Tell me about filing for bankruptcy

[MonkeyPie]

My parents did this about 6 months ago, and they refuse to talk about it. What exactly do you need to do nowadays? I''m not sure where to look and I have some of my friends - a married couple drowning in debt - want to see if they can do it. With the economy all crappy I''m guessing it''s harder than ever. How do you qualify for this now?

 

[MichelleCarmen]

I think it depends upon which state your friends live in.

 

[Hudson_Hawk]

Silly question, but have you googled it? I know the laws changed about three years ago and it''s subsequently more difficult (to weed out people who just don''t want to pay back what they owe). I know the subject is taboo, but I truly think it''s a blessing for people who really really need it. I believe there''s a PS''er who currently works or has worked in the past at a bankruptcy attorney''s office. She''ll hopefully weight in. If I were your friend I''d do some online research and get a referral for a bankruptcy attorney from my state''s attorney general''s office or bar association (there are referral lines you can call if you check the websites).

One warning. Your friends should be prepared to part with anything and everything of value. FI''s parents filed a few years ago and literally had people come to their house and inventory everything. Anything even remotely valuable was liquidated to go towards paying off debt. Even their TV and car. However they were able to keep their house which was great for them.

 

[MonkeyPie]

They live in New Mexico, which is where my parents live and filed for bankruptcy. I think they did Chapter 7? I suggested the other to them, Chapter 13, but the husband got laid off so I don''t know if it would even help. They are living with his parents right now.

 

[Italiahaircolor]

I would suggest pointing your friend in the direction of a bankruptcy attorney so your friends can gather advice as it pretains to their current situation.

On a side note, my ex-FI filed at the age of 23 when he graduated college (we weren''t together at the time)...and it was a nightmare for me. When we were together I was the primary wage earner...but he did have a collection of credit cards in his name. Because I was paying the bills, I demanded that my name also be put on the CC''s so I''d have access to the records and what not. Stupid me. When we seperated, he willingly removed my name from his major CC''s but never took me off his Von Maur CC. Well, since Von Maur has in-house credit, when he filed -- they came after me for the remaining balance of his no limit card! That''s right...no limit. I was completely unaware that this could happen, but it did. And since he was protected by the courts, I had no recourse what-so-ever when it came to getting my money back! As it turned out, in the months prior to filing for bankruptcy, he went hog-wild and charged a small fortune....diamond earrings, designer bags, clothing, shoes, colonge and purfume for both him and his girlfriend (the one he cheated on me with by the way--talk about insult to injury)...racking up nearly $30k on the Von Maur card.

So, my point is...if your friends are seriously considering it...best they speak with an attorney versed in the fall out of doing this. Make sure that they aren''t co-signers on any student loans if they children and what not. I think that if you need it, having an "out" is a terrific thing...but having all your "ducks in a row" is an even better thing!!

 

[PaulaW]

Italia... OMG. My jaw dropped reading this. What a jerk!
I''m sorry I don''t have anything good to offer MP, but I wanted to wish your parents well.

 

[Italiahaircolor]

Date: 4/14/2009 2:24:19 PM
Author: PaulaW
Italia... OMG. My jaw dropped reading this. What a jerk!
I''m sorry I don''t have anything good to offer MP, but I wanted to wish your parents well.

Sorry for the thread-jack...

Yes, it was horrible. Because Von Maur doesn''t charge interest on their accounts either, you have to pay off incredibly large chunk of the balance at a time...if my dad hadn''t been able to help me out, I would have been on the line for close to 3k per month. I was blessed that my father paid off the CC once we figured out that there wasn''t much else I could do...at the time, 3k would have crippled me financally. This was several years ago (I was 20) and I still get sick thinking about it.

Overall, he was a horrible, scum of the Earth human being. After the whole bankruptcy thing, he somehow managed to use my idenity to take out student loans for law school (ironically enough) and rent a condo for him and his girlfriend. Although I was able to stick it to him over those things...the 30k still evokes

....that''s a lot of money.

 

[MonkeyPie]

Date: 4/14/2009 2:35:59 PM
Author: Italiahaircolor

Date: 4/14/2009 2:24:19 PM
Author: PaulaW
Italia... OMG. My jaw dropped reading this. What a jerk!
I''m sorry I don''t have anything good to offer MP, but I wanted to wish your parents well.

