have include the house/homestead, but just contact the mortgage company and say that you'd like to reaffirm and they'll send you the papers. Just get it notarized and you're back in business.

Ditto
 

a lot will depend on how much equity you have in your home vs how much you owe.

In missouri you can keep one car. And as long as your equity is lower than your debt you can keep your home. But you need to reaffirm with your mortage lender.

In Ch.7 ...Personal bankruptcy.....If you Have planned and prepared properly...(1)all secured creditors will get their asset that they financed (house, car, atc, etc.)..back ..if you don't make arrangements to keep making payments , (2)All unsecured debt will be wiped out , basically all credit cards. Each state has set a specific amount $$ aside that is considered a Safe Harbour that will Usually protect ... one vehicle, personal possessions, farm animals , Tools of Your Trade if self employed. In Texas this is set at 30,000. Royalties from oil\gas wells is not a protected item. Your retirement in 401k's etc, is protected also for the most part. Normally, any Charges on a credit card 90 days prior to filing is considered a NO NO and may prevent some or all of your credit card debt from being wiped out. Prior to filing ...say 6 months or so you should remove all CASH, Cd's , etc. from the bank as all cash will immediately be taken into "Custody" by the court and probably paid to your creditors. Filing Ch.7 IS NOT a spur of the moment action . You(generic you) should educate yourself as to how the laws for your particular state of residence apply and start planning to minimize the Pain($$$) you will be subjected to. Finally , the REPUBLICANs in Congress....especially in the House have already Passed a very MEAN , revised new Bankruptcy Act that Was probably written by the Attorney's for Visa and M.Card. It turns the current law on its head in favor of the Creditors instead of us poor old sob's that need alittle relief. BUT...not too worry....it will have a hard time getting thru the Senate so the current law is safe for the near term..........fordy :haha: :worship: :no: :eek:

If you have credit card debts, also see if the creditor is willing to work with you somewhat. For example, they freeze the balance due (no further interest charged) if you pay off something (even perhaps as low as $20) a month against the balance.

Also playing into the equation is recover. As the saying goes, "When you find yourself in a hole, stop digging." This may mean allowing all your property to go back to the lender and basically starting all over again from scratch on a pay as you go basis. It might be practical for you to rent your property and then go live with a relative (if available) with the rent payments going to help pay your mortgage.

Apparently a lot of areas now have free debt counceling services. You should make arrangments to go see one ASAP. They know all of the details.

Ken S. in WC TN

Bankruptcy paralegal here! Whether you can keep your property or not depends on what state you live in. Most states will permit you to keep your homestead property (the property you reside in); however, there is a limit to the value that property can have. That is established by your state bankruptcy laws. Although bankruptcy is a federal proceeding, the federal courts have allowed for certain elements of bankruptcy to be determined by the state. These include the value of your homestead property, value of your automobile, etc.

If you want to keep your property you still have to pay for it. You don't get to keep your property and not pay for it too. This means you would have to have all payments current and continue to make the regular monthly payments timely. If you owe on your property you have 3 options:

1. If you are behind on your payments you either have to bring all payments current or file for Chapter 13 bankruptcy. Under the Ch. 13 you would provide a plan of repayment (usually over 3-5 years) on the arrearages (and all other debts - including credit cards (no debts are wiped out in Ch. 13; however, unsecured debts, such as credit cards, are generally paid off at the rate of 10 cents on the dollar, although this amount will vary). You would also have to continue to make your regular monthly mortgage payment on the property in addition to your Ch. 13 payments.

2. You can file for Chapter 7 bankruptcy, if you have no arrears, and "reaffirm" the debt. This means you would sign an agreement with the mortgage holder to deal with the debt outside the bankruptcy. You agree to continue making your regular payments and they agree to let you keep the property as long as you continue to make all payments. Everything works just as you are doing now.

3. You can file for Chapter 7 and surrender your property. You would generally have a timeframe to vacate the property of approx. 3 months. The mortgage holder would have to get a Lift of Stay (a hearing to take the property from the federal court to the state court in order to foreclose) and then file a foreclosure suit against you. You would then have approx. 30 days (that also varies state-to-state) to vacate the property. The property would then be sold at auction (you would have to be out before the sale date).

Ordinarily, any difference in the amount you owed versus how much the property sold for you would have to pay; however, under the bankruptcy this deficiency would be wiped out. For instance, if you owed $70,000 on your mortgage and property sold for $50,000 at auction, you would still owe your mortgage holder $20,000 and they would aquire a judgment against you for this amount. This amount, however, would be forgiven in the bankruptcy.

I'm not an attorney and can't give you legal advice, but I can give you a very general idea of how things work. You want to consult with a qualified bankruptcy attorney ASAP. Whether you can qualify depends on many factors and the sooner you contact an attorney the better before you do something that would prevent you from filing. There are several time sensitive matters! There are also frequently other options that are available to you that you don't realize you have! Feel free to PM me if you have any questions or if you would like info on how to choose your attorney. Best wishes.

Guest, please be aware that the above posts are opinions; not to taken as issued legal advice, placeing legal advice over the web is not legal. I am sure the above posters have your best interests in mind and are not aware that their opinions could be misunderstood.

I don't think the new laws are nearly strict enough, but then I'm one of those old-fashioned types who don't think 2 bathrooms in a house, or a phone line, or internet access is an entitlement. I see low-income housing in various areas that's tons nicer than a lot of regular housing these days. If I can't afford it, I live without it, or find a cheaper way to do it. For example, it constantly amazes me when people complain about creditors harassing them on the phone at home, when all they have to do is not have a phone! Real simple. I go weeks at a time without making a phone call. Internet I enjoy and use, but would get rid of it if I had to without a second thought, and go to the library more often.

