BK, attempt to pay or just wait for the phone calls to start

[john2kx]

This is my first post and I've spent two days trying to learn the correct nomenclature here, so bare with me. I hope I am in the right forum for my situation.

About one year ago I lost my job of 25 years and have spent that time trying to get my finances in order to get by on about half the income I used to make. Paid off several loans, sold my home and down sized to one with a smaller mortage and paid off both cars.

I spent the last 9 months selling cars and the income was much less than expected. Went from making almost 80K/yr to less than 40K. I've just about exhausted my savings and wiped out my 401K paying off bills and surviving the past year. I do receive a $1400/mo pension from my corporate job and feel sure I can pay my current bills with the type of work I can find in my area BUT I do have one credit card with a $27,000 balance. The $600 payment is more than I see being able to afford in the future. To date I've made all my payments and have had a 700 becon score for as far back as I can remember.

I've never had to deal with credit issues other than disputing a few errors on my credit report but DO want to have a plan before I get backed into a corner.

Have considered BK but don't think that is the proper avenue. Selling cars, I ran credit reports everyday and saw more charge offs than you would believe and thought that I should just continue paying off my credit card until I could not afford it anymore and just let the CAs start calling and eventually having it written off. Reading about all the folks being taken to court, judgements, checking accounts frozen etc. have me wondering if it really was as easy as I had first thought.

I live in South Carolina, single and am 48 years old. The house I just bought will satisfy me from now on and I have about 10K equity in it. As mentioned previously, my 6 and 10 year old cars are paid for and I could easily get by with just one.

I'm looking for some advise. Anything I can do to protect myself/assets ahead of time? Will I be dragged into court many times in the future if I elect to allow the credit card to go to collections? I feel sure I'll be able to prove I can't afford the 600/mo payment.

[LadynRed]

With a balance of 27K if you stop paying you WILL be sued. If the debt is to Citibank, MBNA or Discover, a lawsuit is almost guaranteed.

Charge-offs do not mean you are no longer liable for the debt, it's merely an accounting function for the creditor.

SC's equity exemption isn't very generous (for bk or judgments) and IF you were sued they could place a lien on your house. The good news is they can't garnish wages, but that won't mean they won't come after any other assets you have if they sue and get a judgment against you. The other good thing is that SC has a short 3 year statute of limitations for legal action to enforce collection of a debt. IF you could keep from being sued for 3 years, you'd be more or less home free as far as lawsuits are concerned. I'm not sure you could lay low for that long with a balance like that. Once you default it will double in no time with nosebleed default interest rates and added fees.

You might want to consult with an attorney to see if you have other options for protecting your assets.

[john2kx]

LadynRed,

I'd first like to say thanks for your prompt reply. Have only spent a few days on this site and see you are one of the most valued contributors.

My cc is with SunTrust. I really wasn't that concerned with a lien on my house because of my age and the likelyhood of me staying here forever. None of us know what holds for the future, but I don't see selling my house in the future. Maybe some great job will come along that would require a move, but I see renting as a option to dodge the lien issue. Correct me if I am wrong.

It's good to know South Carolina can't garnish wages since I do plan to keep working for at least the next 15-20 years.

What assests should I be worried about them coming after? The way I see it, I don't have allot of equity in my house. Both cars are paid off and I could elimanate one now if need be. One is worth about $2000 and the other about $18000. I'd like to have the transporation issue nailed down early on if possible. I'm trying to avoid financing any future purchases but could go into debt for a newer car if that would be the smart thing to do, ie sell both and pay the minimum down pmt on a new/newer car. Besides normal household items, I don't have any high dollar assests (jewelry, boats, etc.). I hate to say it, but I could start stuffing mason jars after selling my expensive car and keep the proceeds for future use as the cheaper car is working just fine for now.

Although I'm not in any trouble yet, I'd like to prepare for the worst. Your reply was not what I was hoping to hear but my gut tells me that your advise may be the best route. If there are too many scenarios to provide the best answer for my situation, I'll follow your advise and seek help from a lawyer.

Regards,

John

[bingo]

You're in a better position than many who come through here.

