Young Debtor afraid to file Chapter 7

[had6010]

What is the name of your state? Ohio

I am 26 years old and have $30,000 in credit card debt. I made bad choices in college and also had a dead beat boyfriend a few years ago which these things led me to where I am today. I make $43,000 (before taxes) a year but pay about $740 per month in credit card minimum payments. After necessary monthly expenses and my credit card payments I have nothing...I live paycheck to paycheck and sometimes I have a hard time doing that. My boyfriend and I bought a house in October 2004 where we split the mortgage and the utilities. We thought this would help since the mortgage payment is less then what I paid in rent but it still hasn't freed up much money for me. I spoke to Consumer Credit Counseling and they can only save me about $50 per month. I have no savings and only a little in my 401k. My student loans are currently in forebearance of my student loans until October 2005, but when these come due I will be in the red each month by about $240. Until recently (after speaking with an attorney) I often had to use credit cards to make ends meet.

I spoke with an attorney who suggested Chapter 7 for me. He also suggested that I wait until mid-February to file so I can get my tax return and so that I have been in my house for longer than 60 days. He says that we are not at risk to lose our house since we really don't have equity in it yet and our state allows $5,000 in equity and that I can keep my car because it is a lease. I made up my mind that I was going to file in February as he suggested which would give me time to stop paying my cards and using the funds to come up with the money to pay my attorney and filing fees. However, I am really afraid that this is going to haunt me for the rest of my life or that something will go wrong and I will end up in a worse off situation. Does anyone have any advice or heard of a similar situation? I am afraid that they will say I am abusing the law or something and dismiss my case since if my credit cards are discharged I will have about $600-700 left over each month ($360-460 after my loans start being paid). Does dismissal of chapter 7 happen alot? (I am not lying about anything so I am not afraid of fraud) Can they force me to file Chapter 13 instead...if so, is this common?

Help! I am petrified to file but am drowning in debt. I need a second opinion (or third or fourth if others want to offer advice) from someone other than my attorney. I trust him but I want to be absolutely sure I am doing the right thing. I know this will stay on my credit record but I fear dismissal or some other issues making my life even harder.

 

[ihatearizona]

If you are going to have $300 to $500 left over each month the Trustee could very well force you into a Chapter 13.

You might want to go over your expenses a little more thoroughly to make sure you are listing everything. In order to avoid the 13 you should have $100 or less left over after your monthly expenses.

Talk to your attorney again about this issue PRIOR to filing.

 

[had6010]

Well, my lawyer and I went over expenses and the issue with me is that I don't buy clothes ever, I scrimp on groceries, I quit my hobbies, walk intead of using my car all the time, use credit cards to make ends meet, etc. right now in order to be able to afford my monthly minimums for my credit cards. My lawyer told me that I need to stop paying my cards and begin using my money for my basic living needs, otherwise, I am not showing that I am struggling...which I am very badly! Basically, if I have a car repair or any emergency come up where I need money I am in big trouble b/c I have nothing. I read on another website that up to $500 per month is considered acceptable to account for unexpected expenses and some savings.

Are you a lawyer? If so, this is not true? Should I not file then and just keep trying to tough it out even though that hasn't gotten me no where for the past 4 years?

 

[ihatearizona]

You can account for the funds you are holding for car repairs as an expense on your BK forms. Items that you typically only spend on once a year can be pro-rated on your forms. Let's say that you spend $1200/yr on maintenance for your auto. You can list this as a monthly expense of $100.

As for food, you don't want to list what it would cost for you to survive solely by eating Top Ramen. You want to list what it would cost for you to survive eating normal food (unless you really like Top Ramen).

I hope you're catching on to what I am saying.

As for the $500 thing, I would not trust that. Go by what your attorney has to say as he has had dealings with the Trustees in your area before. He will know what they will and won't allow.

No, I'm not an attorney. Just a person who has experience due to my own BK filing.

 

[had6010]

My lawyer did that I believe because he told me that I need to buy some clothes and need to spend alot more on groceries ( I never buy new clothes, even socks and stuff unless I absolutely have to and I was only spending $30 a week on groceries which was making me get sick because I wasn't eating enough).

I added expenses (that are true) for haircuts, car maintenance, a minimal amount for a hobby, nominal gifts throughout the year, pet expenses, prescriptions, and a few other minor things. I don't have those figures with me though since my paperwork is still witht he attorney but it still left a couple hundred dollars each month I believe. My lawyer told me to keep my account balance low but not buy luxury items.

