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Back to bankruptcy a few years later. What's normal?
DasUberEdward
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So after a string of mistakes, bad ideas, and circumstances things have reached the point where foreclosure and eviction are around the corner for my mother and I. We're currently sharing a car that's also on the chopping block soon.
Right now it seems like filing bankruptcy would only prevent wage garnishments in the future after we are evicted. The question that i'm attempting to get a handle on is just what would rushing to file bankruptcy do versus waiting? The money that would be spent to do so could go to things like the car payment and utilities instead.
Never really been in any situation similar to this before so I could be way off base but without any assets and absolutely no way of crawling out from this mound of debt is it wise to sacrifice other things like transportation, and utilities just to stop the phone calls?
edit: just for a bit of background my parents have lived here for 25+ years but they kept taking out home improvement loans and refinancing every time their lenders offered. my dad died two years ago and made about 80% of the income with a practically non-existent life insurance policy. i didn't manage to finish school in time so I don't bring anywhere near what he did to the table. so all of the debts are impossibly deep and i'm trying to figure out just what exactly the immediate benefit to bankruptcy will be for my mom. I know it could help with wage garnishment and allow her to rebuild her credit. It will happen for sure. Just trying to get a time table for finding a new place to live etc and figure out where filing is among our priorities.
Right now it seems like filing bankruptcy would only prevent wage garnishments in the future after we are evicted. The question that i'm attempting to get a handle on is just what would rushing to file bankruptcy do versus waiting? The money that would be spent to do so could go to things like the car payment and utilities instead.
Never really been in any situation similar to this before so I could be way off base but without any assets and absolutely no way of crawling out from this mound of debt is it wise to sacrifice other things like transportation, and utilities just to stop the phone calls?
edit: just for a bit of background my parents have lived here for 25+ years but they kept taking out home improvement loans and refinancing every time their lenders offered. my dad died two years ago and made about 80% of the income with a practically non-existent life insurance policy. i didn't manage to finish school in time so I don't bring anywhere near what he did to the table. so all of the debts are impossibly deep and i'm trying to figure out just what exactly the immediate benefit to bankruptcy will be for my mom. I know it could help with wage garnishment and allow her to rebuild her credit. It will happen for sure. Just trying to get a time table for finding a new place to live etc and figure out where filing is among our priorities.
DasUberEdward on
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Her debt is hers, your debt is yours. For the love of God do not mix the two.
She's already talked to a bankruptcy attorney for the initial consultation. He wants 500 to begin representing her and then another 1300 or so gradually. That's an incredible amount of money for us so i'm trying to figure out when that fits into the budget.
edit: unfortunately I was still in school when she did the consultation so everything I know about it is second-hand from her. which is obviously a less than reliable source.
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I'm no expert but I think that if she is going to file for bankruptcy, she can pretty much stop making payments (someone else please verify this). Like don't even try to pay the loan on the house, the car and what ever credit cards and other debts she has. A month or 2 of that and she should be able to afford an attorney. Just don't leave the money in her bank. They might freeze the account. See if her employer is willing to hand her a pay-check she can cash anywhere she wants, instead of direct deposit. She needs to live on cash only until the bankruptcy is over.
My mom intends on calling Citifinancial about the mortgage tomorrow afternoon. I'm thinking they may mention short selling to her. We were served the court summons by the Sheriff last week so it may be too late? I don't want to misquote anything from the documents that were delivered until I have them in my hand though.
I know for certain that at this point they owe way more than the value of the house and not to mention all of the repairs and things that will have to be done. This is pretty much a bit of a loss for all parties involved which is kind of funny. Kind of.
barely.
Not gonna lie, it's a miserable, stressful process, but if that sheriff's sale had occurred we would have been really properly fucked.
Second, there are other options besides a chapter 7. A chapter 13 allows you to stay in both your home AND keep your car
Bankruptcy laws do vary, but most ALL of them within a chapter 13 allow for the attorneys fees to be rolled into your plan. DO NOT pay $1500 to an attorney for your bankruptcy up front, let it come out of your plan.
http://www.nolo.com/legal-encyclopedia/chapter-13-7-bankruptcy-reasons-29576.html
That's a link to why, In your mothers situation, a chapter 13 would be better than a chapter 7. She'd essentially file for something like a 20% plan (although the courts will look at her income and monthly budget and decide what she can pay back) and over the course of 5-7 years she will pay back a portion of the loans. It'll cover the value of the car in full, and she'll own that outright when it's done. The house payments will be reduced but she won't lose the house, although she WILL have to be able to make payments once it's over, but it's also possible to sell the house during the plan and move into an apartment or something like that.
Also if you do a chapter 13 you need to file sooner rather than later because you need to do it BEFORE they take the car and the house, like as in the paperwork needs to be filed before they file theirs, otherwise you're pretty much up shit creek there (again, this does vary and I'm not a lawyer)
Speak with a chapter 13 attorney. They'll give you better info than I can and give you ALL of your options as well, besides just bankruptcy. If you do go that route though, a 13 is WAY better than a 7 in this case, in my opinion.
Ch7 means a hard credit reset and you lose all your shit.
Ch13 is a rebuilding of the credit because of circumstances outside of your control.
She may or may not qualify though, depending on how deep they are, they have have to relinquish the house.