Sell the car worth $18K and use the proceeds to pay down the CC to a level that is comfortable. Then, put the cc's away and work on paying it off.

With the situation you describe, BK is not in your best interest.

[LadynRed]

The homestead equity exemption in SC is a puny $5,000.

SECTION 15-41-30. Property exempt from attachment, levy, and sale.

The following real and personal property of a debtor domiciled in this State is exempt from attachment, levy, and sale under any mesne or final process issued by any court or bankruptcy proceeding:

(1) The debtor's aggregate interest, not to exceed five thousand dollars in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor, except that the aggregate value of multiple homestead exemptions allowable with respect to a single living unit may not exceed ten thousand dollars. If there are multiple owners of such a living unit exempt as a homestead, the value of the exemption of each individual owner may not exceed his fractional portion of ten thousand dollars.

(2) The debtor's interest, not to exceed one thousand two hundred dollars in value, in one motor vehicle.

(3) The debtor's interest, not to exceed two thousand five hundred dollars in aggregate value in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(4) The debtor's aggregate interest, not to exceed five hundred dollars in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.

(5) The debtor's aggregate interest in cash and other liquid assets to the extent of a value not exceeding one thousand dollars, except that this exemption is available only to an individual who does not claim a homestead exemption. The term "liquid assets" includes deposits, securities, notes, drafts, unpaid earnings not otherwise exempt, accrued vacation pay, refunds, prepayments, and other receivables.

(6) The debtor's aggregate interest, not to exceed seven hundred fifty dollars in value, in any implements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor.

(7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract.

(8) The debtor's aggregate interest, not to exceed in value four thousand dollars less any amount of property of the estate transferred in the manner specified in Section 542(d) of the Bankruptcy Code of 1978, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.

(9) Professionally prescribed health aids for the debtor or a dependent of the debtor.

(10) The debtor's right to receive:

(A) a social security benefit, unemployment compensation, or a local public assistance benefit;

( a veteran's benefit;

© a disability benefit, except as provided in Section 15-41-33, or an illness or unemployment benefit;

(D) alimony, support, or separate maintenance;

(E) a payment under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, unless

(i) the plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor's rights under the plan or contract arose;

(ii) the payment is on account of age or length of service; and

(iii) the plan or contract does not qualify under Sections 401(a), 403(a), 403(, or 409 of the Internal Revenue Code of 1954 (26 U.S.C. 401(a), 403(a), 403(, or 409).

(11) The debtor's right to receive or property that is traceable to:

(A) an award under a crime victim's reparation law;

( a payment on account of the bodily injury of the debtor or of the wrongful death or bodily injury of another individual of whom the debtor was or is a dependent;

© a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of that individual's death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.

(12) The debtor's right to receive individual retirement accounts as described in Sections 408(a) and 408A of the Internal Revenue Code, individual retirement annuities as described in Section 408( of the Internal Revenue Code, and accounts established as part of a trust described in Section 408© of the Internal Revenue Code, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. A claimed exemption may be reduced or eliminated by the amount of a fraudulent conveyance into the individual retirement account or other plan. For purposes of this item, "Internal Revenue Code" has the meaning provided in Section 12-6-40(A).

(13) The debtor's interest in a pension plan qualified under the Employee Retirement Income Security Act of 1974, as amended.

So, you've got more equity than can be safely exempted.

The auto exemption is only $1200 (equity), so either car could be vulnerable, but certainly the most expensive one is. It IS possible for a judgment creditor to sieze it, though they usually don't bother with vehciles because they simply cannot sell them at auction for anything near what they may be worth. With two cars, you could stand to lose 1.

So, I would tend to agree with Bingo on this. The house would be in jeopardy if you tried to file anything but a Ch 13 bankruptcy. Same goes for the two vehicles.

[jumpman301]

that suntrust card is issued by mbna. how recently have you checked the equity in your home? It may very well have went up some. also you stated you have good credit, you can also do equity loans up to 125% LTV. Also might give you a write off on your taxes. that is of course if you don't want to sell the car worth 18k.