I read your post under the assumption that you truly have no other options (no relatives to help, you've stopped all your credit accounts, gone down to eating rice and beans etc.). You can keep some assets, and it does vary by state. You will also have a new bill to your lawyer if you go that route, or to whomever you do the bankruptcy through. I have heard that going through the "counseling" services that negotiate lower rates and terms is just as bad as doing the other as far as credit reports go, but am not certain of that--looking at the TV commercials, it seems that there are still businesses around that will loan to anyone no matter what. I think if you own property, if at all possible you should sell it and go live in cheaper quarters for a while until things are paid off. You can move in with someone and do housekeeping/landscaping etc. in exchange for room and board, for example, and put any monies you earn from a job towards paying off your debts.

The suggestion to remove any cash and other assets in order to protect them, well, that is sad to see, on this board at least, because if you (anyone) incurs debt, you should pay it. Simple as that. If you loaned money to someone and they got out of paying it you would feel bad if you counted on that money to take care of your family, so.... It seems there is virtually no stigma attached to bankruptcy anymore, which is why often you see people think of it first, instead of last.

You might do better negotiating on your own with each creditor, especially hospitals (although again, there's something wrong, when instead of charging uniform lower rates to all, anyone with insurance or enough assets to attach is paying double or triple what someone else is for the same service).

If at all possible, please try to find some other way than bankruptcy to settle your obligations--you'll sleep better at night.

RAC, In a perfect world we would all repay everything we owe and never sleep around and never cheat , steal , or lie....but that's a perfect world and not the world we, as Imperfect citizens, live in. The problem is that the middle class thinks it is supposed to be guaranteed a 150,000 home, 2 new vehicles , and retire with a million in the bank. A Very Big Part of the Problem is that the Large Corporations that advertise Conspicious Consumption and the Throwaway Lifestyle......USE to Employ thousands of workers that it was selling TOO. Unfortunately, they have seen fit to Export most of those jobs to China and elsewhere. That means , in effect, all those middle class folks DON'T have jobs to Fund their lifestyle. Granted, nobody forced them to Borrow the money but they did based upon the Fact that they could Repay what they borrowed in Good faith. And now all the middle class workers have been basically forced Down one economic level into the Wal-Mart income strata and lots of them have utilized the CH-7 law and it's benefits to keep what little that they can salvage from their previous lifestyle. In the Last 3 years we are continuing to hear and discover how Crooked the Finanical Community has become in Stealing from anybody and everybody that they can Screw out they retirement and\or savings plans. The LEAD Prosecutor in the Discovery for all of this Theft is the NEW YORK A.G. Where the Hell is the SEC?? They just keep having to play catchup with the NY, A.G. WHY????....Because the National Gov't is run By and For the Lawyer\Lobbyists that give all that free money to Both National Political Party organizations. Why the Hell shouldn't the little Guy utilize the ONE Legal Tool that he has to Keep a portion of what he has earned???.......fordy :no: :worship: :eek:

Fordy, no one is forced to go work for Wal-Mart, or wherever. If people read the papers on a regular basis (and sad to say, they don't, and often don't even watch the news on TV) they would know in plenty of time that they need to get out of this field and go into that one. People get too comfortable in one job, or they tell themselves they can't possibly do this or that job because it is beneath them, and then wonder why it costs so much to hire a cleaning service (for example). They spend more than they make on a consistent basis. I don't care what job a person has and how much money they make, they can still be sunk by poor financial habits.

Also, credit companies extend too much credit to begin with. Get a loan on a house that is FOUR times your income? Gee, maybe that's a reason alone for so many foreclosures. But since those loans are secured, they'll at least get their investment back, providing it's not trashed first. And now you can even get a loan for your down payment--what's wrong with this picture? But no one makes you accept the loan.

But bankruptcy is like shoplifting, someone has to pay for the loss, and it is the rest of the people who do manage to pay their bills. Is that fair?

And, I'm not sure taking the cash/CDs out of the bank would help, either, the companies might hire a forensic accountant to look into transactions for the past x number of months, or see if you did a quit-claim to someone else and add the amount of those assets right back in.

Honest, I don't think that everyone who files for bankruptcy wants to just walk away, but because current laws make it so easy to do so, with relatively few ramifications, that I would say that close to 2/3 of people who file now, could have with proper counseling on budgeting and some "tough love" gotten out from under the debt instead of passing it on to someone else.

Did anybody remind you that bankruptcy is a 10 year mistake? It's going to be on your credit record for at least that long. Any time you go to borrow money or need credit, you are going to have trouble. Many insurance companies do a credit check before issuing policies. In several states such as Alabama, Texas, many others, your credit score is part of the process as to whether they will issue you the policy.

I personally believe that it shouldn't even be an option. It causes more hurt for much longer than it's worth.

It is a mark of integrity to make arrangements for repayment, and to pay off your honest debts.

When someone files for bankruptcy, who do you think pays for it in the end? Everyone else does, it always gets passed on to the one's that pay their bills. There are some instances where bankruptcy is the only option due to unforeseen circumstances. I carried a heavy debt load for 15 years, driving new cars, etc. We finally decided enough was enough and sold the expensive items to pay the the debt and then scrimped and save to pay off the rest. All my cars are 10 years or older, my pickup is a 1972. Our house is 100 yrs old, but we do improvements when we can afford to. Within the last year my wife quit her job to stay home with the kid, which ended up being a good thing all around. We lost 30K in income, but still live a good lifestyle.