It is weird because if my debts are discharged I will have a couple hundred bucks left over each month which I plan on saving since I have $0 in savings right now and this overage may cause a problem with my filing but if I don't have my debts discharged then I am negative a couple hundred. It is like pickle in the middle! Oh well, if I have to file Chapter 13 I guess it will still be better than the situation I am in now.

 

[ihatearizona]

Listen to your attorney. He/she is providing you with good advice.

 

[Ladynred]

You're not listing REASONABLE LIVING EXPENSES, you're listing starvation-mode expenses. Those are NOT 'normal' living expenses. Everyone buys clothes, so do as your lawyer says. Do you spend money on home maintenance, like light bulbs, floor and carpet cleaning products, draino, etc ?? Of COURSE you do, any normal homeowner has to. If you get your hair done, include it. If you get your shoes repaired -or would - include it. If you have stuff that needs to be dry-cleaned, then include it. Auto maintenance, insurances, gas, oil changes, tire rotations, TIRES, licensing and registration fees, pet food and care, bank fees and the cost of checks, medical and dental co-pays (if you pay them). Surely you do laundry .. what does it cost you for soap powder, fabric softener, bleach, etc. ?? Get the picture ?

 

[Who's Liable?]

Everyone here is providing you with good information... NORMAL LIVING EXPENSES include EVERYTHING that you would need to live a normal modern life, while not scimping on things like food... You have a right to eat whatever you want, you have a right to buy whatever clothes you want, you have a right to take your car in when you want to, not when you can afford it...

You just can't eat at 5-star restaurants, shop at Neiman Marcus, etc., and claim you're drowning in debt, the courts would laught at you... Remember, filinf for BK is your right... No one can take that away from you... There are people out there who abuse the system and can/will get away with it... If I were you, I wouldn't feel bad about it...

You made some bad choices in life, but as long as you have learned from them, no harm done... Filing BK-7 allows you to start over, a new begining... Everything from now on(if you file) will be a little more difficult to get... Interest rates on new CC will be higher, essentially you will have to jusmp through a few more loops then anyone else, but like I said, as long as you understand why you got yourself in this particular situation, you should be fine...

One last thing, DO NOT let those federal student loans go bad!!! If you do, you might as well move to the moon and ask for credit there...

 

[had6010]

Thanks for the great advice everyone! I guess my mentallity when listing expenses was showing that I try to spend as little as I can in order to pay off my debt but now I see that the expenses should really reflect everything I would normally do if I didn't have to pay that huge sum each month to the CC bills. Now I understand why my lawyer kept probing and probing. He almsot seemed frustrated at times because I would say I didn't spend money on things. It makes sense now. I will have to call him and let him know I have some changes. I am not going to file until February though so I have time.

Thanks for the advice about student loans also. I currently have them in forebearance because I just can't afford them right now but didn't want to go into default.

I have one more question. Will it help me build my credit faster if someone puts me on their credit card after my discharge is complete and will having a co-signer help me get better interest rates? I don't plan on using credit very much once this is done but I understand I have to use some in order to rebuild my credit report. Can someone give me a credit card and put me as and allowed user and then I can buy like one thing a month and pay it off right a way or will that not help?

Thanks again for the help!

 

[ihatearizona]

Try to get someone to add you to their account (after the BK is discharged) as an authorized user. This should help. Also, there are secured cards available that help you rebuild your credit rating. The one I seem to hear the most about is through Orchard Bank.

 

[cyana24]

With your income you may well get some nice offers from Providian National Bank. PNB has one of the most user friendly websites of credit cards I have ever had. Plus you get what's called the PFICO (Providian FICO) score which a real FICO score, just more heavily weighted to credit card usage. PNB tends to give fairly generous credit limits. Expect to be the recipient of some bottom of the barrel credit offers after your discharge with First Premier Bank being one of the worst, followed closely in my opinion by Capital One, aka "Crap 1". Having relatives put you as an AU on their cards will help your scores recover faster if the credit card company reports AU's - apparently not all of them do.

 

[Who's Liable?]

Wait at least 6 months before you apply for anything... Then apply for a department store card, gas card, or something similar to those. Buy one or two small items, and then pay them off at the end of your month. The six months wait time is for a buffer zone. This will give you time to live life WITHOUT CC and all that, plus it will give you time to check your credit to make sure that all your creditors you've included in your BK do not illegally put a mark on your credit. After you file BK, it is illegal for a creditor to try and collect from you if you have included them in your BK, but some try anyway...