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My financial FIASCO


jbmex3
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Ok I will lay it all out there. I stopped paying on my credit cards in April of this year. I have been collecting unemployment for 2 years and my wife works and makes good money so household bills get paid. I can't file for bankruptcy because I have over 100K in equity in my house and they would probably make me sell it. Here are my debts:

BofA 35K

Dis 15K

Amex 3500

Citi 29K

Citi 7500

I've been sending the DV letters but I doubt they would let this much money go without suing me. I don't know how much time I have but i want to be ready. Should I safely assume they will all sue me. What kind of defense can i have and what can i do?

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It they sue you and get a judgement, they could make you sell your home anyways to use the equity to pay off the judgment. It depends on state law. If you wife is co-signer on these accounts OR if Alabama is a community property state, they could garnish her wages to settle the account.

You could fight but I would find a way to way on these accounts.

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I'm new here but I think think with balances that high they are going to come after you pretty aggressively.

How about Chapter 13 BK? The court trustee figures out your disposible income and comes up with a repayment plan that you can afford. You make that payment for 3 or 5 years and you are done so whatever remains unpaid gets wiped out. Not ideal but you get to keep the house.

There are lots of folks here that have been in the same position so maybe they will come up with a better idea.

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Ok I will lay it all out there. I stopped paying on my credit cards in April of this year. I have been collecting unemployment for 2 years and my wife works and makes good money so household bills get paid. I can't file for bankruptcy because I have over 100K in equity in my house and they would probably make me sell it. Here are my debts:

BofA 35K

Dis 15K

Amex 3500

Citi 29K

Citi 7500

I've been sending the DV letters but I doubt they would let this much money go without suing me. I don't know how much time I have but i want to be ready. Should I safely assume they will all sue me. What kind of defense can i have and what can i do?

Alabama is NOT a Community property State so unless your wife signed on the dotted line for these debts she is not on the hook, nor can they garnish her wages.

That is the good news.

The bad news is you can kiss the equity in your home goodbye - expect to be sued for most of these debts and a judgment becomes a lien on your real estate.

You could look into a Bifurcated BK - meaning you alone. That would, assuming your spouse is also an owner of the real estate, cut YOUR equity in half, and the BK Courts could not force a sale of HER half.

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Start by not sending DV letters to original creditors. That is an immediate tip off your not current on the laws and collection issues.

You can send general dispute letters to give you a fighting chance if they claim an account stated in their lawsuit. I agree, it's just a matter of time with that much equity in your house, those creditors, and that kind of money, a lawsuit(s) will be coming.

If you have a legit defense, which you did not mention any, use that. If not, then your only shot is on procedure and making sure they have all the evidence needed and are able to present the evidence in admissible form.

The bad news again is they probably do and can. Fighting an OC, espicially with that type of balance, and a CA or JDB is literally the difference in a small fishing pond and the Pacific Ocean.

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My house is in my name, they ran my credit only, but since I am married my wife had to sign the deed as well.

My only defense is I had a crooked business partner that I'm having to sue and couldn't continue to make those payments. Up until April i had never missed a payment or been late.

I've only DV'd CA and not OC. The judicial system sucks. I'm waiting to go to court and should get a judgement and some monetary relief that I plan to use to settle with OC's, but this is ongoing since May when I filed suit and still do not have a trial date.

I'm considering having my house refinanced in my wife's name if that would save the house.

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The judicial system sucks.

Only when it works against you. Make it work for you and I'm sure you will have a different opinion.

I'm pretty sure everyone of those creditors had or has a private arbitration clause in the agreements. Use that if you want to take them out of court. AMEX, for that amount, probably won't follow you and the 7.5K Citi account might not want to deal with private arbitration.

You can cost AMEX what you stated you owed almost just to get the whole process started. Of course fees and possible atty fees awards need to be considered. Of course, for court that is also true.

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OP, having your wife refi the house into her name won't help you.

You need a good Bk attorney. You can file by yourself, but you will have to use your gross household income (including your wife's income). There is a way to expense her income, legitimately, but your case is not a simple case just based on the little bit you have posted here. Interview several BK attorney's with all of your figures (debt/income etc) so you can get an honest evaluation of your situation.

It can be done - but you need to be very careful here. Have the attorney run both the Ch 13 and the Ch 7 senerios so you can choose which works best for you.