I ...Don't ....believe , for a NY minute that "everybody pays" when an individual files Ch.7 . Why???Well , ALL...large assets that are purchased such as houses and vehicles are collateraiized by their intinsic market value. Other than collection fee's and\or legal fees the lending institution retains title and therefore control over the item in question. So, they Don't lose in Ch-7.....Now lets look at Unsecured Debt. Does anybody here believe that ...IF...ALL credit card debt was paid off today that Visa\M.card would lower their Mafia interest Rates down to Prime plus a couple of points??????Not Hardly!!! Visa\M.Card both willingly accept a 20% default rate and they Still make an UnGodly amount of money on their credit card business.....So , they Don't lose either because of a Ch.7 filing as their interest rates are so high that they have Already taken their loses into account. I'm quite sure that I have omitted situations whereby finanical institutions do lose in a Ch.7 filing but they are Not that significant. The real Question here IS....Are credit card interest rates significantly HIGHER because of Ch.7 and My contention is ....NO , they are NOT. They are so outrageously HIGH because they are like PIGS at the Trough.....They Squeal when even the smallest morsel(sp) of their Slop is taken away. Now...boys fire at will............fordy :waa: :no: :D :eek: :worship:

Fordy, the credit card companies make the vast majority of their money off the businesses that pay for the privilege of accepting their cards. Interest charges/late fees/etc. on balances are icing on the cake, but those who pay off their balances in full every month aren't paying anything (so interest rates are of no interest to them), unless they're paying an annual fee for an airline/hotel card (I did read somewhere that credit card companies are looking at charging annual fees again because more people are getting smart and paying off balances every month--many have now shortened their grace periods to 20 days). If you have bad credit you will never get good interest rates, read the fine print in most offers. Someone extending you credit is taking a risk on you and they charge interest in many cases according to how risky they think you are.

The credit card companies need the businesses to survive. If all the businesses went back to cash/check only there wouldn't be any credit card companies. Just something to think about. I still see cash-only businesses (no checks, either), and they always cite card company fees (and machine rentals, other fees like for chargebacks, etc.) as the reason they don't take credit cards or accept checks. No checks, no bad check fees....

Houses might go up in value between a purchase and a foreclosure, but that is not always the case, and banks don't like to manage rentals or safeguard vacant properties, so often they are sold at a loss, and at quite a large loss when you consider that most people don't pay their mortgages early (all that interest income gone bye-bye), and add in any real estate commission fees, and fix-up fees. Cars lose a third of their value when you drive them over the lot, so the lenders also lose money there, even if they sell them, there are still detailing costs, repair costs, etc.

So everybody does pay, in some way, when people default on their obligations.

Personal responsibility. The key word there is "personal".

Banks aren't responsible for it. Advertisers aren't responsible for it. The government isn't responsible for it.

You, personally, are.

I've been through hard times, been through good times, then back to hard times. Money comes and goes, so do jobs in todays world. Property values fluctuate, so do interest rates. There are things I need and there are things I want.

None of that takes away from my personal responsibility to make the best decisions I can, using the values and morals I live by...honesty, integrity, etc. If I make a bad decision, I pay the price. If I make a good one, I accept the rewards.

If you've gotten yourself too far into debt, at least accept the responsibility...all the way to the bankrupcy court if need be, but don't whine and blame everyone else. It's childish and doesn't convince anyone that you are a victim, just tells them that you don't understand what personal responsibility is.

I do understand that there are times the most responsible person can face bankrupcy, as in the case of medical bills. I don't think they whine too much though. That's usually the way it works. The ones who are part of the problem are doing all the whining, while those who truly suffer, just do it in silence.

Jena

Several years ago, I was working as an adjunct professor (think: next to no pay), paying for school and just making ends meet, when someone backed out on $2000 they owed me. It sent me into total financial chaos and, as a result, I fell behind on payments for 3-4 mos.

I did quite seriously look into bankruptcy, but was told by a friend (who'd successfully declared it, due to several years of catastrophic medical bills) that I'd be laughed right out of bankruptcy court. I also looked at the consequences for future credit, and considered the general kind of *karma* of the whole thing. So I decided against it - my debt hardly compared to hundreds of thousands, probably more than a million in medical costs or anything similar - it was a paltry sum in comparison and the result of some bad judgment on my part in counting on this certain person to come through with what they owed me.

So I bit the bullet and started paying it off. And it took me a good 3-4 years to dig myself back out, but I did it, a nickel and a dime at a time.

It can be hard, sure, but it's do-able. I sold stuff on eBay, had running garage sales (it really is amazing what people will buy!), learned 75,000,000 billion miraculous ways to turn brown rice and an onion into gourmet fare! etc.

I came out of that with the belief that there are legitimate reasons to declare bankruptcy - people saddled with hundreds of thousands of dollars in medical bills, for example, can't possibly ever expect to dig out from under them, unless they're making a good half million a year. I say they ought to just do it, declare bankruptcy. I wouldn't ever hold it against them. Some others, though? No. I do think they have the obligation to pay it all back. And I know it's do-able. :)

Hi,

My experience with credit is that it is a necessity, but one that should not be undertaken lightly. Credit is necessary in most cases to purchase a home or land.

If the credit card companies were going broke due to the record numbers of bankruptcies, why is it possible that I can call my card company, request a lower rate, and when they say no, tell them that XYZ is offering me a cheaper rate on a different card. Then I request to be placed with account closures department and zap, instantly I am placed with a customer service rep. who lowers my rate (the last time 5%). I have done this for the last two years and each time I get a rate reduction. If this keeps up, soon I'll be paying prime! :haha: I get around 4 to 5 credit card offers in the mail a week, but don't seek them out.

Some people have told me that they felt they had no choice except to file for Chap. 7 as the collections people were so rude, mean and threatening that they didn't know what else to do. People out of work have enough to do trying to put food on the table, hunt a job, keep a roof over their heads, and so forth - that they don't usually have the energy to fend off collections agents.

Sometimes bad things happen to good people - I have seen alot of people, good people, out of work due to layoffs and plant closures. Plants and services moving to Mexico, the Pacific Rim, and Asia. These are lost jobs - lost for good or at least any foreseeable future. The people who worked these jobs were average folks just trying to put braces on the kids, pay the house note, and keep food on the table. Well in my part of the US, when you have several plants close at about the same time, just where are all those people going to try to get work? Are they supposed to yank the kids out of school and move in hopes of getting a job? Around here, the loss of one plant can be dealt with, the loss of two and things start looking grim, and the loss of three pretty much can trash the local economy. Folks gotta make things in order to buy things..pretty much fact of life in a manufacturing community. So you see, it is not so easy to just "get another job in another industry" when there are no other industries hiring...or the other industries have closed their doors too.

