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What would you do?


BrokeNFroze
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Hypothetical situation:

Your net worth is about negative $30,000. Your house if financed 100 percent loan to value. You make good cash, but are still about $1,000 behind every month.

Debts:

home $170,000

vehicle : $17,000. Can't sell becuase on one will buy it unless you take a big loss.

Bank of America: $18,000

Cap One $19,000

Chase $15,000

Citi: 5,000

WFB: $7,000

Discover: $7,000

Sears $4,000

Banana Republic $2,000

You've called the creditors, and made good progress on citi (0% and $45/month for 12 months), and WFB(3.25% for remainder of balance). The others have indicated that they can't help you. Some are totally out of control (Sears, for example, at 30%). Others (Cap One at 10% are not unreasonable). The creditors not willing to set up hardship plans have stated that you are not eligible becuase your payment history is solid.

Your credit score is about 530.

What is your next move?

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You have no equity in your home, upside down in the vechicle and owe over $70K in cc debt.

You're bk-you just don't realize it yet.

Most bk lawyers give free initial consultations. Talk with a couple and see what sort of relief you can get with a bk filing.

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Yep - BK material.

Don't try to "work yourself out of it" - it is a downward spiral.

Better to BK now - get all the debt behind you and then move forward. You will find a certain freedom in having no debt and actual SAVINGS! xdancex

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In the case where one's net worth is less than zero I suppose there isn't much to lose, is there. Maybe just trying to hang on to a few heirlooms and letting the rest go is the ticket. Even settling that much debt might destory one's credit to the point where it's an alias to BK.

However, it just can't be that easy. Even in BK does the debt really go away?

Thoughts?

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Once a bk is discharged, it carries a permanent injunction against any further attempt to collect the debt. Technically, it doesn't disappear but, it is uncollectable.

All states have exemptions for property you can carry through bk. Things like IRA's and 401K's are exempt.

Here are AK.

http://www.bankruptcyaction.com/akexemptions.htm

They're not bad at all {Ak. bk exemptions}. Most bk lawyers give a free or lowcost initial consultation. Speak with a few and get your options explained.

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There is NO WAY someone with a six figure income would pass the means test. That is double the median for AK.

How do six figure folks do Ch. 7?

Because, the bk code allows you to use your actual mortgage and utility expenses as opposed to IRS standards.

The means test is only the first step. Next, you fill out schedules I and J to determine if you have any disposable income to fund a Chapter 13.

Fill this out and see where you stand.

http://www.legalconsumer.com/bankruptcy/means-test/index.php

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I'm confused. If your income is 6 figures, then the debts you listed are managable...not great, but managable. You must have additional cash going somewhere else.

At any rate, you might also talk with a couple of BK lawyers about doing a BK13. That will force ALL your creditors to play nice. You won't have a lot of walking around cash left over, but it will get you out of this in 3 to 5 years.

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So,

I did the consultation at lunch today. Basically I MIGHT be able to do a 7, and no doubt can do a 13. The next step is to finish off the means test and see if a 7 or a 13 is reality. I have some unusual expenses (custody related) that the court might consider in the means test. So, a few hundred bucks and I'll at least know which way to go.

Other than that, I have some obligations where I could both legally and ethically shelter some equity, so I need to take care of that.

Blech, what a mess. Pretty sad when Ch. 7 BK is one's best alternative.

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But things WILL look up, tho....

I used to live in Chugiak, just N of ANC, and I ran into several other folks who had to file BK back in the day, and it worked out for them in the long haul....

The very best of luck to you from a fellow Alaskan (at heart)....(I can't believe I ever left)

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So,

I did the consultation at lunch today. Basically I MIGHT be able to do a 7, and no doubt can do a 13. The next step is to finish off the means test and see if a 7 or a 13 is reality. I have some unusual expenses (custody related) that the court might consider in the means test. So, a few hundred bucks and I'll at least know which way to go.

Other than that, I have some obligations where I could both legally and ethically shelter some equity, so I need to take care of that.

Blech, what a mess. Pretty sad when Ch. 7 BK is one's best alternative.

A lot of misconceptions about bk. A lot of misinformation came out about the effects of means testing that was mandated through bk reform. Glad you got some legal help.

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our family has had a huge blow to our income, at first gradual and in the last 2 months more than 1/2 and still we are walking the means test fence

this last month i was not able to send the 1st or 2nd mortgage and i am not sure i can this month & the car will be late this month(upside down on both)

without those payments i will not pass the means test

will the trustee still allow the debt to be counted even if payments are not current?

Distressed Nevadan

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our family has had a huge blow to our income, at first gradual and in the last 2 months more than 1/2 and still we are walking the means test fence

this last month i was not able to send the 1st or 2nd mortgage and i am not sure i can this month & the car will be late this month(upside down on both)

without those payments i will not pass the means test

will the trustee still allow the debt to be counted even if payments are not current?

Distressed Nevadan

\

Maybe. Have you spoken with an attorney.

http://www.debt-consolidation-credit-repair-service.com/forums/showthread.php?t=295001

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  • 3 months later...

It's a 7...MAYBE. I make a lot of money, but have a lot of divorce and custody related living expenses. The atty thinks the Trustee will go for most of the expenses (pretty hard to not go for child support, I guess), but I'm still about $250 short. He suggested that I get into my 401(k) at work and that a modest contribution (well, we talked about $700/month) there might be deemed reasonable and get to where there is no discretionary to worry about and make it a 7.

We'll see. Won't be actually filing until mid-Sept at the earliest.

Ahhh...what a mess....

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