Sorry for the thread-jack...

Yes, it was horrible. Because Von Maur doesn''t charge interest on their accounts either, you have to pay off incredibly large chunk of the balance at a time...if my dad hadn''t been able to help me out, I would have been on the line for close to 3k per month. I was blessed that my father paid off the CC once we figured out that there wasn''t much else I could do...at the time, 3k would have crippled me financally. This was several years ago (I was 20) and I still get sick thinking about it.

Overall, he was a horrible, scum of the Earth human being. After the whole bankruptcy thing, he somehow managed to use my idenity to take out student loans for law school (ironically enough) and rent a condo for him and his girlfriend. Although I was able to stick it to him over those things...the 30k still evokes

....that''s a lot of money.

OMG. I am so sorry that happened to you! I can''t STAND guys like that - I had one run me into the ground with debt, too, first with a cell phone he racked up to 2k and then a car he stopped making payments on. I learned my lesson with him, to never trust anyone like that until I knew for sure I wouldn''t get reamed. But that debt is still there, and I am fighting to pay it off...except now I have my husband, a REAL man, to help me.

 

[Hudson_Hawk]

Italia-I'm speechless! Really and truly horrified for you. I'm glad things have worked out. FI's father has the same name (FI is a third) and has dragged his name through the credit mud puddle. He's had a lot of trouble with his father opening up CCs in his name and the guy even went so far as to try to take out a second mortgage on the house (which was FI's grandparents)! He's a crook.

Regarding student loans. I don't believe you can have these forgiven when you file for Chapter 7/11/13. Possibly the private, but not the federal.

 

[steph72276]

Here are my 2 cents on the subject and take this with a grain of salt as I have never filed and I don't know anyone who has had to file, I just study finance quite a bit....

I would not file for bankruptcy until I was absolutely forced into it. You said he lost his job, so there is no chance of wages being garnished at the moment. They live with their parents, so there is no house to be taken away. Student loan debt/government taxes are not bankruptable....so basically they just have credit card debt? If so, they need to not worry about the credit cards right now. They need to focus on finding an income again (even if it's a couple of part time jobs for right now). They need to focus on necessities such as food/shelter/clothing/transportation to work. Then when they get an income going again, they can start taking care of the credit card companies. They will likely settle with them for pennies on the dollar b/c they have written it off at this point as though they are never getting paid. They can save up a bit, and the settle with each company until it is all paid off.

Bankruptcy should be a very last resort when cars are being repoed, wages are being garnished, etc. It is not some easy fix. And going to a bankruptcy attorney is not necessarily the best option....what do you think they will tell them??? Of course they will try to get the bankruptcy through the court, that is how they get paid! Just do some research online about avoiding bankruptcy and I wish them lots of luck!

 

[neatfreak]

Date: 4/14/2009 3:32:26 PM
Author: Hudson_Hawk
Regarding student loans. I don''t believe you can have these forgiven when you file for Chapter 7/11/13. Possibly the private, but not the federal.

That is correct-can''t get rid of those student loans.

And I believe it is DivaDiamond who works at a bankruptcy firm of some kind...you could page her on the mommy thread if she doesn''t see this.


And Italia That is HORRIBLE. And exactly why people who file for bankruptcy shouldn''t be absolved of the debt they rack up immediately before filing. Have they changed that now? If not they should.

 

[oobiecoo]

Date: 4/14/2009 1:28:05 PM
Author: Hudson_Hawk
Silly question, but have you googled it? I know the laws changed about three years ago and it''s subsequently more difficult (to weed out people who just don''t want to pay back what they owe). I know the subject is taboo, but I truly think it''s a blessing for people who really really need it. I believe there''s a PS''er who currently works or has worked in the past at a bankruptcy attorney''s office. She''ll hopefully weight in. If I were your friend I''d do some online research and get a referral for a bankruptcy attorney from my state''s attorney general''s office or bar association (there are referral lines you can call if you check the websites).


One warning. Your friends should be prepared to part with anything and everything of value. FI''s parents filed a few years ago and literally had people come to their house and inventory everything. Anything even remotely valuable was liquidated to go towards paying off debt. Even their TV and car. However they were able to keep their house which was great for them.