And a result of that is a lot more people have to file for Chap. 7 - folks that wouldn't have considered it before, suddenly have to do something after being out of work or underemployed for a long period of time. It is very sad to see people go through that and many do lose their homes, or give them back and try to start over. Sometimes Chapter 7 is the only relief these people have, so I am not too quick to judge all by the bad actions of a few taking advantage of the system.

Sidepasser

I disagree with you Jena. The credit card compaines who, by the way, are owned by Banks , make Credit much TOO easy to qualify for. That, in and of itself is ONE of the primary reasons that people get themselves into finanical trouble. It is all too easy to rationalize your ability to repay a credit balance . There are several reasons that validate a CH. 7 filing other than just medical bills. Such as when a major corporation moves its manufacturing capacity to China so it doesn't have to furnish it's employes some kind of retirement plan. And you think its whining for a worker who lost their job and can't make the multitude of payments to seek relief from Ch.7. You over simplified the situation just a tad mam me thinks. People , being the subjective and weak creatures that they are can and do make very stupid and irrational decisions with their credit but when XYZ corp. cuts 10,000 jobs and moves its operations to Kat Man Do to escape the FICA tax their Inability to Repay thie obligations IS NOT Necessiarly Their Fault..............fordy :confused: :)

Money management is all about choices. Your money, your choices.

No one makes you write a check or use your credit card or home equity line. Or even get a credit card or mortgage. You choose to. That is debt by choice. Manage it well or pay the price.

I agree that catastrophic health care is a different kind of debt. But even a large one can be paid of in increments. I am still making payments on debt for health care from 14 months ago and it bugs me to carry that debt. I have made extra payments as much as I can, yet I still owe some. Responsibility sure cramps my style! ;)

I don’t think the majority of people think of bankruptcy as an easy way out. Granted there are some that do but I think they are very much in the minority. A lot of our clients have been struggling to pay their bills for a long time, some on their own and some through Consumer Credit Counseling. However, all it takes is one creditor unwilling to cooperate who gets a judgment and starts garnishing wages and bank accounts to force them into bankruptcy. Once that one creditor starts garnishing suddenly the debtor is unable to pay his monthly living expenses let alone other creditors. Then another creditor gets a judgment and the whole house of cards collapses. Also, I have to point out that more often than not the creditor that is unwilling to cooperate is a hospital or other medical provider. A very large percentage of people in bankruptcy are there due to medical problems. First you’re ill and cannot work so you lose income and at the same time medical bills are going up and up. A good portion of credit card debt can be from paying medical providers via credit cards. I’m not saying its right to misuse credit cards but if that was the only way to provide medical care or food for your family who knows what you‘d do. On the other side of the coin are the credit card companies giving credit left, right and sideways to anybody and everybody regardless of their means to repay. How is it a widow with $600 a month income can run up $50,000 + in credit card debt? Of course, the widow is wrong to do so knowing she cannot repay, however, the credit card companies have failed at business 101 in providing the credit cards to someone who OBVIOUSLY does not have the means to repay. If you're considering bankruptcy find a knowledgeable bankruptcy attorney before you do anything else. Once you've made a pre bankruptcy mistake its awfully hard if not impossible to undo. Pre bankruptcy planning is perfectly acceptable if its done within the law. The U.S. Trustee's office in our district is now doing much more stringent means testing on Chapter 7 filings and more cases are being dismissed or converted to Chapter 13. Also, starting in November random cases are being selected for outside independent audits.

Ann, I'll agree with you. One of the reason that old medical bill bothers me, is that they went straight to "we will turn you over to a collection agency in thirty days if you do not pay this in full within 30 days" which I could not do. So I called them and made an absurd offer to pay $50 a month (I know many people who pay $5 a month to them--even more absurd). They took the deal and there is no interest, where I would have been paying some extreme interest if I had caved and charged the amount to a credit card/or the home equity line.

I think this is the generation where the learning about credit takes place......there is always an initial learning curve where losses/discomfort happen to many to benefit the future folks who will learn from their mistakes. Take smoking...the generation that smoked and died of lung cancer have allowed the younger generation to be better informed and make conscious choices about smoking. Maybe thats a bad example.

We are preparing to file bankruptcy. I would like to respond to some of the comments made in this thread. It is an absolute last resort for us but we feel it is now necessary. Getting out of debt is not the easy thing that some of the above posters seem to think. Here's our story. Maybe it will help some of you to understand why this is an option that is sometimes necessary.

Early in our marriage we ran up several thousand dollars worth of credit card debt. Nothing frivolous really. We used the cards to pay for auto repairs, medical expenses, and other "emergencies". My grandmother passed away and we charged a trip home for the funeral. Things like that. We were doing fine, usually able to pay it off (or mostly off) each month. Suddenly we had several months in a row with extra medical expenses, loss of income due to illness, large auto repairs. Since we were short on income due to illness we charged groceries, gas, etc. IT is stupid to charge consumable and living expenses I know. At the time though we didn't see anyway out. (We were 20 and 22, newly married with no money management training.) After a few months our debt was so large that we were struggling to make the minimum monthly payments. It snowballed from there.

That was seven years ago. Five years ago we were advised to file bankruptcy. We resisted thinking if we just tried hard enough we could work our way out of debt. We have not used a credit card in over six years. We have paid the card companies much more than we ever borrowed. However due to interest, late fees, over limit fees, and every other possible fee they can tack on we have made only a small dent on our original balance. A huge chunk of our monthly income went to making payments on our credit cards. There was nothing left for savings. We couldn't even afford health insurance. We had cut our spending down as tight as we possibly could. We've been down to one (old) vehicle for several years. We've ate beans, rice, beans, beans, beans, and rice for years with little variety. We haven't taken a vacation in our entire married life. We have very few clothes and most of them were purchased second hand or received as gifts. Our furniture is all hand-me-downs from relatives. I'm not complaining about any of those things. I just want to show that we weren't wasting our money instead of using it to pay down the debt.

