Bankruptcy Synopsis - My story for those of you "on the brink"

[Indenturedebtor]

I would like to briefly share our story of bankruptcy for those of you who have lost your jobs, or are just barely hanging on anymore. I will stick to the main facts here. I know that when we started considering it, we were very frightened, confused, and I personally really benefited from the stories of other DU'ers.

We got into trouble in the first place because as a salesman my income was highly variable, and steadily declined over the course of three years. We didn't have any huge medical bills, and we cooked our own food, didn't go out almost ever, and didn't spend money on music, electronics, clothes, whatever. We both had late model cars, but very low payments because our credit was nearly perfect and I was a car salesman. Most of our budget in fact went into a house payment which was not outrageous.

Anyways, as everything from rice to gas got more expensive and my commissions shrank and came farther apart, we had to rely on the credit cards more and more to buy food and to get to work. Over the course of a couple of years we ended up owing about 17k in CC debt, and could barely make the minimums on top of our other financial obligations, but we were only very slowly sinking. Then I lost my job.

At that point I started looking for another job, and after two months it seemed that I had a good chance at a great one! Finally I would be able to get out of sales, and even though I would make less money, I wouldn't hate going to work so much!

But by then we were buried in debt and nearly every one of our creditors was fairly beating down our doors. If it weren't for the late fees, etc, we may have been able to get back to the point of only slowly sinking again, however we realised that we would likely never be able to really save for retirement, or to ever be able to afford to do things like weekend trips, have children, go to the theatre, etc.

So we started looking into bankruptcy. We quickly realised that under The Worst US President Ever's bankruptcy laws if I took that other job, we would not be able to file chapter 7. We were going to go over the Mean's Test limits by about 200 dollars a month. Even though we couldn't afford to pay our bills and see the doctor, we were just far enough above the "poverty line" that our lives were destined for indentured servitude.

We decided to try and thread the needle. I did recieve a job offer from that company and I accepted, but we put them off for a couple of months while our average income sank low enough to qualify for a total restructuring. We had to borrow money from family to pay for legal representation, and we ate a TON of ramen and PBJ's, but long story short we are getting ready to move into a cute neighborhood in the heart of the city, and life is full of possibiliy again!

I can now afford to start a new career in a field that excites me, and we can actually save money and plan for the future. It helps that we surrendered one of the cars, etc, but really - getting rid of 700 dollars a month in debt payments is like throwing a boulder off of my chest. We may have trouble getting our next jobs, we will likely never own another house (not that we want to), and if we have to buy a car in the next 8 years or so it's going to hurt. But we both really feel as though we have our lives back again.

And we don't feel the least bit of guilt. There is a real stigma about bankruptcy, but we know that we lived as frugally as we could, and we know that companies "reorganise" every day. In the end it comes down to a simple business decision: Will I be better off after bankruptcy? If you are on the brink and feel like we did that you'll never be able to pay all of your debts off, then maybe you should do some research. Companies do it every damn day, and they wouldn't hesitate to tell you that your gift certificate/maintenance contract/paycheck is no longer valid. To them it's "Just Business" and it should be "Just Business" to you as well.

[Horse with no Name]

1. It should be MORE difficult for a corporation

to go bankrupt than for the average citizen.
I'm glad you got your life back.
I've never gone bankrupt but I went through some tough times and not really sure how I came out swinging on the other side.
I do know that I pay cash for the things I want and NEVER go into debt for anything.
I drive an older car with low mileage--but it is paid for.
I refuse to ever let THAT monkey take a ride on my back again.
Good luck to you.

[Indenturedebtor]

3. Thank you and I agree. The corps use BK like a bludgeon

They use it to squash their employees and cut health plans.

Yes we've always wanted to stay away from debt but we got out of college with a fair bit, and then moved to a new town with nothing and no jobs. To get a decent job takes months, and you need transportation (which in most western cities means a car), and clothes to wear to work, and dishes to cook on, etc. No sooner had we started to pay that debt off than we hit some little bumps in the road that we had to borrow for, and so on. And once that ball gets rolling it's very hard to stop.

Now we actually have a chance to save money, and avoid relying on the snakes for help when something unexpected comes up.

[varelse]

2. Recommended

Thank you for sharing this with us, for shedding some welcome light on a situation that is likely to be the fate of hundreds of DU'ers in the near future, and for saying something that needs to be said, and repeated:

In the end it comes down to a simple business decision: Will I be better off after bankruptcy? If you are on the brink and feel like we did that you'll never be able to pay all of your debts off, then maybe you should do some research. Companies do it every damn day, and they wouldn't hesitate to tell you that your gift certificate/maintenance contract/paycheck is no longer valid. To them it's "Just Business" and it should be "Just Business" to you as well.

[SOS]

4. Thank you

We are also near collapse, after my wife's "downsizing".
Question: Did you have to sell the house?
We want to keep our home at all costs, even if it means potatoes and tap water for dinner every day.