The bankruptcy lawyer she spoke to earlier in the year recommended losing everything and starting over. Which is what makes me wonder why we should be in a hurry to pay him if we're losing everything anyway?
Way too deep in the hole for a chapter 13 I believe. That's not even including property taxes and things which are also behind. The amount left on the car is currently more than half of her yearly income. It's a bad situation.
edit: i really wish i could have been there for her initial consultation. i'm just worried that she'll get conned or ripped off. she is perhaps the easiest mark in the world. it's part of the reason why things have gotten so bad because I wasn't there to hold her hand through every decision.
PM me if you don't feel comfortable sharing.
Debt is a little over 100K. 20K on the car (currently sells for less than half of that). 80-90K on the house.
These are just rough estimates. I'm trying to get all of her documents in order but it's an absolute mess. Those are just two biggies.
She only owes double her yearly income, and you're willing to help her on bills? I'm not sure how the eviction/sheriff sale situation works, but just on dollars and cents that was a totally recoverable situation.
Assuming you can somehow make good on the mortgage, I would sell the car ASAP, and put some of that money towards a practical vehicle and the rest towards the mortgage to smooth things over with the bank. The car is a completely toxic asset at this point, and if you have the choice, you need to get rid of it in favor of keeping the home. If it's practical to use the bus for your area, just do that and put all the money towards the house.
Start budgeting not around huge looming lump sums, but manageable monthly payments. And then you'll need to prioritize. As an outsider looking in, the math doesn't really work out for her to be in this much trouble. She should be able to ditch the car, pay a low minimum on the bill for a super long time and get the rest of the finances in order.
The problem with the car is that she has compounded two or three other leases into that one vehicle. So no one will let her sell it back. There's no reliable bus service near us at all so no car is nearly impossible. When she purchased the car she was more or less conned out of thousands of dollars from the small life insurance claim and the car lot willingly lied about what her income was to get her out of the door with her credit. She's paying 500 a month on a car that currently has a blue book value of between 10,000 to 12,000. They saw her coming a mile away.
but yes without the car payment she would be alright. just can't see any way of getting rid of it and she's months behind on all of the major bills. last payment on the mortgage was in October and the car is now two months behind I believe.
If the car gets repossessed, they're going to sell it for $10,000 and you're going to have a $10,000 deficiency balance that'll need to be paid.
Chapter 13 might be doable if you relinquish the car, and pay the house outside of the settlement.
You'd want to structure the plan so you surrendered the car and paid nothing else on the car loan.
How much equity is in the house? Are there other unsecured creditors?
The current situation is that my mother lost the house, her car, and basically all of her finances. She's in debt to numerous collection agencies and would never pay off what she owes before she dies. With the idea of a penny-pinching retirement around the corner bankruptcy is back on the table.
To give you a run down of her finances she has no equity, no investments, and lives from paycheck to paycheck just barely cutting it. The amount of debt is absolutely insurmountable.
Right now she's being told she would need to pay the lawyer 3K which seems kind of high? What sort of standards should one look for when finding a bankruptcy lawyer and what are typical expectations? I really have very little idea what to tell her here but i'm hoping she can spend the remainder of her money wisely without making any more mistakes.
Any advice?
It's a real shame it got this far, chapter 13 could have protected a car and a house assuming they were both still affordable (depending on the state).
I know some states allow you to file a petition on your own, paying for the filing fee, but I would consult a lawyer as most the time it's free for an initial consult. Is Chapter 7 an option?
Thanks for giving me some idea of average costs though.
You should figure out with your mom what the quote is for - a 7 or a 13 (or an 11, but that would be unusual), and if it appears to be over the average price. There might be reasons to file a 13, but from what you describe it wouldn't get her very far.
So questions in order:
(1) is this a chapter 7 or a 13 proposed filing
(2) ask them to explain benefits of filing 13 over a 7 (occasionally i have seen a debtor's lawyer not have any obvious reason to file a 13, leading me to suspect some people do it just to charge more). structuring tax debts could be one reason to prefer a 13 even in this scenario.
(3) if $3k is for a 7, ask attorney to explain what about this case requires up-front payment of $3k? for a chapter 13 some portion of fees are paid out over life of plan usually. again, keep in mind the people charging the lowest price aren't necessarily people you want to work with. if nothing else, lawyers will up their price a bit to discourage bad clients, leaving worst lawyers to advertise on price rather than quality.
At this point it is a chapter 7. I did edit my original title and that was years ago when we were looking into doing a chapter 13 where she could keep some things but as it stands I believe she falls into the income range for a single earner to file chapter 7. I do not know a lot about the attorney she originally worked with but based off of her habits and previous associations I am more inclined to assume that she is being taken.
The 3K price may have been for a 13. I've been looking for the paperwork but she has been unable to find it and has told me to call the attorney to find out the details because she lost them. Which. . .is a completely different set of issues. I am trying to dig into what I can to find out more specifics it seems she gave this person $250 a year ago but never followed up beyond that.
I will try to update the thread as things move on. I'm hoping to have a clear picture by the start of next week. I know that with the foreclosed home and other mistakes she has I think close to 200K in debt and makes under 40K per year. That will drastically decrease as she is nearing the age of retirement. She does not have a single asset to her name and rarely goes a week without her bank account reaching zero or below just for standard bills and food.
All of it was paid to the attorney through the plan. I told the attorney up front I had no money to give him at that time.