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I haven't seen your figures. Generally speaking when you file a Ch 7 you can keep your home and the equity in it as long as it fits within the exemptions allowed by your state. Check your states exemptions at LegalConsumer.com :: Free Bankruptcy Forms, Information, Means Test Calculator, 50 State Exemptions, Federal Bankruptcy Law, Bankruptcy News Every state has different exemptions for different things (for example: home, cash auto etc). You will need to complete a schedule of both your assets and liabilities in order to determine your actual "equity". If you have a home equity line - it goes against the equity in the house.

Once you file BK, you loose your credit lines - all of them. That is one of the purposes of filing - to get rid of the debt.

Having said that, you can generally keep the house. If you have a complex situation (business debt, personal debt, assets for both you and your wife etc) it really is advisable to get an experienced attorney. BK law is deadline driven and runs on a very fast pace - especially Ch 7. You miss a deadline and you are scr*wed. :(

One of the parts of BK that people don't talk about to much is the relationship between the attorney's and the trustees. The trustees know who is "good" and who is not (referring to attorney's). In complex cases that can make the difference between a smooth case and one that isn't so smooth. Experience counts, especially in a complex case.

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this is what it says about alabama

Real property or mobile home to $5,000; property cannot exceed 160 acres (husband & wife may double)

I have about 100K in equity. With my credit shot to hell now I don't think I can take out a line of equity or refi with cash out. My vehicles are paid for. My only bills are regular household bills and child support which has been 626 but is being lowered. and i pay med ins of 411 month

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You may consider a Ch 13. A Ch 13 is there to protect YOU and YOUR ASSETS as well as getting creditors paid. Don't think of it as a 100% repayment plan - there are many types of Ch 13 repayment plans - even those as low as zero (but that is rare). If you have assets that you want to protect, for example your $100k in home equity and your paid in full autos, a Ch 13 is a good vehicle to use.

Be careful in your selection of an attorney. Not all attorney's are good with Ch 13's. In fact, you should interview several BK attorney's with your financials in hand so you can get a good idea of what each of them has in the way of experience for your specific type of situation. Educate yourself on what is allowed in your budget and what is not allowed so you know going in if the attorney knows what he is doing. A good attorney is worth their weight in gold - an inexperienced one can make it difficult for you by not structuring your plan the right way. This is where the rubber hits the road.

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Remember too, that the value of your home determines the actual equity. If you are using a site like Zillow to determine your value - you may be off significantly. For example, here is S Fl the values from Zillow are much higher than the actual value of the property. The best way to determine value is to get a free market analysis from a local experienced realtor. Let them know that you are just using it for planning purposes (or estate valuation type purposes).

Most people have a tendancy to over value their assets which hurts you when you are planning a BK. Think of garage sale values for things like clothing and furniture (yes everything is listed in a BK) and distressed sales for real estate when valuing your assets in a BK.

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i got the equity figure based on my apprasial when i built the house and then this years tax estimate, they are normally on the low end.

as far as attorney goes, i'm a member of prepaid legal and last year i spoke to one of their atty's about my situation. i think i will call him back tomorrow as well as call a local one bond, botus and syskus. they were actually the firm that handled a bankruptcy for a former biz partner that filled and listed me as one of the creditors.

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I don't mean to beat up on you, I truly don't but let's look at a couple of things...

You did create these debts (at least I didn't see any indication otherwise) and you owe them.

With this much money involved I'd say it's likely you will be sued and you will lose and you will end up paying whether you want to or not.

Bankruptcy can sometimes be an answer but in this case I think it's an answer to the wrong question as your ultimate problem is one of INCOME and neither more debt or the elimination of current debt through BK is going to solve that.

So...

I'd suggest that your primary concern should be in finding a job...any job...to bring in an income. I know you may not be able to find the type of work you want but when you are in a crisis you sometimes have to do things you don't want to do.

Further, I like to control a bad situation as much as possible so were I in your shoes, I'd much rather sell my house myself, get my equity out, pay the debts (maybe even settle them for smaller amounts) and get this behind you as quickly as possible so that you can start rebuilding your financial life - as unpleasant as all that is, I'd much rather do that under MY terms than be forced to do it by some creditor, judge, etc. Further, if you sell your home and aren't tied to a geographic location because of the "house" you could be free to move to find the type/quality of work you want.