Last spring I had a medical emergency that resulted in about $3000 more in medical bills. Two months after that my husband lost his job and was out of work for a month. We are thankful he found a new job after only 30 days even though it was a significant pay cut from his old job. While he was out of work we got behind on utilities. (Actually we were somewhat behind before. The job loss pushed us over the edge.)

Now we have creditors calling multiple times per day. They are threatening lawsuits and wage garnishments. We would love nothing more than to be able to write them a check to pay them off. We simply do not have it. We are struggling to pay utilities and pay for propane for our furnace. I'm only spending $25/week on groceries for 4 people. The only meat we are eating right now is the (free!) venison that my husband got this fall. If an order to garnish wages was put into place we would not be able to put food on the table and keep the house heated.

At this point we can either take care of our family or continue to fight our way out of debt. We can't do both. So, we are filing. Without our debt we will be able to keep groceries in the house, keep the utilities on, and maybe even afford a health insurance policy so that medical bills won't be such a financial burden in the future. We will be able to set aside a little each month to cover those "emergencies" that come up (auto repairs, unpaid sick days, etc).

I'm taking the paperwork to the attorney today. We wanted to file in September, but it has taken 3 months to scrape together the few hundred it takes to file. Pretty pathetic when you can even afford to file bankruptcy. I am sad that it has come to this. We really thought if we worked hard enough we could "do the right thing." Now I wish we had filed 5 years ago when we were advised to do so. It seems all these years of sacrificing were for nothing.

My husband and I accept full responsiblity for our situation. We made a lot of bad money decisions early in our marriage. But it is not as simple as just tightening our belts and paying this mountain off. It just doesn't work that way.

One of the cards we are filing on is a Sears card. When we stopped using the card in 1997 we had a balance of $750. After making payments on this card for six years we have a balance of $1440. We added no new charges. That is all from interest and fees.

When I was 19 years old, in college, and working a job that paid $50 per week I was issued a card with an $11,000 credit limit. Yes, I was stupid to accept the card, stupid to use the card, and stupid to let the spending get out of hand. I accept responsiblity for my actions. On the other hand I think though that any company that takes advantage of a 19 year old like that is horrible and I do not feel guilty for filing on that debt.

So, throw eggs, flame me, whatever. After dealing with debt collectors for years my skin is tough and thick. It is painful to share this story, but hopefully it will help you to see that not all people who file bankruptcy prefer to spend their money on frivolous things instead of taking care of debt they are responsible for.

I should add that we tried working with Consumer Credit Counseling service but several of our creditors would not accept their proposal. The proposal was the absolute max that we could afford to send them each month. Silly creditors. I guess they would rather get nothing instead of a little each month. :(

Guest, don't shed any tears for your creditors cause they're very cold blooded about "your" problems and could care less. Your particular situation is a Prima Facia reason for retaining the current bankruptcy law as it is currently written. Merry Christmas and I know things will get better....After.....you have this situation behind you.........fordy :)

People who file for bankruptcy aren't scum bags -- they are people who either made a mistake or life just took over (such as huge medical bills). You all don't understand that more many people there is NO other alternative. The interest doesn't stop. If you suddenly find yourself without a job, the bills still continue coming in and the interest quadruples what you owe.

Creditors aren't as they use to be and will work with you. They turn your debt over to a collection agency within a couple of months and those people are trained to be mean! They want a payment and they want it now. They won't freeze the interest and they won't work with you past a couple of payments. Things can get out of hand very quickly! Creditors then start, not only calling you at home, but also your neighbors, relatives, and employers. It is legal for them to do so. They can't discuss your debt with them, but they make it obvious in other ways that it is regarding a debt. Even with medical bills, it is not true that most will take only what you can pay. They have very high minimum amounts. For some people there is no income to pay debts. It is all they can do to keep a roof over the family's head and food on the table. If you haven't been to that point, you have no idea.

Bankruptcy is a proceeding in Federal Court. There are very strict laws and there are several "acid tests" to be sure you can even file. The Court puts you through a hearing, and it is very ridged about what you can and cannot keep. It is a long and drawn out process and is embarrasing. It is not a closed proceeding and your hearing is done in front of all sorts of other people. In many places your bankruptcy is listed in the newpaper. Depsite what others think, it is NOT taken lightly!

With regards to many of the creditors, believe me, most of these people who have been struggling for years to pay back their creditors have paid them the amount they barrowed ten times over with those 18-20% interest rates! No credit card company is losing money. If they truly were, they would all be out of business by now...LOL!

Granted, there are a few weasles that know how to work the system; however, I can honestly tell you that 8 years of filing bankrupties for others, I could count them on one hand. Most are genuine, panicked, embarrassed and emotionally broken people who have no other choice. I can't tell you how many people I have seen that are the edge of suicide they are so broken. I can honestly tell you that I have seen more big-bad-macho guys break down crying that you could imagine. Women who are such emotional wrecks that they can't even muster up the energy to get together all the information for the paperwork. Beleive me, these people KNOW they made terrible choices and they ARE paying the price more than any of you can even fathom! I can also tell you that we rarely had someone who made those same mistakes again.

Even in the Bible they had the Year of Jubilee where your debts would be forgiven. People are human and make mistakes and bad choices. They shouldn't be branded as low lifes for it! Only through the grace of God is it not one of us. Circumstances can change for anyone of us at any moment and there is no such things as adequate savings in a disaster. It could all be gone in a heartbeat!

Actually, guest, I completely understand. My debt was much much smaller, but it ballooned overnight, as a result of the failure of someone to pay me $2000 they owed me and my resultant inability to make payments for maybe 3-4 mos. It was insane!