I guess this isn''t always the case depending on what all you have going on and where you live...

My parents filed for it a few years ago and we didn''t have to give up anything at all... not furniture, jewelry, the house. They even were able to keep a couple of their credit cards because they were paid off at the end of each month.

 

[MonkeyPie]

Date: 4/14/2009 3:45:58 PM
Author: oobiecoo

Date: 4/14/2009 1:28:05 PM
Author: Hudson_Hawk
Silly question, but have you googled it? I know the laws changed about three years ago and it''s subsequently more difficult (to weed out people who just don''t want to pay back what they owe). I know the subject is taboo, but I truly think it''s a blessing for people who really really need it. I believe there''s a PS''er who currently works or has worked in the past at a bankruptcy attorney''s office. She''ll hopefully weight in. If I were your friend I''d do some online research and get a referral for a bankruptcy attorney from my state''s attorney general''s office or bar association (there are referral lines you can call if you check the websites).


One warning. Your friends should be prepared to part with anything and everything of value. FI''s parents filed a few years ago and literally had people come to their house and inventory everything. Anything even remotely valuable was liquidated to go towards paying off debt. Even their TV and car. However they were able to keep their house which was great for them.

I guess this isn''t always the case depending on what all you have going on and where you live...

My parents filed for it a few years ago and we didn''t have to give up anything at all... not furniture, jewelry, the house. They even were able to keep a couple of their credit cards because they were paid off at the end of each month.

Yeah, my parents didn''t lose anything, either. Not that they had much to begin with, but they didn''t get anything taken away, which is why I mentioned to my friends that it might be an option.

If there was a way to just go out and find a new job, I''m sure he would. I tried to get him in where I work and where my husband works, but no dice. Sure, he can work at McDonalds, but that won''t pay the bills. They need a quicker fix than that.

I think they have close to 50k in debts, not including the student loans. (I didn''t know that couldn''t be added, but I see why.) One of my husbands friends was able to include his student loans though - why can''t everybody?

I found a website to refer them to, but I think after this I will stay out of it. They seem really stressed and I feel bad

 

[Hudson_Hawk]

Date: 4/14/2009 4:41:38 PM
Author: MonkeyPie

Date: 4/14/2009 3:45:58 PM

Author: oobiecoo

Date: 4/14/2009 1:28:05 PM

Author: Hudson_Hawk

Silly question, but have you googled it? I know the laws changed about three years ago and it''s subsequently more difficult (to weed out people who just don''t want to pay back what they owe). I know the subject is taboo, but I truly think it''s a blessing for people who really really need it. I believe there''s a PS''er who currently works or has worked in the past at a bankruptcy attorney''s office. She''ll hopefully weight in. If I were your friend I''d do some online research and get a referral for a bankruptcy attorney from my state''s attorney general''s office or bar association (there are referral lines you can call if you check the websites).



One warning. Your friends should be prepared to part with anything and everything of value. FI''s parents filed a few years ago and literally had people come to their house and inventory everything. Anything even remotely valuable was liquidated to go towards paying off debt. Even their TV and car. However they were able to keep their house which was great for them.

I guess this isn''t always the case depending on what all you have going on and where you live...


My parents filed for it a few years ago and we didn''t have to give up anything at all... not furniture, jewelry, the house. They even were able to keep a couple of their credit cards because they were paid off at the end of each month.

Yeah, my parents didn''t lose anything, either. Not that they had much to begin with, but they didn''t get anything taken away, which is why I mentioned to my friends that it might be an option.


If there was a way to just go out and find a new job, I''m sure he would. I tried to get him in where I work and where my husband works, but no dice. Sure, he can work at McDonalds, but that won''t pay the bills. They need a quicker fix than that.


I think they have close to 50k in debts, not including the student loans. (I didn''t know that couldn''t be added, but I see why.) One of my husbands friends was able to include his student loans though - why can''t everybody?