At the end of the day, a house and all the other property we own is just "stuff" and stuff can be replaced.

Just my $0.02

Edited by Robert_Nashville
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Get a current appraisal of your house's value - and make sure the appraiser indicates "DISTRESS SALE VALUE" in addition to "FAIR MARKET VALUE". Use the Distress Sale Value as a house sold in a BK is certainly sold in a Distress Sale situation. Distress Sale can be as much as 20% less than Fair Market Value, so you may very well be within the $100K exemption.

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Get a current appraisal of your house's value - and make sure the appraiser indicates "DISTRESS SALE VALUE" in addition to "FAIR MARKET VALUE". Use the Distress Sale Value as a house sold in a BK is certainly sold in a Distress Sale situation. Distress Sale can be as much as 20% less than Fair Market Value, so you may very well be within the $100K exemption.

Perhaps I'm reading it incorrectly but I think the homestead exemption in Alabama is $5,000 and 160 acres; not $100K. If that's correct then even a distress appraisal is probably not going to protect him from losing his home if he files BK.

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i will look into what that value is.

also i'm fully aware that i accumulated this debt. until april i had never missed a payment or been late. i went into business with someone who i thought was a friend but some people when they see money get greedy. needless to say we are in litigation and right now i'm without 3k a month and drawing 1k a month through unemployment, so a net loss of 2k a month. while this is ongoing i've gone back to school to finish my degree and will get me bs this time next year. also my exwife did some things she shouldn't have so i took her to court for custody of my daughter which has so far cost me 4k in addition to what i'm paying for suing my ex biz partner. i had to prioritize what bills needed to be paid the most and the unsecured debt was last. my mortgage and all household bills are current as well as child support.

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i will look into what that value is.

also i'm fully aware that i accumulated this debt. until april i had never missed a payment or been late. i went into business with someone who i thought was a friend but some people when they see money get greedy. needless to say we are in litigation and right now i'm without 3k a month and drawing 1k a month through unemployment, so a net loss of 2k a month. while this is ongoing i've gone back to school to finish my degree and will get me bs this time next year. also my exwife did some things she shouldn't have so i took her to court for custody of my daughter which has so far cost me 4k in addition to what i'm paying for suing my ex biz partner. i had to prioritize what bills needed to be paid the most and the unsecured debt was last. my mortgage and all household bills are current as well as child support.

I'm not trying to beat you up here; I hope you understand. :) When we are in a crisis we have to prioritize and frankly, unsecured debt; especially CC debt ought to be at the bottom of the list!

All I'm suggesting is that, in my opinion, staying in control of the process is always a superior position to allowing someone/something else to control it...if in fact you would lose your house in a BK then, in my opinion, it's better to sell it yourself for as much as you can get and settle the debt(s) with the proceeds rather then let a BK court decide. :!:

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Robert has an excellent point. Your state has very low exemptions for homestead property protection. Right now you will need to be very careful in your planning - part of that is figuring out if BK will work for you. It may be better to sell and get all of your debt paid, especially since you are going to be going back to school and not working.

Naturally we have no idea because we don't have access to all of your figures: income, debt, etc. Sit down with your wife and come up with at least two plans even before you meet with the attorney. That way you can contrast and compare so you know where you are going.

The one thing about selling and paying off all of the debt is you will feel much better. Sounds like you would be able to negotiate an amount with the creditors anyway. But don't tell them its coming from the sale of your house. They will run out and get a judgements to convert to a lien in very high amounts (I've seen that happen). You can fight the judgements like the posters do here, but in the meantime, protect yourself and your equity so you can pay on your schedule.

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i'm hoping to settle my lawsuit soon and then use money to settle with creditors. i'm hoping i still have some time, like i said i've only recently stopped paying the cc, since april. hopefully none are too trigger happy

seriously , I understand your circumstance, but I don't think negotiating unless you have at least 3 grand you wish to back it with is going to help ( Now this was jsut my experience and be honest I wasted about 5 grand and still never got it settled as I thought I would of.) BK real in your case sounds like your best option. It is their for a reason by law. Keep in mind our for fathers many of em were sent to North America as punishment for not being able to pay their debts.

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