So in fact, I completely understand. I was able to dig out because it WASN'T that huge of an amount of money that I owed (under $10,000) - but it was unbelievable the amount of grief I was put through for all of it. To this day, I do not answer the phone unless someone identifies themselves on the answering machine.

Take your current financial situation, job crisis, etc., and add this to the end of it.

I personally know a family that went through the same type of financial situation, stopped charging, paying everything down, slowly, but paying it down. One day, after 2 years of consistent payments on one of the credit cards, there was a knock at the door, a summons. 45 days to pay the entire sum (less than $7000) or court. Despite trying to work something out with the credit card company, they claimed the family HAD a wealthy father in business for himself that could easily spring for the $$. He had been dead for over 15 years... there was no such business.

Nobody wanted (or could) help, so they filed in a week or so. Reaffirmed a vehicle and that was about it. Just one credit card with a balance of less than 7k, caught at a time when they couldn't come up with the entire sum. They filed chapter 7.

The same year, the feds passed the child tax credit, something like $500 per kid. Combined with their tax return, they could have PAYED off over 1/2 the credit card company, a few months after it was all done. I feel sorry for BOTH parties, both seemed to suffer from poor timing. One lost out on 7k because they couldn't wait, the other has a 10 year mark that makes obtaining any credit very difficult - sad! He said if he KNEW he was going to go through that kind of grief and wind up filing - he would have done it years before.

Cash is about it for them - and they're doing fine now. Through all the stress, their marriage is curiously doing better than ever. This is tough stuff to deal with, I just don't know if there is a "right" side or "right way" to deal with either party.

Bill

Fordy,

My response was written mostly to you.

It's not the bank's fault. The responsibility lies with the one who borrows the money.

Everytime I have pre-qualified for a mortgage, I was always told I could spend far more on a house than I was comfortable doing. The mortgage company told me they thought I could pay it back, I didn't think so. So...did I go buy a more expensive house and then blame the bank when I couldn't afford it? No. I bought a house I thought I could afford, because I am the one responsible for it.

When the bank sends me a credit card with a $10,000 balance, do I run out a charge it all up? Why not? It's there, they gave it to me, made it really easy. No I do not because I can't afford to pay it back and do not want to pay all that interest. That is called personal responsibility.

I could probably walk into the bank today and get a rather sizable loan. It wouldn't be hard, just tell the guy what I want and wait for him to call to sign papers. I don't because I can't afford to pay it back.

Grow up and stop whining. Take responsibility for yourself and your spending habits.

Jena

Unregistered,

Thanks for a beautiful example of what I was talking about.

You have made mistakes and are accepting the responsibility for them, even as you file for bankrupcy. I don't hear you blaming the banks for your mistakes.

I'd say that you are one who understands the concept of "personal responsibility".

Jena

Karen, you write:

"Creditors then start, not only calling you at home, but also your neighbors, relatives, and employers. It is legal for them to do so. They can't discuss your debt with them, but they make it obvious in other ways that it is regarding a debt."

But what recourse do the the other people being called have to make them stop? Would that not come under harassment of the neighbors/friends/employers, since they do not have debt? As to the person who is in debt, why not just drop the phone line altogether? Learn to make your calls from other places. Or, only turn on the phone when you are expecting/making a call--that's what many do with the fax machine. Let only close friends and family know to make calls from 1:50pm to 2:00pm, or some other time good for you. Inconvenient? Yes, but at least you would have a phone if you *really* need it.

Also, what does a lawyer do as far as consolidation or prioritizing that you can't do on your own? Oddly enough, lawyers always get their payment while they help people get out of paying others. Why is that okay? How come the lawyers can put their fees ahead of creditors who in some cases have waited for years to be paid off?

Just to clarify, when I say there is virtually no stigma attached to bankruptcy it is because of all the creditors out there still willing to give them credit for just about everything (other than perhaps a house, but even these days you never know).

Ann writes:

"However, all it takes is one creditor unwilling to cooperate who gets a judgment and starts garnishing wages and bank accounts to force them into bankruptcy. Once that one creditor starts garnishing suddenly the debtor is unable to pay his monthly living expenses let alone other creditors."

Why should creditors bend? That creditor might be a big corporation, but it could also be the landlord you didn't pay rent to (who might be a little old lady counting on the rent check for retirement to pay her bills), or someone else equally in need of the money, like Countrygrrrl. What happens when because people don't pay their debts other companies lay off people? Being a lender is really no different than being a grocer or a shoe store owner. They provide a product or service for money. Put the shoe on the other foot for a moment, as in Countrygrrrl's experience. Have you ever loaned money out in good faith and had someone not pay you back?

I can in some cases understand restructuring ALL your debts where you still pay them off, but over a longer period of time, and you cannot incur any new debt of any sort until the old debts are paid, but just being able to essentially walk away from your debts is wrong. Unsecured debt is still a debt that people made the decision to get into, and it deserves to be paid off just as much as secured debt.

Unregistered, and anyone else who might be in this situation, you want to rethink attitudes on credit cards. It is not wrong to use them for everyday expenses, especially if you are getting cash back or other rewards. But use them only if you have money at the time to pay for whatever you are charging. Pay them off every month, and the interest rates really don't matter. If you get them at your local bank/credit union, you can pay on the very last day you can without incurring interest, instead of having to mail checks to a processing center two weeks early and hope 1) they're not lost in the mail, and 2) the card company doesn't "misplace" it. Pay off your biggest bills first.

It is better to cram a family into one or two rooms of another family member's house for a while and pay/work it off (write a contract for this, please) than to try to keep up house payments you don't need when you have other debts to pay--or, take in a boarder if you really want to keep your house. When someone passes away, one person goes to represent the family--explain that finances are tight, and let it go at that--if they want you there bad enough, they will pay your travel expenses to be there. Same with weddings and any other invitations. See if relatives will pay you to do work around their place (they might be loath to loan money)--helps out both you and them.