[Indenturedebtor]

10. My heart goes out to you in what I know is a very scary and hard situation :(

In nearly every state you can keep the house and any items that you would like to continue paying for. Now if you have a great deal of equity in your house beyond what you owe - most states will still let you keep your primary residence.

In CH 7 you have to surrender all of your cash assets except untouched retirement accounts, and can lose things like cars and boats that have equity in them (above what you owe). Your creditors have the option to pursue other property of yours like jewelery etc, but as I understand it they rarely bother unless you're a Rothschild. CH 13 is more like debt restructuring, where most people get rid of whatever debt can't be paid off between 3-7 years in a structured plan.

In any case we found a couple of lawyers who were willing to look over our assets/debt/income etc at no charge to tell us if and what we might qualify for, and briefly explain what we would have to surrender/do under both types of BK. We did have to fil out a 15 page packet to get all of the info together for them first, and we had to do a lot of research on our own to really feel that we understood the process, but it REALLY was worth it for us.

Honestly, I don't know what your situation is like, but after looking at both 13 and 7, 7 was WAY better for us. But again, you have to qualify for the Means Test. They differ by state (based on median household income), and with a little work you should be able to look it up. If you don't directly qualify for the test, it is possible to still go 7, but quite a bit more difficult.

We gave up the house because with the downturn it just became a massive money pit that we would never dig out of.

[SOS]

20. Thanks again for all the info.

I will do the research and take your example as a template for possible future action.
We are barely hanging there now.

Fixed expenses are still covered, but with zero left over.
We will try to increase income, but if necessary we will file.

[SoCalDem]

17. Depending on your state's laws, your house may be exempt

as long as you can and do keep paying.. These days, forcing a house sale at a hge loss, does not benefit anyone..even banks, so maybe they are not that eager to force sales anymore.. the premise behind it , was that people would sit on piles of equity, claim bankruptcy and THEN sell the house, pocketing the profits..

BUT, as painful as it may be to think about, you might be better off without it.. That depends on how long you have been paying on it, and how much you still owe..

:hug:

[aikoaiko]

5. Don't forget to thank Joe Biden for Bankruptcy Reform, too.

[yodoobo]

6. Bankruptcy is a beginning. Not an end

I've been through it. In 2002.

Banks have convinced society that there is a stigma and that filing Bankruptcy is far far worse than living in a state of constant financial crisis.

For me filing bankruptcy was the a new beginning that allowed me to become a via player again in the economy, instead of a slave to the banks.

The hell of BK is *NOT* the court process. The hell is putting it off and thinking that you are doing the right thing by trying to avoid it for x number of years by treading water.

Once you actually file bankruptcy. The financial hell is over and your new can begin.

Net Net, I'm convinced that going through bankruptcy has allowed me to contribute far more to the economy, than if I had just remained a slave to the banks.

[sandyd921]

8. That's it exactly! n/t

[wroberts189]

25. It was for me..saved my life.

but this was before the new bankruptcy bill.

[sandyd921]

7. Thanks for your story.

Been there myself (back in 2000) but before the a-hole regime's onerous bankruptcy law was passed. I've re-established my credit and am doing fairly well (actually for the first time in my adult life) other than my 403b retirement account having crashed (like everyone else's).

[Delphinus]

9. I appreciate you sharing.

There's as much a stigma about bankruptcy as there is about depression (mental health).

My mom had to file a few years ago because of health issues and it took a lot out of her to do that.

Me - I've not got health issues, I've got health insurance issues. I have gone into so much debt to be able to have health insurance ... {sigh}

I like my house - very affordable, small, close to work, and a great garden. I own my car and it's over a decade old. I don't want to jeopardize my home, which is the only thing that keeps me from investigating bankruptcy. That and the dream that all I need is to have one huge loan and I'll be OK. Or a second part-time job ... maybe even a third. And the shame. I would have a heck of a time with the shame. There are times I think I'd rather die than have the shame of bankruptcy around me.

Time will only tell.

[Indenturedebtor]

18. Yes it is a little embarassing. But that's largely because of advertising

One thing that really encouraged me to get over the shame is knowing that bankruptcy is an option in nearly every culture around the world that has been dealing with debt for more than a couple hundred years. In fact in many cultures it's obligatory and or honorable for creditors to forgive debts periodically. Societies around the world know that debt can become a form of slavery. In fact, that's really the point...

Not saying "Hey go out there and declare bankruptcy", but don't let shame/guilt keep you from making a good business decision. Remember that all of your creditors would grind you up into meat and sell you for a nickle if it helped their bottom line one iota.

[Delphinus]

26. Too true:

Remember that all of your creditors would grind you up into meat and sell you for a nickle if it helped their bottom line one iota.

