Financial Challenges Support Group

Connie

It depends on each individual situation. Both hurt your credit. You're less likely to get "taken" in bankruptcy; because a lot of those "credit counseling" companies are scams. But it costs a LOT of money up front. I tried both...

For me it was Chapter 13 bankruptcy ....a huge relief and the very last resort. I was going to lose my house, had a ton of debt from a divorce and some unexpected medical bills. I've lost my job twice over the course of 18 months and don't qualify for unemployment.

I now can survive on my income. A few pit falls... my home/auto insurance premiums went up (I'm consider a higher risk because of my credit score), and things like cell phone contracts and auto loans are impossible to get. Also I can't contribute to any savings or retirement fund until my 3 years are up.

Hope that helps. If you have any questions don't be afraid to ask.

Hi Connie,

The debt consolidation didn't work for us. I, too, thought if we use a debt consolidation plan, it would cut down our payments by 50%-60% but it's not true. When our new plan was presented to us, it only saves us $89 a month. Besides that, the payment to the agent is $35 per month for his service. I could save $89 every month by not eating out during work days.

I read from a BK forum that if you are using credit cards to pay bills, that's not a good sign. I am no expert in bankruptcy; hence, my DH and I are seeing a BK attorney next week to see if we are eligible to file or meet the Means Test. You can get free consultation if you are considering to go that route.

Sorry to hear that you're facing financial difficulty. My DH and I are also in the same situation as you are. I guess we just have to take a day at a time.

Dear Oestonee,

Can you kindly elaborate or explain why you are not able to contribute any savings or retirement fund? I am really curious, for I have been paying a little to my 403(b) each month. If my DH and I are eligible to file BK, I would love to be able to continue paying into my 403(b).

Thanks.

The trustee's statement was basically I had no business using that income for savings when as long as I'm in repayment. I don't have to liquidate my retirement, but can't contribute to it either.

I needed that extra income to meet my budget.

Also you will lose any tax returns, dividends, or other income as long as you are in the program.

Thank you so much for the information, Oestonee!

I do have two more questions if you don't mind enlightening me. 1) Did you mean every year (for 5 yrs in Chapter 13), our tax returns will be taken away to repay the debts? 2) When you mentioned "other" income, does it mean like an "extra" income from working a 2nd job?

Thanks again.

No problem....

I know I had a lot of questions when I started this process.

The answer is yes...

You must forfeit any and all tax returns to your trustee during your repayment plan (mine is only 3 years).

You must report all change in income. I work 2 jobs and even though one is seasonal I had to report them both.

If you win the lottery, earn any interest, or any other winfall.... it must be forfeited to your trustee.

Now each state interrupts the FED laws a little differently and it really depends on your lawyer to negotiate your repayment plan. A good one will cover all the bases.... a bad one can put you in a world of hurt. I went through 3 before I hired one.

Also I was mislead.... you can file bankruptcy even if you don't have any income (if I had filed when I was unemployed I would have come out better).

Wow, that's really good info, Oestonee! I appreciate you for explaining my questions in details.

I hope we have a good attorney. His secretary only requested me to bring our 2008 tax return, our recent cc statements and the last 6 months of our pay stubs to the consultation. I did some research on the Internet and was surprised that the secretary did not ask us for our monthly expenses.

How do I determine whether or not if the BK attorney is good since I don't know exactly what are considered as good bases? I found him on the Internet. The first one my DH contacted said she is too busy to take our case. : (

Sling

Contact the company you investigated your debt consolidation, ask them for a referral. That's how I got my current lawyer.

I was told to bring to my first meeting...
6 months pay stubs
3 months bank statements
and my budget of actual expenses for 6 months including all debt I wanted discharged.

That's the information they need for the means test which determines if you are eligible to file bankruptcy and which type. This meeting takes about an hour and may be with an assistant attorney or even a paralegal.

Then it's time to collect your paperwork..... you will need legal copies of titles to any vehicles, property, or assets.
Proof of insurance on them
Recorded Mortgage, Deeds
Property Taxes and status
Appraisals of property
all financial agreements
statements for all investments
and basically anything that has your signature on it.

Make sure you have EVERYTHING the lawyer requests of you. It makes your meeting with your trustee so much smoother.....

I might add you need account number - total amounts owed and MAILING Addresses of all your debtors..... My lawyer sent me a spreadsheet to fill in ... also get at least one copy of your credit report. Make sure you can account for EVERYTHING on it.

Hello Oestonee
How about if I filed for Chapter 7? Will they take my tax returns to pay off my debt? My friend said she file for bankruptcy in 2005 and she feels so much better but she never mentioned to be about the tax returns and she's on vacation now so i can't ask her. Thank you so much for all your advice it helps tremendously. i'm so confused this is the last thing i want to do but I see no other way out.
Thank you