Transportation may be a need, but do you (general you) need a car of your own? Or can you get a ride with someone and chip in for gas or take public transportation? Eliminates all of those expenses that go with cars--registration fees, insurance premiums (that Andrew3d points out are raised by bad credit reports), repair bills, and gas.

Think more in terms of "access to" rather than "ownership" of things/services. Can you drop your phone and pay half of the neighbor's basic bill and all your long distance? Or if you have a phone to keep in contact with distant relatives go to phone cards or pay for half the calls on the relative's bill? Can you split a garbage collection bill? Each person's situation will yield lots of different ways to cut costs.

Sure, no one makes you get a mortgage or credit card. But in the Atlanta area, which is growing so fast that they are adding more outreaching areas to the metro area, the avergage rent on a house is more than $1000.00 per month. It was much more reasonable for me to buy a house and pay a mortgage than to continue to rent. And I don't fool myself. I was lucky enough to be able to live with my parents for a year and save the rent money that I had been paying. I had a cheap place at $975.00 per month. If you move to far out, you are so far from the job that the gas will eat you alive. Try to rent a car, buy a house, even rent a video (we rented tapes to save on the cable bill) without a credit card. You have to have them and use them (responsibly) to even get a home loan. I'm happy for those who can save 19,000 a yr off a 25,000 a year job. But they are trully exceptions to the norm. And I have been behind on credit payments before and called the company to try and work something out so I could pay them and got queen b-t-c-h on the line who wanted no less than all of the money. In a perfect world, companies don't close without warning to take jobs to China, India and Mexico. Everyone who ever lent you money wants help you make arrangements to pay them when an unforeseen situation causes you to get behind. But this is not a perfect world. My DH company told him at 9:00am that the doors were closing at 3:00pm and to clean out his desk. They claim because they didn't make projected profit margins, (not that they didn't make money, just that they didn't make what they thought they would make), that they couldn't afford to stay open. Also, after 17 yrs. there, he was informed that he didn't have a 401k anymore becuase the company managing that part of the business went belly up from mismanagement. Where did he go wrong? What did he do that caused this and how could he have changed it. Take off the rose colored glasses and as Dr. Phil says, "Get Real". Live is not that simple. Not everyone could live like we try to live. If so the country would be over run and there would be no one to keep the cities alive. It takes all kinds to make this world go round.

Honest, hardworking, responsible people are sometimes forced into bankruptcy. This has been happening for ages - and this is why our bankruptcy laws exist. Like everything else, including money-lending, these privileges can be abused. Look at the offers for "low introductory" interest rates, and "pre-approved" credit. If the credit card companies were being hurt, I would certainly think they would pull in their horns a bit. Instead, this is getting more prevalent every day.

I think a positive aspect of poor credit is that people are forced to become more financially responsible. Cash is still the best.

Being "financially responsible" is great as long as:

1. You are fully employed,
2. Never sick,
3. Have great insurance if you do get sick,
4. Plan your children carefully and make sure that each is born perfect w/o any health care needs,
5. Pick a career/job that will never shut down, move away, let you go for other reasons such as "you are close to retirement",
6. Your 401K is perfectly intact, managed by well intentioned financial planners who only have your best interests at heart,
7. Your husband/wife would never consider divorce,
8. You have a vehicle that runs perfectly requiring nothing other than occasional maintenance,
9. You never have an auto accident caused by someone who has no insurance to cover it, if this happens -PRAY your insurance is always way above the maximum any hospital would think of charging to repair all those broken bones,
10. You have an amount of money in the bank equal to whatever you have borrowed for your house or car, otherwise if Items 1-9 happen to you,

11. You may be suddenly unable to pay the loan that you thought you could pay when you received it and therefore will then be deemed to be personally and financially irresponsible per your definition above.

Think about it,
Sidepasser

This is a very interesting thread and I have mixed feelings on this.

A friend of mine has filed twice in the last 14 years and his standard of living just keeps getting better. When I met him he was a telemarketer living in a small apartment and now 14 years later he is a manager at the company, owns a home and everything else that goes with it. Both times he filed because he had a very large amount of credit card debt.

I had another friend who just kept charging with the intent of never paying it back. I once asked her about it and her answer was, "So what, they just keep giving me more credit so I am going to just keep spending until they stop, I am never going to pay it back". She reached over 35k in debt and then filed.

In each instance they charged up the credit for there own personal pleasures, not because they didn't have money to pay for food and heat etc..


I am sure that in a majority of cases it really is needed and the people filing may of just not had much choice due to very real circumstances. I understand this, they tried everything but it just wasn't enough, they need help. But there has got to be a way to close some of the loop holes so that the people who file just because they can't stop spending, don't just walk away scott free. Lots of people file because they simply can't stop spending money on "want items" that they just can't afford.

A friend of my sisters lives across the street from me and they are going through some hard times but I really don't have much sympathy. In the last six months they have bought a new car and just a few weeks ago she called me to ask a question about her new computer. All bought on credit etc... Some people just don't get it. They really are getting deeper and deeper in debt, the husband works 3 different jobs 7 days a week but they just can't stop spending.

My father taught me at a very young age to always take financial responsibility and to never rely on others to bail me out and to not even ask him for help unless I had done absolutely everything possible and I was completely broke and homeless. I new that once I left home that I was truelly on my own and I had to be financially responsible.

A lot of cases would never happen if people would just stop spending on a bunch of stuff they don't even need.

I have heard a prime source of new leads for offering credit cards is bankrupcy court. Why would a credit company being interested in someone who just went through bankrupcy? Simply - they know they are likely to run up these high interest charges starting almost immediately and they know they won't be able to file for bankruptcy again for what - 7 or 10 years. In the meantime they rack up the interest payments.

Creditor collectors are rude and sometimes abusive because they know it is an industry where nice guys really do finish last. They are working on commission, pure and simple. Don't collect on these bad debts and you don't earn your commission.