I found a website to refer them to, but I think after this I will stay out of it. They seem really stressed and I feel bad

It depends on the type of loan. A private loan (think Sally Mae) for school is no different than a private loan for anything else. Those are debts that can be paid off. The federal govt has protected itself against this by writing into the bankruptcy laws that those loans can''t be forgiven through B. I think in part it''s because it''s so easy to establish a reasonable repayment plan with the govt for student loans. They''re a lot more forgiving about hardship and you can consolidate them into really low interest rates. Private loan companies are creditors like the CC companies. They want their money and they want it now.

 

[Italiahaircolor]

Date: 4/14/2009 3:32:26 PM
Author: Hudson_Hawk
Italia-I''m speechless! Really and truly horrified for you. I''m glad things have worked out. FI''s father has the same name (FI is a third) and has dragged his name through the credit mud puddle. He''s had a lot of trouble with his father opening up CCs in his name and the guy even went so far as to try to take out a second mortgage on the house (which was FI''s grandparents)! He''s a crook.

Regarding student loans. I don''t believe you can have these forgiven when you file for Chapter 7/11/13. Possibly the private, but not the federal.

The identy theft is more common that you''d think. I only discovered it 2 years after the fact when I went to buy my first home. My first attempt to secure a pre-approved mortgage was way below what it should have been because it looked like I was paying a lot in bills. When we pulled my credit report, we saw all sorts of things reporting that shouldn''t have been there...the condo, the student loans, and another credit card. Once we were able to identify the source, we acted quickly and filed criminal charges, as well as flagged my credit.

Turns out, both he and his girlfriend were in on it. When he was cleaning house he found several documents with my information on it...his girlfriend posed as me to obtain the proper documentation to co-sign loans, rent the condo and get a credit card. Although my ex was clearly at the root of the issue, his girlfriend took the fall heavily for his actions...although no one was innocent I wished he had fallen on sword.

The CC debt was horrifying...when I opened the strange bill, I threw up...I remember that as if it were yesterday. He was a conartist for sure. The weeks prior to his being absolved of his debt, he and I were actually spending time together. He was trying to keep me distracted, I firmly believe that, because ironically enough, I was getting phone calls asking for my ex around the same time (we lived together before seperating). These calls weren''t random, they came every other day or so for weeks leading up to my getting the bill in the mail. I do now believe that they were CC collection agencies. But, when he and I would speak, he''d always take the number and tell me they were possible law schools looking recruit him...and I believed it hook, line and sinker...love is, after all, blind.

So, long story short, bad things happen to good people...bankruptcy is nothing to play with...make sure you''re crossing your T''s and dotting your I''s and protecting those that you may be tied to that do not deserve to be walked all over.

 

[MonkeyPie]

That really sucks italia...it makes me so angry for you!

 

[DivaDiamond007]

MonkeyPie - I am sorry that your parents are down on their financial luck, please know that they are not the only ones. I do work for a very well respected bankruptcy attorney in Ohio so I know a bit about the subject

Firstly - Please DO NOT GOOGLE bankruptcy. The internet is full of false information. Your best bet is an established bk attorney that practices in your state. Ok, now that that''s out of the way some basic info:

1. Most consumers file either a Chapter 7 or a Chapter 13.

In a Chapter 7 any assets are liquidated and the money is divided among the creditors that timely file a proof of claim with the court. A trustee is appointed and oversees this process, along with the judge. The vast majority of Chapter 7 cases that come through my office are "no asset" cases - meaning the debtors (our clients) don''t have anything of value - therefore, they lose nothing. In my district the court is not interested in your furniture, clothes, appliances, televisions/electronics or jewelry - unless any of these items are of *substantial value*. By law debtors are allowed to exempt a certain dollar amount of their personal property and the exemptions usually cover all of the things I listed before.

There are certain types of debt that are dischargeable and non-dischargeable. Credit cards, medical bills, unsecured personal loans, payday loans and signature loans are all dischargeable - meaning they do not have to be re-paid in a Chapter 7. Student loans issued by the U.S. Dept. of Edu., alimony, child support and most taxes are non-dischargeable - meaning that they must be repaid.

A Chapter 13 is esentially a bill repayment plan. All of the unsecured debt is consolidated and monthly payments are made to the bankruptcy trustee, who then distributes the money to creditors that file a timely proof of claim. The repayment term is generally 3 or 5 years (usually 5) and any debt that isn''t paid in the term is considered discharged by the court. Further, if a creditor fails to file a proof of claim the entire debt is considered discharged upon the closing of the case by the court.