[xiamiam]

22. hr200 will be passed at some time in this administration..house judiciary passed

..allowing judges to restructure and modify the mortgages..to reflect market values...for homeowners who file bankruptcy..Durbin wanted it attached to stimulus bill but Obama wanted to not muddy the waters ..Obama is committed to this legislation..

http://www.mortgageorb.com/e107_plugins/content/content.php?content.2900

I'm heading toward bk ...its tough...even here there are generalizations about taking risks and getting in over your head...its the me versus them..like it could never happen to me and you deserve what you get.....trust me, if its happening to me...it could happen to anyone...unless of course you paid cash for everything and have lived a very conservative life...I'm single, 58...one income...commission only income...in real estate..and yes, I took risks..but I bought my first house when I was 24 and that was a risk as well...even at 25k..I've worked my tail off..buying old properties and fixing them up..while my friends were having fun...I was buying roofing material..hauling old tile to the dump..fixing everything..years and years of this..had a plan for my retirement to eventually begin selling the properties...I got sick, had a couple years in the run up to the market collapse being bed ridden, radiation, and rehabilitation..and used equity to cover those expenses..I still had equity in every property...but the foreclosure sales have driven prices down as much as 50%...so even the properties that are still ok are affected by the ones that are very underwater...I've spent my life paying every bill on time..perfect credit...and then the crap hit the fan...I went from having a plan...to a deep depression thinking nonstop about offing myself...I probably would have if McCain had won the election...the humiliation, confusion, loss of self pride..is unbearable at times..I showed a foreclosure several months back that belonged to a family, 2 children and an infant...all there at the time of the showing...I came home and cried for them..I just cant do it...the bank was willing to short sale but not renegotiate their principle with them..why punitive?...everyone loses..I just dont understand ...I'm an average face of this problem...I've stopped resisting the inevitable...

[Rick Myers]

11. k and r

thank you for sharing!

[Oceansaway]

12. K&R....n/t

[K Gardner]

13. I had the same conversation yesterday with my neighbor. Her story, much like yours. She

did not qualify to do a Chapter 7 because she made a little over $32,000/year (she and her husband combined), so they're doing an 11 and throwing her car payment in as well. She said, "My credit will be ruined but we'll have a fresh start and in 5 years, I'll be completely out of debt."

It seems "credit scores" and the scare of losing yours is what keeps many people pounding the neverending treadmill of the debt cycle.

I'm happy for you, happy for my neighbor and am SO thankful you shared this story. Best of luck to you in your "new life" !! :hug:

[yodoobo]

14. What they don't tell you about credit scores

When you need bankruptcy the most, your credit score is one of the least important things you have.

People need to ask, "Why do I need a good credit score when that last thing I need is new debt?"

Furthermore, it takes about 1 to 2 years before your credit score recovers. Which means by the time your score recovers is about the time you'll be financially ready for new debt anyway(should you choose that path)

People irrationally value their score imo.

[SoCalDem]

15. Just keep making a "car-payment" to yourself, in a savings account

every month, and before you know it, you'll have the cash to buy a decent used car..and have NO payment.. No one checks your credit when you pay cash :evilgrin:..

and don't worry so much about the "stigma" of BK.. .My best friend did it a few years back..2003, I think, and within WEEKS, she was already receiving offers of credit in the mail..

She was scared to death when she had to have a credit check run, in order to rent a place at around year 4 post BK, and her credit check came back just fine..

There are so many people these days in the same boat, I think people are going to have to be more "understanding"..

Congrats on your "new start":hi:

[girl gone mad]

16. People need to get over the stigma of bankruptcy and foreclosure.

The banks you borrowed from wouldn't hesitate to walk away from debt if it was in their best interest.

[Indenturedebtor]

19. Yes as a matter of fact we'll all pay them through our taxes as it is!

We are all nothing but money to them. If they have any emotions towards the average citizen at all, they feel contempt and greed... why should we let our "good natures" keep us from making good business decisions in regards to these companies?

[govteacher]

21. Great Message

Thanks for your story and good luck!
One big issue, in my opinion, is the unconscionable interest rates. Of course, the banks had no problem raising interest rates immediately after getting billions in bailout money.

To those worried about losing their homes in bankruptcy, I don't believe you would unless you are in foreclosure or can't afford to keep up the payments. Of course so many people are "underwater" with home prices, it may not make sense.

Just think of bankruptcy as getting some of your money back for the bailouts!!

[closeupready]

23. Thanks for sharing your story.

I was just thinking the other day, isn't it fucked up that corporations are completely free to 'reorganize' their financial business, regardless of merit or who it harms in the process, and individuals are essentially enslaved, with the government's blessing, to their creditors. Fucked up Congress. :mad:

[Delphinus]

27. Yeah,

that's all I need - reorganization.

I just need to investigate things a bit more before I make this step. Someone I spoke with suggested settling with the credit card companies, where I would pay a percentage of the outstanding debt and the rest would be written off (but I'd get a 1099-C to pay taxes upon).

I don't know ... I just don't know.

[wroberts189]

24. You are correct ..if your a corp. you are off the hook. knr

But as an individual it will follow you for what ..ten years now?

It's an outrage. And Joe Biden has some explaining to do or better yet FIX IT.