Some folks don't realize one way to stop a telephone from ringing is to simply unplug it from the wall jack. It's like magic. Incoming callers hear it ringing indefinitely, since the answering maching isn't activated, but nothing is happening on the other end. Only take calls after 9PM and before 6AM.

Sorry, but I think very few people need more than one general purpose credit card. Cut up the rest. Never use one to pay for consumable purchase - such as vacations - which will not be immediately repaid. Simple - don't take that particular vacation.

I haven't seen it recently but I loved the commercial where the guy showed his huge suburan home, his nice car, his swimming pool, his golf game and, I really loved the riding lawnmower for about a half-acre lot. "How do I afford this? I'm up to my eyeballs in debt. Won't someone help!"

I love home equity loans saying how easy they can be used to pay off current debts. Problem is probably 90% of those who use that route will be back up to their debt limit within a couple of years - now with little or no home equity.

Know what folks, as interest rates rise a lot of folk's newly purchased home will likely depreciate in value. Why, at higher interest rates fewer people can afford it. Demand decreases - supply stays the same = which in economics translates to price droppig. And, chances are they paid too much for it to begin with as the low interest rate created a seller's market - at least for a while.

I really don't have a lot of sympathy for some folks. About month ago someone I know stopped by to say they didn't even have money for gas for the car and could she clean the trailer. Come back the next Saturday to do so. Deal was for $40. About halfway through the father of two of her children come by to pick up one she had with her, and then was to go to school to pick up another. She got $20 in advance of finishing from me and gave it to him with instructions to pick up the second kid and then go to get something to eat at McD's, picking her up something as well. Now, I doubt the McD's bill came to less than $10 - for a single meal. For the same $10 they could have purchased a nice processed rolled ham at Wally World, a couple of loaves of bread and eating for about a week on it.

I guess I would have more sympathy if I saw at least some lesson had been learned. In every case of personal bankruptcy caused by things not out of their control (e.g., huge medical expenses), I know of, they quickly went back to living beyond their means. They say it is a vicious cycle. I say it is poor judgement and money management.

Ken S. in WC TN

I have read most of the posts above through and really every viewpoint and situation has a valid argument. I work in an attorney's office and we do file ch 7 bankruptcies. In our area major manufacturing has cut personnel or left town. (They probably left the country). Many small businesses have collapsed because of the shrinking consumer base income in the community. The school board gives themselves raises and the kids are less intelligent than ever. A fortune 500 company is on the verge of asking for union wage freezes. (Oh, that's for the peasants, not those that drive jags.) In my age bracket (the end of the boomers), our parents worked at the same job until they retired, so didn't we expect the same thing? They had a pension, they expected to have social security. They accelerated their mortgage payments. Before gasoline, health care, insurance and taxes went up in the last 2 years, I could figure $25,000 annual in expenses to live comfortably, having only liability auto insurance and no new furniture, etc., no major home repairs and no house or auto payments. We're talking $50/month eating out/entertainment. We do have dishtv, but no cell phone, the inet is $10/month. We have the best healthcare in the county and I just received a bill for $253 (my obligation) for one crown! I haven't been putting $20/month away for a crown. I do put $50/month over and above DH's BP meds for co-pays and other meds, but it isn't always enough. Something else will have to give, again. And it will, we do have a good income for now. But, that's our family. I see the people who have lost their jobs and incurred medical bills with no insurance. I see the people who tried to get an education and have $40k in student loans (non-dischargeable BTW). I've seen where some of these people live and your tax-dollar housing is better. I've seen people who are just "tired" and ready to give up on life completely. People who work hard to make ends meet and there's barely enough for school lunch money. I've also seen people who are allowed to keep a new Harley and other non-necessities (secured loans) in addition to their regular vehicles. The bankruptcy laws are definitely lacking there. Oh, and attorney fees incurred before a bankruptcy are dischargeable. I used to dislike lawyers, but now I have found that it is the laws and most politicians I dislike. There is a "marriage penalty" involved in filing bankruptcy. In some cases, more protection can be had for your family by keeping credit and assets separate. There are people who do need relief and there are record numbers of petitioners. But shouldn't one look to the source? I was amazed recently (I don't know why anything amazes me anymore) when I watched a PBS doc on cigarette commercials from the first ones through the '70's or so. These companies knew and blatantly lied and contorted the facts, but it gained the momentum needed for generations of damage. We are just peasants and I believe we have no real power in the function of our government. Sure, I can and do vote, but I don't really have any good choices. I want men on the podium who have been there where these people were, at the point of personal bankruptcy. From having not even a sustainable job and no medical insurance, driving a vehicle whose single repair part costs more than the car's worth and is on a recurring shop schedule. Someone who knows what it's like to be tromped on by big business and not on the receiving end. <dream over> My prayer to anyone having gone through a bankruptcy is that your luck changes and your children be taught how to spend what they have from an early age and that the economy turns around. Ignore advertising period. Want what you have. We have two sons in tech college right now. We didn't qualify for any assistance other than student loans because we do work. OS is also in the Air Guard which covers most of his schooling and we found out that our other son's tech program just received a grant to cover half of his. Homesteader's will like this, it's in alternative energy. Maybe the government is waking up? Truth is, we and they knew it all along, but the big boys have now got their ducks in a row and are now going to profit. Ho-hum, as the worlds turns. Well, I've rambled enough for awhile, expecting kids today.

I think two credit cards are okay (one to use all the time, the other for when that one doesn't work--it happens).

We have good credit, and our main card got shut off (found out at a restaurant) without warning, no letter, no phone call. Used the other card instead. Called the bank to find out that they thought our electric was high, and put a hold on it for that. Well, this was in the middle of the Enron stuff, when everyone's rates went up, as well as it being wintertime in an all-electric house. Needless to say, we dropped that card pretty quick. Also, sometimes cards' magnetic strips get ruined, and if you are only at a swipe machine (like at a gas station) without a clerk, you're kind of stuck.

But I can't see any more than two :-)