2. Most consumers now have to complete a two-part consumer credit counseling/financial management course to file. Easy peasy - can usually be done online or over the phone.

3. Income must be under the median income. The median income is based on your family size for the city in which you live. For example, in Toledo, Ohio the median income for a single person is right around $40K. If your annualized income on the Means Test Form is more than that then you do not qualify for a Chapter 7. The median income raises with the number of people in your family. The median income numbers are established by the U.S. Trustees office and are reviewed several times a year.

There is so much information involved in filing a bankrutpcy case and every case is different. Most people who file for bk start out with bad credit scores so they usually go UP after filing just because the debt load is removed. The immediate effect of filing is not good. May be able to qualify for credit through an account issued through HSBC/$300CL/25%+ interest. No chance of getting a car loan for probably a year and absolutely no chance at getting a mortgage for at least 2 years. After the two year mark lenders could really care less about a bankrutpcy if you''ve worked to improve your credit.

I know this is really long - I wasn''t sure exactly what you''re looking for. I''m glad to help if you have any more specific questions.

 

[neatfreak]

Diva Two years? That''s it? That seems insane that people can come out scot free in two years.

 

[MonkeyPie]

DivaDiamond007, that is SUPER helpful! I am sending them an email right now - thank you so much!

I did get parts of that off the internet, with one of my local websites only (I didn''t trust anything else, which is why I came here), but you expanded immensely. Some of it I knew from my parents, like the income being under 40k. I think they may actually make more than that right now, but I was really hoping they would do a Chapter 13 instead, anyway. It makes a lot more sense, and hopefully the husband gets a new job soon.

neatfreak, my other friends that filed bankruptcy two years ago are in their first apartment and looking at houses with no problem. So yeah...it seems crazy, but most lenders consider a bankruptcy decent credit because you can put all your money toward the house.

 

[DivaDiamond007]

Date: 4/14/2009 10:56:53 PM
Author: neatfreak
Diva Two years? That''s it? That seems insane that people can come out scot free in two years.

Neat - I wouldn''t say that people who file get off scot free after two years. A bankruptcy can legally be reported for up to 10 years, but they generally drop off during the 7th year after the date of file. As long as it''s being reported a person who has filed should be prepared to explain their situation any time they apply for secured credit.

Obviously, filing a bk will dent your credit and the key to getting "scot free" by the two year mark is to be super diligent with you credit after the bk. You MUST pull all three of your reports and pore over them to make sure they are completely correct. Most people have errors on their reports and don''t even realize it. Paying all of your bills on time, every time is the best thing you can do. If you must have a cc then charge a small amount each month and pay it in FULL every month and that will also help bump your score up.

Once a debt has been discharged in bk the entry should read Name of Creditor, $0.00 balance, $0.00 limit, any history beyond the month of file should be blank and/or deleted and the entry must read IIB (included in bk), CH7/CH13, Discharged or something to that effect. If that is not the case then the consumer should dispute the information via certified u.s. mail, return receipt requested for each violation and then re-pull each report after all of the corrections should have been made. There is a ton of information on this practice at www.creditboards.com - which is where we refer all of our post-bk clients.

I think it''s also worth mentioning that for the vast majority of people filing for bk are doing it because they have no other choice. It''s easy to pay your bills and debts when you have your wages, but when that''s gone because your company went out of business or you got laid off it gets real hard real fast - especially for those living on the edge to begin with. Sure, we''ve had our fair share of "serial filers" but they are truly few and far between.

 

[MonkeyPie]

Thanks again, divadiamond, for all the info. My friends have an appointment Friday - I may be back to ask questions with them. The wife is dying to come on this forum but she said it makes her sad because she will want stuff and now is not the time to buy anything.

My husband and I considered this some time ago ourselves, but we are really trying to do it on our own. It isn''t really working - we have been putting double payments and such for two years and still have nearly 40k in debt that has accumulated. And some of it, yes, we made mistakes we should have been smart enough not to make, but some of it was medical-related. I don''t know. We''re trying.